This Is the Only Reliable Way to Get Valuable Investor Intros

This Is the Only Reliable Way to Get Valuable Investor Intros

Expanding your network is the only way you’ll meet the investors you need to grow your business.

If you want investment dollars for your business, you need to meet people. But that’s easier said than done, right? If you had throngs of investors filling up your inbox every day, you wouldn’t be looking for ways to round up funding.

But I have some good news. You probably already have resources in place that can help get you there. Warm introductions are the key to generating investment dollars as in many cases, investors cannot take unsolicited pitches or introductions. If you can get mutual friends to connect you with the investors on your list, you stand a better chance of getting the funding you’re seeking.

The best new tool in your funding toolbox is lead mining, which helps you get those crucial introductions. Lead mining is an organized way to help you mine your contacts to find mutual connections that can make those introductions. Using lead mining, you can close your funding round in weeks when it otherwise would have taken months.

This strategic guide will help you get started on your lead mining efforts.

Create a map

To start, you’ll need to get a grasp of your entire network. LinkedIn will likely be the best tool for this, since this is where you can easily see not only your connections, but their connections, as well. At one time, you could generate this information through LinkedIn’s InMaps, but that feature is ancient history.

One of the best third-party tools for this is Socilab, which outputs a map of your network and gives you the opportunity to see your macro groups. You can also see “nodes,” which connect your various macro groups, and “outliers,” which don’t connect to your existing networks. Don’t dismiss the outliers. Those people can be just the bridge you need to that investor that most of your network has never met.

Meet with ‘super connectors’

Look over your network and try to identify the “super connectors.” Once you’ve identified those within your network who can introduce you to the right people, it’s time to get to work. Reach out and ask for a meeting, whether it’s an offer to buy lunch or a request for a brief cup of coffee to catch up one morning.

Once you’re face to face with the person, don’t jump right in to ask for a favor. Instead, make an offer to help the other person with something. Ask questions to determine what that connection may be working on at the moment and offer to use your own resources to help.

Ask for the intro

After you’ve scratched your connection’s back, it’s time for a little return scratching. You’ll want to be subtle about this. Nobody likes to feel as though they’ve been scammed into helping. Simply mention offhandedly that you’re thinking about pitching an investor you’ve noticed they know and see what they say.

You’ll immediately be able to gauge your connection’s comfort level with your ask in that moment. That will give you the confidence to proceed. You may find that the connection initially claims he or she doesn’t know the investor all that well, only to later get a phone call that they’ve mentioned your business or handed over your contact information to the person.

Repeat the process

Once you’ve achieved this first introduction, whether it lands investment dollars or not, it’s time to move up the scale. Shoot higher with each introduction, looking for investors who stand to help move your business to the next level. If you’ve identified a dream investor, always go to that map to identify someone who can help you meet the person.

Don’t forget to continue to expand your network. This will help you grow your focus from networking groups where you can meet potential investors and business partners to simply reaching out to meet others in your community. Everyone you add on LinkedIn, whether you meet them briefly at a national conference or they’re someone you worked with years ago, has the potential to help you reach your funding goals.

Lead mining seems like a game because it is. The problem is, many people know how to play that game and, yes, they’re looking for funding, too. Don’t be afraid to be aggressive as you expand your network, since that will help you get the money you need to grow your business’s bank account.


Read the full article on Entrepreneur.com:
This Is the Only Reliable Way to Get Valuable Investor Intros

Expanding your network is the only way you’ll meet the investors you need to grow your business.
Source: Entrepreneur.com By Alex Gold


How to Keep Your Company Afloat When Investors Pull Out Just Before Closing

How to Keep Your Company Afloat When Investors Pull Out Just Before Closing

If not handled correctly, this situation can be the end for your company.

It was raining harder than usual as I grabbed a tea at one of my favorite cafes in Toronto. With the pounding rain making the monochromatic design of the cafe even more imposing, I started to reflect on the past month of my career. Just about to close my company’s Series A round, I was getting all investor signatures returned and starting to see the money hit the bank. By the end of the day, I could formally close the round and move on to doing what I really wanted to do: build my business.

There was only one issue. Our co-lead investor had not returned any signatures, emails, calls or even text messages. With one week of runway left, my entire team was starting to get nervous.

