The Ultimate Cheatsheet for Raising Investment Money for Your Company
Investors are looking for three things: Team, Traction, and Product.
At least ONE of these three qualifiers should be massive.
When my company (Magnific) got into the Techstars accelerator in 2014, the above law held:
Team: One team hadn’t written a line of code but a founder had give that company about $10million, other teams included ex-Google, Zynga, and Yahoo.
Product: Another team was in a very early stage, but had designed a unique widget that could be in every supermarket in the world. (Proximus); Another team had used machine learning algorithms to make language learning faster. (Lingvist)
Traction: My team was there because we were getting over $2million unique visitors a month on our sites.
James Altucher said it best: It take six months to raise money in an AMAZING business, infinity on a mediocre business.
1) Don’t look for an investment until you have one of “the big three” absolutely popping off.
If I had to choose one of the three to have up to perfection, it would always be traction, followed very closely by a unique, defensible product. A defensible position is a particularly great tech product that would be hard to build or copy. Or if your product has a community following which will also give you a position of strength.
Also, your pitch will suuccccccckkk the first time you try it out — so don’t burn it and use it up on the best investors. Practice a little first.
2) Slide deck
Follow Guy Kawasaki’s dream slide deck process or a slide deck that is similar.
Show one slide each for each of these:
1. The problem you’re solving. 2. The solution you’ve created. 3. The market size. 4. The opportunities. 5. The team. 6. The traction.
Front load the deck with whatever is your most impressive of the three.
Here are a few starting sentences:
- “Before I start, let me tell you a little about our founding team.”(If the team is strong.)
- “We’re growing fast and are already making £10,000 a month.” (If you have traction.)
- “Let’s dive straight into the product, it’s amazing.” (If your product is ready and is actually amazing.)
Make sure it’s clear in your pitch deck how the investors will make a 10x return on their money.
If you are where I was when I was raising money for Planet Ivy, you are probably f***ing desperate.
The problem with this is investors can smell it when you are nervous, worried and desperate — and believe me, they will use it against you.
The way to inoculate yourself against lacking credibility is to have phenomenal market knowledge, and a vision for the future. Make sure you talk about the future. People never get tired of dreaming and the people passing out the vision of that future sometimes don’t think deeply enough about it.
If you’re spending time trying to hire someone to make the deck, you’re doing it wrong.
Here are some hints on how to make your deck:
Use Google slides, black background, Proxima Nova Font size 40 or above. Don’t use very many words per slide. You want people looking at you, not sitting there reading your slide. You have got to be the one selling it. Use many varied and beautiful photos.
If you don’t know your material that will be very bad for you. Take a moment to write out your talk on Keynote with the script which shows you your notes next to the slide. May seem sneaky, but your job is to put on a good show. This is your future.
3) Who should you raise money from?
The mafia (and gangs in modern day, to a certain extent) are looked upon favorably for “only going after their own.” An example is that they generally only go attacking people who have chosen to be in that lifestyle and have then messed up.
Keep this in mind and have this same mentality with investors:
Don’t work with people who NEED to make the money back they give you.
Investors are like record labels:
They invest in 10 companies (bands) and only expect one or two to be massive, recouping the losses of the others and making a huge profit on the side (Adele, One Direction, Facebook, Uber).
THUS if you take money from institutional investors, they’re not gonna make you sell your house to give you their money back (I once was offered a £1 million investment from (obviously can’t say here), then heard that anecdote and had second thoughts.
Established investors know “the game.”
Likewise, if you borrow $25,000 from a family member or friend, that is a TONNE ton ton of money to them. They will hate you for losing it.
Institutional investors? The game is the game.
Your blood is their gold, and they expect you to work until near-death to make them they money, so they have to accept a few failures along the way.
4) Getting meetings
NEVER COLD EMAIL INVESTORS. They hate it, and it doesn’t work. And then they will hate you. Don’t do it.
Get intros from smart people in your network. If smart people won’t give you intros, your product probably isn’t that good.
Always ask those smart people WHY they think your idea will fail or WHY they fell they can’t recommend you.
Pitching events work. BUT don’t do too many of these events. Those investors start to think, “If they were that good, they’d be signed-up by now from someone at one of these events. Something has got to be wrong with them or there product.”
I’ve been out of the game a long time.
But, I would suggest, London. I asked my advisor (an ex-Facebook-er) who got me investment-pitching at a Lions’ Cage event. I can also recommend Angels’ Den and City Meets Tech.
