To Raise Capital, Go Outbound Without Assumptions

22 Oct

By Dennis Ford, Founder & CEO, LSN 

Dennis book

In my opinion, you need to initially canvass investors that can fit into your indication or service and stage of development. LSN business development staff see over and over again entrepreneurs with beliefs about fundraising that really hinder their chances for success. Entrepreneurs are building walls that do not need to exist — “I can do my fundraise regionally; I only want to talk to family offices; I don’t need a 3-5 year plan because I will exit long before that; I know all the usual suspects so I will just go after them.” Every time you put down an assumption that is not true and then build a universe around that assumption, you waste valuable time going in the wrong direction. 

I steadfastly believe that one has to be completely open and nonjudgmental when raising capital. Make no assumptions other than “let’s go find a global list of investors that are a general reasonable fit”. Seriously, take a broad brush approach and find and aggregate as many reasonable fits as possible, and then canvass them with compelling emails and succinct phone calls over the course of a few months.

The market for capital is extremely competitive and a fundraising CEO who takes the time to package up their technology and company into a lucid message will rise above all the noise. Investors are evaluating you from the first second you surface, and their job is to weed out the CEOs that show they are not aware of how the game is played and thus not a fit for capital investment.

The days of 20-30 page PowerPoints and white papers are gone. Concise, adroit messaging is key. A sensible in-context logo; a tagline that captures the essence of what you do; an elevator pitch that nets out who you are and what you do in 4-5 sentences; a 2-page executive summary that tells a succinct and compelling story; a 10-12 slide PowerPoint that presents your value and advantage; a 3-minute video of your pitch that nets out why the investor ought to have an introductory chat with you; and last but not least, a website that hosts all the aforementioned material, plus enough content and data to allow the investor to make a cursory first pass on you and your team.

When your marketing message is in place, then you can begin to canvass your global investor list. Email marketing software will allow the targets to click on links if they want to learn more. You will get reports on what links the targets clicked and how many times, allowing you to gauge their interest and find the most engaged readers to contact.

So let’s say we create a list of 400-500 reasonable targets and start the outreach process through canvassing, and find that 100 that show some interest. Via further dialogue you can then vet those investors down to 50 good fits, then vet that down to 25 who are interested in a meeting, and may find that 12 are engaging in further dialogue and starting to develop a relationship with your company. That 12 will go down to 6 as time moves on, and eventually you will have 2-3 qualified investors that are the right fit, have a good relationship with you, and could invest.

Of course, there are many different iterations and configurations that can manifest in this process and the aforementioned is just a generic example. But the effort involved in getting those investors into your funnel through a canvassing process that highlights the fact that fundraising is strictly a numbers game and you need to set up that numbers game globally in order to succeed. A big part of the canvassing is getting your marketing messaging right and web presence pristine so that when investors get to your web site, there is a full pitch sitting front and center on the home page. This, in turn, makes it easy for them to decide to pick up the phone or answer an email and set up a meeting.

One Response to “To Raise Capital, Go Outbound Without Assumptions”

  1. David Lopez, CM&AA October 22, 2015 at 6:20 pm #

    As an investment banker I agree with what Dennis is saying about trying to cast as wide of net possible when it comes to raising capital, primarily for a startup. The advent of Regulation D 506c has allowed this to be possible, which now means one can undertake general solicitation of a cap raise to all accredited investors, regardless of whether a prior relationship with the investor existed or not. This approach however sometimes confuses founders who believe they are engaging a banker for their personal relationships with investors, which while true should not prevent the banker from expanding beyond his network and reaching out to all investors who one could argue could reasonably be interested in the cap raise. This closed mindset by founders (and bankers at time) is what I feel continues to make the capital markets so inefficient for the private middle market.

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