Finally, after many calls and texts, the investor responded and said he could not produce the money he had committed to and signed the term sheet for. This wasn’t at all a “reflection on our business and its potential,” he said. “I just can’t raise enough capital.”

For my co-founders and me, the next month was a whirlwind of calls, investor meetings, team huddles and some begging to keep the company alive. We made it, but it was a harrowing ordeal. If you’re an entrepreneur long enough, you most likely will experience this yourself. Here’s what you should do if you ever run headlong into this situation.

Engage in scenario planning.

First things first. Huddle with your team, and engage in a series of scenario-planning sessions. Map out and plan the results of a “worst possible” outcome and a series of other eventualities so you at least have an idea of what may happen — including having to shut down completely.

At the very least, devise a strategy that takes into account what the office needs will consist of as it contends with a decreasing amount of money in the near term. You’re going to be searching for more funding as well as making cutbacks (more on that in a minute). In the meantime, you must have a plan in place for your strategic ops moving forward.

The starting point for your scenario planning is timing. How much time do you have before the cash is gone? If you have a small team and only three weeks before you think you can ship a completed product and get paid, you may be able to pull it all off with minimal funds — and fuss.

Ensure all other investors are still on board.

Once you know what scenarios you can realistically count on, start calling all other investors immediately. The goal here is to ensure that every other investor is still on board with you. Do they believe in your business? Do they trust that you can raise more capital to cover the unexpected shortfall? Do they know another individual or company that would like to invest in your company?

This is perhaps the most critical step, as one investor pulling out — even for reasons that have nothing to do with the promise of the business — can cause a cascading effect that leads to others pulling out.

Calling and having this conversation with investors isn’t an easy step to take. You’ve most likely convinced these folks of the virtue and efficacy of your business model or product. You’ve sold them on where you hope to take the company in the coming years. As tough as it may be to keep some of the investors on board, it’s only the first part. Now it’s time to double down, and get them to invest even more.

Get other investors to make up the shortfall and hit the road.

Since you’ve probably told other investors about the shortfall, give them the opportunity to make up the difference. It is likely that many will — and possibly even be happy for a bigger piece of the pie.

Use every tool in your arsenal to do this convincing since time is critical at this point. Your arsenal could include discounts, super pro-rata rights, rights of liquidation, changing stock classes, and even board observer or board seats. With many suggestions and strategic interventions in mind, go out and immediately hit the road to get other investors in the round. Offer the same preferential terms to each of them. Go after these individuals as if this is the very first time you have done this for this particular round.

Be open to accepting a series of new business milestones from an investor offering a cash-infusion. Work with them candidly to identify those specific milestones as well as the money you receive upon reaching them. Once that’s been solidified, take a hard look at what needs to be done to get those milestones accomplished and then make visible the steps you will execute to make this happen.

Make immediate changes where appropriate.

Here’s the stretching part that may hurt the most. Don’t wait to make cuts in costs wherever you can. Cut founder salaries. Cut all expenses to as close to zero as possible. Put a hold on all accounts payable. Ensure that very little cash leaves the company — especially if you have very little runway left.

There’s an important point to make here about product. Your most vital adjustment may be to whatever you’re shipping. I strongly recommend limiting — at least for the time being — the set of features you’re offering with your service. Now is the time to scale back to the minimum viable product (MVP) and push forward from there. It is possible for the bells and whistles to wait until you’ve proven there’s enough demand.

Be open, honest and constructive with your employees.

While all entrepreneurs want to portray an image of ambitious success to their colleagues, in these situations honesty goes a long way. Be open and honest with employees about the situation, and be careful to explain to them the very real risk facing the company. You will absolutely be amazed at what your employees will do for you if you have treated them well and been honest with them. Many companies have been saved by their employees.

Even more importantly, you should give employees something constructive to contribute. Do not doubt their very real ability to save the day here —  whether they find you an investor connection or furlough pay for extra equity or other instruments. Often, you’ll find extraordinary loyalty in times like these.

Part of what’s going to generate this level of loyalty is how well you’ve been able to make your team feel invested in the company. Have you hired people who really understand the mission of your business and believe in it themselves? If you have, you’ve given yourself an insurance policy of sorts that can get you through the toughest of times.


Read the full article on Entrepreneur.com:
How to Keep Your Company Afloat When Investors Pull Out Just Before Closing

If not handled correctly, this situation can be the end for your company.
Source: Entrepreneur.com By Alex Gold


To Attract Investors, Let Them All Be the 'Last One In'

To Attract Investors, Let Them All Be the 'Last One In'

Raise smaller mini-rounds in close succession rather than one large equity round.