Angel Lab will give you money quickly if they like you, but it’s HARD to get in there. 5 or 6 members need to nod you into the secret room. then you get to pitch them all, as far as I heard (I got 4 interested people but didn’t get into the main pitching room.
Start strong. Attend a few small pitching events to get your weight up and get used to it, practice your pitch VS people you respect on Skype, etc.
My friends at Metaspeech can help you project confidence and voice. They’ve helped entrepreneurs raise millions.
Tied to this, the amounts of money involved are so great that in this case small things DO matter.
Remember, brutality normally prevails where there’s large amounts of cash involved.
So, some thoughts on the process once you have an intro to an investor:
- Details matter. Email signature, sending them documents etc. FAST after they request it, showing up slightly early. You have to play their game until you create your own
- Concerned about writing this one: If you’re not a youngish (under 40) white male, consider the odds slightly against you. Multiple data points back this up. What does this mean in real terms?
- Stay on topic, don’t go off on tangents, acknowledge any differences and how they are an advantage, be extremely prepared for the meeting, etc.
- You don’t have to be formal, necessarily, but you have to be somewhat serious and intense for a sustained period of time/read the other investor to see how to play this.
- If you think this is bullsh*t, that’s fine, but it’s the same reason I assume everyone I speak to is on welfare like I was: Anything above this is a bonus. If you come into your intro correctly, and presume you’re up against a lot going in, you can pull in your focus for an outstanding performance.
- After the pitch? People always ask you how it went. They want to hear “well,” or “badly.” If you can say “I gave the best possible account of myself,” you can rest easy, whatever the outcome.
Caveat for all of the above:
Strong domain expertise will make a lot of the above irrelevant: You can do a lot worse than bringing up some of Jay Abraham’s questions. Jay grills new clients with a bunch of questions to see if they have an f***ing clue about the business they’re running.
Knowing the question listed below will protect you from some of the hardest questions an investor can throw at you.
Who is your direct competition?
Describe your positioning in the market and why it makes you special.
How do you sell? How do you know how well you’re doing?
What are your offers to entice people to buy?
What does your website do better?
Why do people buy from your competitors and not you?
Why is your price different to others?
How does your produce perform better than others in the market?
Do you know the mindset of the perfect prospect?
What are the alternative solutions available to your perfect prospective client?
What are the current trends in your market? Where is the opportunity right now no one else is taking advantage of?
How is your competition performing?
6) Getting deal flow
It’s often said that American investors love to be first in the round, while Europeans want to see others in there first, as they are more risk-averse. To presume the worst-case scenario, once again, let’s presume the latter.
So how do you go from zero to bursting with investors?
Start with the above suggested questions and know them well. Use a warm intro with a good pitch deck. Lead to a meeting where you wow the investors with your future-facing ideas, and insane domain knowledge.
Now you need to start dancing with investors.
Ask them at the end of the meeting if they want to invest, having already told them how much you’re looking to raise and what you’ll spend that money on.
If they say no, ask them why not. Then ask what you would need to do in order to come back with a better product or traction and you’ll do it. Sometimes the investor just wants another team member, for them to say “yes.”
Email them updates once a month.
SO, it’s great if they say:
I want to invest the full amount you ask for (then negotiate terms).
It is good if they say:
I don’t want to invest the full amount, but may come in for a little (amount) pending who else you get in the round. Then, memorize the following carefully chosen words:
“So you’re saying if we can get another investor(s) in the round, you will invest.”
If they say “yes,” you are off to the races, believe it or not.
Your next pitch begins.
“We are XYZ company, our product is XYZ. We’re looking to raise £X capital, and already have X committed. You have the other investors word, and that will do for now.
Once you get the second investor on board with this promise, you knock on the first one’s door and say “I got the other investor, are we doing this or what?”
If they back out, you still have the second investor which becomes the first investor and another “interested.”
Join the investors together in a glorious orgy you organized and let the good times roll!
Quick cheatsheet for raising money:
- If you are running an agency, unless you have a super-innovative secret sauce like The Social Chain has (or you have seven-figure revenues), don’t raise money. Get more clients. Agencies only really get bought by other agencies, normally a nominal fee to acquire the talent working for the first agency.
- Take advice onboard from people deep in the space: Raising money is an easy way to waste a lot of time if you are doing it in the wrong way, and can kill your company
Close the round as soon as possible and get back to running/managing your company.
Ask me any questions you have about this process below ✌️