A serial entrepreneur who has raised $100 million in his lifetime explains exactly how he did it.
I often help entrepreneurs raise money from investors. I'm not a venture capitalist or investment banker, but I have raised millions of dollars for companies I've started, so I know what works.
A few years ago, some technology company founders I was mentoring asked me to come with them to their investor pitch. I helped them get the presentation fine tuned and ready. But we never got to the presentation. Five minutes into the introductions, the lead investor stood up and said: "We don't do technology investments, why are you even here?"
How could this happen, you ask? I did too. But here's the No. 1 rule of working with investors that this company, and so many others, failed to follow: Do your homework.
In addition to pitching for money my entire life, I have also sat on the other side of the table, listening to hundreds or perhaps thousands of pitches from entrepreneurs and business owners. And they all too often make the same mistake. They begin by talking about themselves. About their company, and their goals, and what they want.
There are two reasons I was successful in raising over $100 million in my life. First, I followed the most important rule: I did my homework about investor firms. No investor cares about your goals. They care about their goals. Research investor groups. Read all the information you can uncover. Find out what kind of investments they do. Find out what kind of companies they like, and what industries they favor. Study their portfolios, and write down the common elements of their five most recent investments. What gets their attention?
You want to research their investment criteria. Not unlike a dating site, your objective is to find investment companies that are most likely to want to invest in your company, and you. Make a scoring matrix of all the key attributes about your company as an investment. Then fill out the matrix for each possible firm. When you schedule meetings, start with the investment firm that scored the highest–the firm whose investment portfolio most looks like the investment you're offering.
Just as you have goals with your business, these firms have goals they want to achieve as well. When you go into that investor pitch, instead of leading with "Here are my goals, and here's how you can help me achieve them," try "I researched your firm, I understand what your investment goals are this year, and I want to explain how investing in my company will help you achieve your investment goals".
The No. 2 rule I followed that helped me raised $100 million in my lifetime: I carefully researched the individuals at each investment firm. As is the case in all sales dealings, people buy from people. All things being equal, investors prefer to do deals with people they like, people they'd enjoy working with on an ongoing basis. Look for common interests, shared values, similar experiences. Make a list, by individual, of anything you have in common, or at least the things the investors are personally interested in.
In those first few minutes of small talk, however brief they are, be sure to talk about the personal interests, recent accomplishments, or shared experiences of the people in the room. Establish a connection, and show potential investors you chose them specifically, that you are diligent, and you did your homework. And then start the pitch with a first slide that says how you came to that meeting to help them achieve their goals.
This isn't rocket science, but people today are too focused on their own needs. If you follow these simple steps, your odds of closing the deal go way up, I guarantee it.
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