Driving down the Bay Area’s idyllic I-280 — for the third time — from San Francisco to Palo Alto made for a very, very long day. But it gave my cofounder and me time to marvel at the speed with which we were able to supercharge our business with new capital.

In just a few days, we had gone from struggling to close to having enough capital to make the hires and purchases we needed. More importantly, we were able to do this in smaller increments and at successively higher caps, or valuations.

As founders, this is an even bigger win because higher valuations for investors means less dilution for founders. Unknowingly, we had stumbled upon a novel strategy to raise money and lower founders’ dilution risk.

If you’re raising money for your startup, you’re likely spending way more time than you thought you would working and reworking your valuation. You may get offers from investors, but not often enough to fill out your round. Yet, through a simple technique, you can push your fundraising to the next level, resulting in a higher valuation that attracts the funding you need.

Adjusting valuation caps attracts money.

This is called a “step close,” and it requires you to raise smaller “mini rounds” in close succession, at ever-higher valuation caps, rather than one large equity round at a fixed valuation.

This gives founders more control over the timing and strategy of the close. All that needs to be executed is a simple document at signing.

The first key to this technique is employing the valuation cap of convertible notes to your advantage. Often, the value of notes are offset by a valuation cap, which places a maximum amount on converting your notes into equity. This protects investors if, for instance, your company becomes the next Facebook or Amazon out of the gate.

But founders can also use this instrument to their advantage. Companies can issue a variety of convertible notes at different valuation caps, meaning you can raise with a valuation cap of $5 million one week and then, owing to demand, raise the valuation cap to $6 million a week later. For the extremely daring, you can compress this time scale into a matter of days.

Close the door behind you.

The second key to this technique is the “last person in” principle. Very few investors, even the most daring, want to be the first “money in” at a company. The smartest investors prefer to wait until other stakeholders have validated the business before committing.

This is great if you have three-quarters of a $2 million round completed, but it’s quite daunting if you’ve only closed a tenth of that. Smart founders turn this problem on its head, turning a $2 million round into a $400,000 mini-round that’s already received more than half its commitment. Making the round smaller, you give investors the ability to be the last money in for that mini-round — the way they prefer.

Let’s see how these two techniques play out in practice. Say your goal is to close $1 million in seed funding. Because all investors want to be the last one in, close the first mini-round at $500,000 at the first valuation cap. Usually, this valuation cap is lower and offers preferential terms to the first investors. Luckily, you can close this small amount from close family and friends, making it much easier to gain traction.

Once the first mini-round is completed, raise another $500,000 at a slightly higher valuation cap, owing to increased investor demand, company traction and progress. With more traction, you’ll be able to close angels and seed funds. With a higher valuation cap, you get to preserve more equity as a founder as well. Continue this process until you reach your $1 million goal.

You can repeat this process over a period of weeks and months, depending on how many mini-rounds you need to reach your ultimate fundraising goal. In doing this, you’ll gradually drive your valuation up and have fewer dilutions. Best of all, several investors will get to achieve their goal of being the last one in.

Of course, if and when you exit, the opposite often proves to be true. Investors will all want to be the “first money out.”


Read the full article on Entrepreneur.com:
To Attract Investors, Let Them All Be the ‘Last One In’

Raise smaller mini-rounds in close succession rather than one large equity round.
Source: Entrepreneur.com By Alex Gold


How to Use Psychology to Get Investors to Close When You Want Them to

How to Use Psychology to Get Investors to Close When You Want Them to

Deadlines can trigger FOMO and FOMO can trigger signing the papers.

The night before Demo Day, my co-founder and I were sitting in a drab hotel room next to the Computer History Museum in Mountain View, Calif. Deciding that the extra precious minutes to practice our three-minute pitch for the next day justified springing for the cost of the hotel, my co-founder and I carved out five hours to fine-tune a pitch that had gone through at least 20 revisions and was about to go through at least 40 more.

The only catch was that we kept getting phone calls from investors throughout the night and into the next morning.

“I know we met two weeks ago, and I was dragging my feet, but I want to commit now,” said one.

“Look, you may not have any more room, but I want to get in at this valuation right now,” said another.

