Like most things in life, there are ways to do things more efficiently and effectively. Fund raising is no different. I thought it best to bring to light some of the handy tips to ensure a successful fund raise:
a) Focus energies: While capital raising exercise might be ancillary to your core business activity, do remember that this raise will eventually help you realize your business plans. It is important to dedicate a significant amount of energies to the exercise. Hiring an advisor may make your job easier but you still have to go the extra mile and devote your efforts.
b) Anticipate and prepare for potential concerns from investors: An entrepreneur does not see a potential threat to the business from the concerns raised by investors. One must understand that once you start a business it is exposed to multiple threats – within and outside the company. You must have a holistic approach towards your threats and have an appropriate risk mitigating strategy in addressing the same. The sooner you make peace with it the faster you can close investment with the investor.
c) Ensure a consistent momentum: We have also seen that in periods where the investor is digesting the information shared with him, the entrepreneur tends to move into a slumber. It typically happens when 2-3 investors are interested in your business and you are happily counting your chicken before they hatch – in fact you have already made your omlette and served it to yourself. Interested investors need not necessarily translate into funds into your company. During such lull period do ensure that you reach out and connect to more potential investors and have a new pipeline ready should these investors back out. Also keep sending regular reminders in the form of a company update to investors who have shown interest and are currently analyzing the information shared by you.
d) Turnaround time: In most cases the reason why a deal is put off is because the time when an investor query is raised to the time when it is finally addressed is too long. It tests an investor’s patience. Investors at one point in time are working on multiple proposals and it is foolhardy to assume that all proposals are getting equal and personal attention. All proposals have a limited shelf-life. Ideally one should respond to their queries in a week’s time.
e) Be data ready: One thumb rule for all your investor meetings. Investors love data. They might like your story but they are more likely to fall in love with the data you share with them (by data I mean numbers). They love to slice and dice. Look at various angles. Upside down and topsy-turvy. Simulation and sensitivity. Whatever be your story, it has to be backed by yours and the industry data. Keep multiple data points ready with you. Obviously it goes without saying that you need to share relevant data – daily temperature is hardly a handy data if you are selling diapers.
f) Be smart during document negotiation: There is a lot of literature available on key constituents of the shareholders documents. You would have your trusted advisors and lawyers alongside to guide you but there will be times when you need to bite the bullet. The reason why I am specifically pointing this out is that while the documents are being negotiated considering specifics, in practicality most of them are ignored in good faith. So, keep a pragmatic approach to negotiating documents. Don’t lose focus in negotiating petty. Apart from money there is time at stake as well.
g) Set deadlines for yourself: Let’s face it – no great project has ever been executed without timelines. It might sound repetitive, but discipline is critical during fund raising. The fulcrum of all the points above is to set deadlines for all the activities. Without deadlines you would never know the status of the fund raise.