First, we’re pretty excited about our new Weekly Warrior format. Tell us what you think! Here we go…
Our team here at TGW did a little research to find an analogy to the quandary of entrepreneurs doay – how do they get in front of investors? And, once they do, how do they close the deal to secure funding?
The concept of door-to-door selling came up. Those of us behind-the-scenes here at TGW have never met a door-to-door sales person, but there are numerous stories of what those experiences were like back in the 1940, ‘50s & ‘60s as the practice started to wane by the ‘70s. Members of the Boomer and Greatest generations lamented those days when a stranger would knock on their doors, often in the middle of the afternoon or around dinner, and pitch encyclopedias, vacuums, magazine subscriptions, air conditioners, microwaves, life insurance and just about everything else that we easily source online in today’s marketplace.
Why is the story of traveling salesmen (and yes, they were all men back then) relevant? It’s akin to the misconceptions entrepreneurs have about getting investors. Most entrepreneurs think that their job is to knock on hundreds of random doors, have fabulous 1-min pitches polished and ready to go to sell people who we think spend their days just waiting for entrepreneurs like ourselves to pitch them. Not so!
How investors actually spend their days (hint: it’s not waiting for your pitch)
Angels, super angels, venture capitalists, and private equity and family-office CIOs and partners are either entrepreneurs or people working on entrepreneurial things. They actually spend most of their days in board meetings, managing the businesses they run, raising money or managing their LPs if they’re venture investors, and doing three things that transform their results-and-return profile: networking, solving problems, and studying markets and other businesses.
What investors really want (hint: it’s not a pitch about your incredible opportunity)
Think about it from inside the shoes of an investor. You don’t actually want to be pitched. You don’t want a random person knocking on your door and trying to sell you something. You want a smart person who comes through your network, someone with insight and expertise in a market who can enlighten you about a specific cohort’s pain points. You want someone who offers a unique and inspiring solution and, possibly (and lastly) a terrific investment opportunity.
What investors expect from you (hint: let them do the proposing and closing)
To become that smart someone, don’t chase investors. Instead, run your business … aggressively. Focus on cementing the culture of your business and shaping a “cabinet” or board of directors who match that culture. Then, when the time is right, the right investors for your business will seek to invest in you.
When investors do come calling: 1) respond quickly, honestly and thoughtfully to their questions and inquiries; 2) remove obstacles to them partnering with or investing in your business; and, 3) prepare the data and information they need to value your company at the right level AND to get their partners (spouses, investment committees, co-investors) onboard.
While you’re doing that work, inform yourself about the investor, too. Formulate intelligent questions that will let you know whether you’ll want to partner with them for the next three, five or seven years.
And when it comes to the final process of “closing” the investment, let the investor have the wheel. They know how to move from term sheet or verbal agreement to written agreement and due diligence to close. So let them.
They’ll do the investment sheets. And you should keep doing what you do. That’s what will bring forward the investments that you’re looking for.
Take action: How to allow investors to want to close you Here are three simple patterns to create and follow to make your opportunity delicious to the right investors.
- Make room for investor relationships by building your business, hitting your goals and PROACTIVELY sharing target-to-attainment metrics and details with potential investors.
- Identify and share real and relevant “deadlines” or key milestones for your business. For instance, if you’re set to close a massive deal that will drive up your valuation, or if your product will soon move from 10,000 customers on the wait list to 10,000 paid, it may impact the “price” investors will pay. Use a technique like, “We’re having a board meeting on Friday and would love to better understand your interest.” Unless the milestone you choose may cause you to lose the deal, or if it makes things more expensive or challenging for the investor, it’s doesn’t necessarily have to be relevant. It does have to be real though.
- Finally, the MOST important pattern is to create a “market” and competition for your deal by getting other investors interested through honest, high-impact conversations.