This continued as my co-founder and I closed several hundred thousand dollars’ worth of capital within several hours. All the while, we kept asking, “Why?” Why, after we had met with these angels and firms for the past six weeks, were so many committing the night before Demo Day?

We had struggled for weeks with cash flow, attempting to get investors to commit when it was good for the business. We had failed repeatedly; now, they were suddenly interested — so eager to commit at 1:00 a.m.?

It turned out we were bumping up against a major third party-verified deadline.

Something neither investors nor entrepreneurs can control

The third party-verified deadline is one of the easiest ways to get investors to close on your schedule. Essentially, it’s an event-, holiday- or calendar-based function that the entrepreneurs themselves cannot control but must adhere to for business reasons.

This deadline is a literal “line in the sand” that can help you force a close at a specific valuation because investors will know you cannot give them more time or make extensions.

After our Demo Day presentation, the company’s valuation was going up by more than 40 percent. Many investors waited until the last possible minute to get in because they knew we couldn’t extend the deadline set by our accelerator program.

Conversely, it’s been my experience that if we had just told investors our closing deadline was at the end of the week or month — arbitrarily set by us — they would continue to drag their feet because we’d set the deadline.

How to create your own third party-verified deadline

Closing investors on your timeline is a critical skill for any entrepreneur. After all, as founder, you know what’s best for your business and have dedicated plans for hiring, expansion and cash flow that require capital commitments at specific junctures.

Unfortunately, many investors don’t think that way. Their currency is time. The more time they have to assess the business and ask the opinions of potential customers, partners and other investors, the more power they have in terms of doing their due diligence and driving a better deal.

And while not everyone has an accelerator program-sponsored Demo Day to turn the tide, there are some key ways you can create your own third party-verified deadline to turn the tables and close investors when it matters most to your business.

Step 1: Create FOMO by stacking meetings.

The first step is to create investor FOMO –fear of missing out — by planning to engage as many investors as possible in a short period of time. Rather than meet with a handful of investors in the weeks and months before you wish to close, set a hard timeline to meet with as many as possible in the two weeks before you wish to close.

Investors gossip more than Regina George in “Mean Girls.” By stacking meetings, you’re more likely to be at the top of investors’ minds as they circle like sharks.

Step 2: Pick a third party-verified date.

Once you have your meetings planned, pick a date set by a third party. No Demo Day? No problem!

A tax filing deadline works just fine because it’s often the case that a company may not be able to accept capital after that date has passed. National holidays also work extremely well.

Additionally, the last day of the year is also a good option. Once you have your date, tell this to investors — and stick to it.

Step 3: Gamify with an incentive.

To get investors to close on your timeline, they need to be provided an incentive that’s at immediate risk of loss.

Operating on the concept of loss prevention, investors will often accelerate their exposure and their review of your business to come to a decision much faster than normal. Good examples of this include a lower or more attractive valuation that’s at immediate risk of increase or the hiring of critical staff.

Remember, the third party-verified deadline only works if the date and time are set by a third party — not you. There are natural and often convenient real-world cutoff points that you can leverage simply by integrating them into your planning. Don’t waste your time by creating your own deadlines that investors have no good reason to follow.


Read the full article on Entrepreneur.com:
How to Use Psychology to Get Investors to Close When You Want Them to

Deadlines can trigger FOMO and FOMO can trigger signing the papers.
Source: Entrepreneur.com By Alex Gold


7 Reasons to Never Send Your Deck to an Investor Before You Meet in Person

7 Reasons to Never Send Your Deck to an Investor Before You Meet in Person

Without you, your deck is just a memo with diagrams.

You’re proud of your deck. You worked hard to put it together, and you’re pretty sure it’s a presentation that will wow anyone who sees it — you can’t wait to show it off to investors. The problem is that VCs spend, on average, less than four minutesreviewing pitch decks.

The pitch deck investment is lopsided: While VCs spend mere minutes glancing over decks, companies invest in an average of 40 investor meetings before locking down funding. That means that funding doesn’t flow from the deck; it flows from the conversations surrounding it. If you send your deck ahead of time, you’re setting yourself up for something I like to call the “deck blocker,” which means you give potential investors the chance to turn you down before they even meet you.

Meeting you, however, is the first step in winning 39 more meetings. Here’s why you should make sure the first time your investors see your deck is when you’re standing in front of them.

