Raising funds can seem intimidating for new CEOs.
The actual process – the execution – is very simple and straightforward.
That’s why we run our Ready for Funding Competition for Canadian companies, to walk them through this process once, so they are ready to do it for real with an investor.
If you are, or know, a Canadian company, outside Quebec, consider applying to our competition by end of day this coming Monday, April 14th. Everyone gets more ready for funding; the winners get free legal and accounting services from our sponsors BDO and Cognition LLP and investor meetings with family offices or OMERS Ventures.
A four step process
Raising funds is a psychological process. Investors are very busy people, with only minimal thinking energy to spend on your deal vs. all the other investment opportunities they will see that week or even that day. So they follow a simple four step process. You need different materials for each step.
- #1 Get their attention:
This takes an ‘elevator pitch’, i.e., a 20 second description of your business to give face-to-face, and two sentences as a teaser if sent by email. The goal is to get the investor to say ‘tell me more’: that’s all.
- #2 Get a meeting:
For this you need a 1-2 page ‘executive summary’, that can be circulated freely, which an investor can review in 2-3 minutes to decide to meet you. The only goal of this document is to get the meeting: it needs to get them interested, but won’t sell your business for you.
- #3 Get them to ‘yes’:
Human beings make decisions very quickly. Investors, who make many decisions every day, make them exceptionally quickly. Your goal in a first meeting is to get the investor to want to invest. Your tools will be a 10-15 page ‘pitch deck’, as well as a demonstration of your product.
- #4 Keep them away from ‘no’:
Once the investor has decided they are interested, they enter a ‘due diligence’ phase. At this point they are looking for the holes in your business: reasons to say no. They will ask for more and more items, ending in a list of over 100 items, i.e., all your key paperwork, for them to review.
The first three steps are what most entrepreneurs focus on. They believe that if they do a good pitch at ‘demo day’ then they will walk away with a cheque.
Actually, you will walk away for interest. You need to get through due diligence to get the cheque. You need to sustain the investor’s interest, and prove you are worthy of their investment.
How does IncMind fit in?
You’re reading this blog on the website of a company that makes the ‘social’ network for small businesses: a tool to manage your corporate information and securely connect you and it to your trusted network so you can work supported, not isolated and alone.
IncMind supports you throughout the funding process:
- #1: Get their attention:
A lot of this is on you: to meet and build relationships with your local investors. And keep an eye out for our upcoming ‘Public Profile’ feature, where you can share your written elevator pitch with our community.
- #2: Get a meeting:
We’re doing a fundraise right now, and what I find works for me is sending out a one-pager by email, and then inviting people to our profile on IncMind if they want more information. I set the security of people I invite to ‘Supporter’ or similar. I then allow them to see my full Profile, and selected Documents: an executive summary, some basic marketing documents and (if they ask) our pitch deck.
- #3: Get them to ‘yes’:
This is primarily on you to develop your business to a stage that it interests people. Having great traction and only a modest presentation is far better than a weak business with a great presentation. And it is possible to give such a bad presentation that people don’t know what you have. If you want help here, sign up for ‘coaching’ under IncMind, in which case we will give you feedback to help.
- #4: Keep them away from ‘no’:
Due diligence is where IncMind shines. If you pre-load the Documents, Cap Table, People and Partners sections with your key corporate documents, when an investor hands you their 100 item list you can smile. Then invite them to IncMind and adjust their security setting to share whatever you want them to see. There is nothing to excite an investor who’s already at the ‘yes’ stage like receiving a 1 hour turnaround on their due diligence list.
Many deals collapse after a great first meeting. If you use IncMind, you can help make sure your deal ends in a cheque. You can keep them from ‘no’ after you first get them to ‘yes’. Try it out!