Raising any kind of investment outside of friends and family is one of the hardest things to do as a founder. It’s an un-natural act to ask strangers for money to operate a business.
There are certain unwritten laws that every founder hunting for funding should acknowledge from the start. These will help ease the pain, the stress and the anxiety that comes with the uncertainty of having other people make a decision about the viability of your company.
It’s really hard to be critical of your own business — you have a slight bias. So keep these in mind as you go down this path.
- Assume the answer is no. 99.9999% of the time it will be.
- Do not say anything that isn’t researched or true. NO speculation. NO false projections or results. Just stick to the facts. Do not make stuff up to “win the deal”. You won’t.
- Investors see 1000’s of business plans, decks, pitches, emails every year. They may invest in 5. It is YOUR job to make your business stand out, not theirs.
- Warm intros trump cold outreach.
- Investment criteria will change. Today it might be growth at all costs, tomorrow it will be gross margin, next week it will be EBITDA.
- FOMO is not a thing.
- Global, world-altering events are opportunities and threats — even in your small town. Wars, pandemics, inflation all impact the investor psyche.
- It will take WAY longer to raise than you could ever imagine so brace yourself and your cashflow. Also, see the previous point about the world…when it takes a full season or two to close a Series A, the world sometimes doesn’t line itself up properly.
- Geography IS important. Investors are looking for the BEST company in your space to invest in with the greatest opportunity to see a return. They have to be able to see the path forward and, unfortunately, you may have the greatest offering but your reach is limited because of your distance to the epicentre of your market.
- You probably don’t need/deserve funding. This is the hardest to swallow but most companies are not worthy of investment.
So many things need to be aligned in order to raise money from investors. Acknowledging these 10 laws will help as a sanity check if you choose to go down this path. To raise is a full time job — aside from the one you have building the actual business…