1. You’ll give away the ending.

Chances are high that your pitch deck gives away everything about your business. It’s designed to show off what your product is and what problems it solves, as well as show how you’re going to make millions with your business model.

When an investor sees this out of context, it’s easy to judge your company without giving you a chance to debunk any misconceptions. Rather than sit across from a potential investor, countering objections, you’ll find yourself at the receiving end of a simple “Thanks, but no thanks” email.

2. You need to paint a worst-case scenario.

This advice sounds counterintuitive — entrepreneurs are encouraged to paint a picture of a world that’s better off as a result of their companies’ efforts. But the truth is that most of these rosy pictures don’t ring true; entrepreneurs who claim they’ll win 100 percent market share within a three-year period sound naive, which is a major turnoff to investors.

The better route is to use the deck to paint an ideal picture and then paint a more realistic one with your words. What’s the worst-case scenario? What will happen if people don’t invest? Explaining how Problem A, unresolved, will lead to Problem B, which will create Industry Trend C, is much more compelling than an ideal scenario that could ultimately be at the mercy of Industry Trend C, anyway. But you have to get in front of an investor in order to paint that verbal picture.

3. You need to acknowledge the competition — without giving them real estate.

Another naive tactic many entrepreneurs indulge in is deep, deep denial of any competitors. “We’re the first of our kind,” “our team differentiates us” and “our process makes us unique” are all common phrases that indicate an entrepreneur doesn’t realize that there are already others on his heels — or there will be soon.

At the same time, giving the competition a spot on your pitch deck is like giving them free advertising. To avoid sacrificing some of your precious deck real estate to the companies aiming for your same niche, you need to discuss them in person. Without a visual, they’ll be less memorable, but explaining how your organization differs from the competition — and improves upon it — will eliminate one real worry for your prospective investors.

4. Decks aren’t sales pitches.

If you’re a kick-butt presenter, your deck is built to enhance your telling of the story. When you’re standing in front of an investor, flipping through slides, the images connect with what you’re saying. Your tone, enthusiasm and supporting details tell as much of the story as the images on your slides.

When you aren’t there, those slides are merely words and pictures, leaving the investor to interpret them. This puts a spin on your presentation that could be misleading, resulting in your business losing an opportunity based solely on misconceptions.

5. People are much more compelling than a slideshow.

You may have the best idea ever, but investors are more interested in you than your product. They’ve learned through experience that they need to invest in people, not companies.

When an investor is judging your concept based solely on the presentation you’ve created, you miss the opportunity to build trust and camaraderie. Finding a way around sending your pitch deck ahead of time is an important first step in ensuring you get to meet that investor in person. Even if the investor has had the pleasure of meeting you previously, there’s no comparison to hearing you tell your brand’s story in the way only you can.

6. You’ll arm the competition.

It may sound like a tinfoil hat theory, but yes, some investors are shady. Even a trustworthy investor could end up hacked by a bad guy willing to give away all your great ideas. Some slide-sharing services have security features, which can help, but the safest approach is to avoid sharing the pitch deck in the first place.

7. You’ll weaken the presentation.

As I said before, you want to wow the investor. How are you going to do that if you give away the ending ahead of time? If the investor has already read through everything you’re going to present, start to finish, the result will be a “spoiler” effect that diminishes the power of the story you’re trying to tell. You’ll battle a checked-out listener who’s eager to cut to the chase.

So what can you do if an investor asks to see a copy of your deck? Be honest. Explain that your deck is designed to complement your presentation; without your narration, the information won’t be useful.

Maintain a document that summarizes what your company does, along with your revenue model and what you’re seeking. Make it clear that more in-depth information will be provided in the meeting, but send compelling information ahead of time, such as a link to a case study or the testimonials page on your website.

Play into the principle of FOMO, or the fear of missing out, by letting the investor know you’re meeting with other investors and that you prefer to streamline things by issuing a one-page description of your company’s offerings.

If an investor asks to see your pitch deck, run — or simply send over a one-pager that provides the basics of your business idea. The goal is to give investors just enough to pique their interest, but not so much that they judge your entire business model on a slideshow you put together to go with your earth-shattering pitch.


Read the full article on Entrepreneur.com:

7 Reasons to Never Send Your Deck to an Investor Before You Meet in Person

Without you, your deck is just a memo with diagrams.
Source: Entrepreneur.com By Alex Gold