Raising Money — Where to Start?
In my previous post, “How NOT to Raise Money”, I covered the intricacies of asking for an introduction to investors. Today, I’d like to share a framework that had helped me to raise the funds for a startup that we had shutdown and later restarted with the remaining capital.
Raising money is considered to be a black art. And little can be said about black arts. Also, chances are, there are no people in your network that raised money before. So where do you start?
However, if you think about it, fundraising is an exchange of equity for money. Which is the precise definition of a sale. When you raise money, the investors are your customers, and they buy your product — a percentage ownership of your company.
Now, things start to clarify. Many books exist on the topic of selling. Also, chances are, you know many successful business/sales-men/women that sold complex products in their career.
I thought of fundraising as selling technology products to Samsung. Why? Because that’s exactly what I did in my previous life. Once I started thinking in these terms, it got a bit easier. Not because selling to Samsung is easy, but rather because it is something I understood.
When selling to Samsung, you must first identify your champion. They must fully comprehend what you offer, so later they can sell your story internally.
Your champion must understand the benefits of your product to Samsung. Along with its costs, commitments, deliverables and, of course, competition. The champion must grasp your vision and details of your plan to get there. They must believe in your ability to execute the said plan.
The champion’s career is on the line here. If your product is indeed beneficial to Samsung, this champion’s career will skyrocket. However, if you do not deliver, their career is at risk. So your product’s success and your champion’s career are somewhat aligned.
You need to earn each others trust. It takes time to get there. You can’t rush it. Can’t accelerate developing this relationship. Remember, by supporting you, your champion is risking their credibility at their own company.
Once the champion is fully sold on your product, they go to their Samsung colleagues to tell your story. The champion arranges a meeting for you to present to a larger Samsung audience. The champion will often even support you during your presentation. If you do well, you’ll make your champion feel proud that they are the ones that found you.
Once you’re done presenting, you leave the room. The champion stays there and continues to advocate your product to their Samsung colleagues on your behalf. Nothing sells better than an insider’s recommendation.
If you did your homework and armed the champion with all the necessary tools, they will help you to seal the deal. They now need it as much as you do. When all the stars are aligned, you will get the money in exchange for your product. Whatever it is that you sell.
Hope it helps you to frame the thinking on ‘how to fundraise’ and where to start. For example, start with this book that helped me in the past:
Rated 4.6/5: Buy The Selling Fox: A Field Guide for Dynamic Sales Performance by Jim Holden: ISBN: 9780471061809 …www.amazon.com
Three important caveats to remember:
- Obviously, a VC partner is not your typical Samsung employee.
- You cannot outsource raising a round. There is no VP of Sales equivalent for fundraising. You are selling a one-of-a-kind product. Only you, the founder, are able to articulate and set a proper value for your equity. As only you possess the crucial unique blend of vision, leadership and verve.
- While often helpful, frameworks are generally limited. Here’s a quick video on the topic of frameworks by the fascinating Dan Ariely: