Fund Raising as a Sales Process

Guest Post by Bryan Brewer of Funding-Quest.com.

Some entrepreneurs arrive on the angel funding scene with a Field of Dreams attitude: “If I build it, they will come.” In this case, “they” refers to investors.

Truth is, it usually doesn’t work that way. Since you are literally selling stock in your company, I suggest you will have a better chance of success if you engage in a true sales process.

Here are the five steps:

Step 1 – Maximize Your Fundability. In this first step, which could span a year or more, you build your business and your team in anticipation of approaching investors.

Do your best to optimize the basic building blocks of your business: good match between problem and solution; large and growing market; high-margin revenue model; cost-effective go-to-market strategy; competitive advantages; strong management team; and defensible financial projections. (This entire step is covered in detail in my new Fundability Scorecard™ assessment tool, which I am introducing at my Funding Quest One-Day Workshop on Feb. 5, 2013.)

In other words, you are developing and refining your business as the “product for sale.”

Step 2 – Structure a Term Sheet. Now you are ready to price your product. You determine the amount of money you need to raise, valuation, use of proceeds, milestones, and other deal terms. In this step, it’s essential to work with a competent corporate securities attorney, especially one who sees a lot of angel deal flow.

Step 3 – Connect with Angels. With a product and a price, you can begin the sales process in earnest by first generating leads, i.e., finding angel investors who might be interested in your deal. I recommend you pursue three strategies to acquire leads:

  • Apply to angel groups so you can get exposure for you and your business.
  • Leverage your network of contacts, both business and personal, to reach out to potential investors.
  • Develop a strong online presence, including gust.com and angel.co, and use social media to connect directly with investors. (But beware – again, consult with your securities attorney; don’t advertise or make general solicitations to sell stock.  Your lawyer can give you advice on how to avoid running afoul of the general solicitation prohibition.)

It helps to implement a CRM system to keep track of all your activity with contacts as you nurture these leads.

Step 4 – Give Your Pitch. Now that you have a product, pricing, and prospects, it’s time to start pitching, either to angel groups or one-on-one. Ask your support team and others for honest feedback about your pitch. Make sure it’s simple and understandable. Weave a compelling story into your narrative so angels will relate to you personally. And practice, practice, practice!

Step 5 – Close the Deal. Now comes the tricky part – trying to the “herd the cats” and manage your anxiety while investors take their own sweet time to decide. You can help speed this process in several ways:

  • Create a plan to make a number of interesting announcements about your business so you have a good reason to communicate regularly with your prospects.
  • Host events or conference calls to increase engagement with these potential investors, and look for other ways to have additional meetings so investors can get to know you better.
  • If realistic, create a sense of urgency about the closing of your deal to induce investors to act.

Treat fund raising as a sales process, and you are more likely to be rewarded with positive results.

Don’t get discouraged. You will encounter lots of obstacles along your journey. Take these in stride and learn from them if possible. And remember that you can’t please everyone. As a client once told me:

“Raising angel funding is not about convincing skeptics; it’s about finding believers.”

Best wishes in your quest for funding!

Bryan Brewer
@fundingquest
www.funding-quest.com

About Joe Wallin

Joe Wallin focuses on emerging, high growth, and startup companies. Joe frequently represents companies in angel and venture financings, mergers and acquisitions, and other significant business transactions. Joe also represents investors in U.S. businesses, and provides general counsel services for companies from startup to post-public.
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