Stop Trying To Sell Your Business, Sell The Dream Instead
No one likes the fundraising process
Raising capital for your startup is a tedious, annoying process. I haven’t met a founder who enjoys it. From first-time entrepreneurs to seasoned vets with ties from Silicon Valley to Wall Street, everyone seems to struggle through the process.
As someone who’s spent a lot of time helping technology companies raise money — from the inside of an Investment Bank, the inside of a startup, to numerous consulting gigs — my conclusion is more simple than you’d think.
Stop focusing on selling your business, sell the dream instead.
Sure, this sounds cliché and we’ve all read Guy Kawasaki. But none of the current literature surrounding “the rules of fundraising” or “how to structure a pitch deck” will differentiate you from the next founder who walks into that VC board room.
In my mind, raising early-stage capital involves two key disciplines:
First — understand the difference between enrollment and registration.
Second — Aim to build authentic relationships with partners who believe in your vision for the future and want to see you win.
My goal in this post is to get you back to the reasons why you started your company in the first place.
Enrollment vs. registration
Most of you have probably never thought about the difference between enrollment and registration before. I’ve only recently discovered it myself, thanks to Landmark’s Curriculum for Living. It’s been an important distinction that’s made a world of difference in my overall performance.
For those of you raising capital, understanding the distinction can accelerate your close rate and help your fundraising process gain momentum.
The difference between enrollment and registration.
As I see it, Registration is the act of trying to get someone to do something.
A straight-up sales pitch like “buy ABC” or “you should do XYZ”. Registration has zero power and very little emotional appeal. It also typically leaves people questioning “why”. “Why does she want me to buy ABC?” or “Why do they want me to do XYZ?”
On the other hand, enrollment is the act of leaving someone moved or inspired by sharing with them your vision for the future.
See the difference? Enrollment leaves people moved or inspired, while registration leaves people asking “why?”.
Registering for a class
“You should take a Spanish class. It’s valuable to know a second language in case you ever do business overseas or travel internationally.”
“Imagine traveling the world, from Spain and Portugal to Central and South America, communicating fluently with locals and your international clients. Wouldn’t that be great?”
Registering to vote
“It’s your duty as a US citizen to vote in this election. You can’t sit this one out. It’s important that everyone participates and makes a difference.”
“I envision a future where everyone has affordable access to healthcare, education and clean energy. What do you think about these important issues? Are you voting in this election?”
Now let’s apply this concept to raising capital
“We’re the #1 direct-to-fan tool on the market. Our competition is basically non-existent and it only gets better when we roll-out XYZ feature in 2017. Plus our sales will grow 35% this coming year. We just need about 1 year more in cash runway until we break-even in 2018.”
“In 2016, artists and creators have the power to own their fan relationships. We need tools that help creators make better business decisions and empower them as entrepreneurs. If we empower creators and artists, we push art, culture, and ideas forward without boundaries. This is the world we want to live in, and it resonates in everything we do — from our product to who we hire.”
From seed stage to IPO, I believe the best CEOs are not the ones that intricately describe every detail of their product or BD roadmap during investor pitches. The best founders enroll investors in their vision for the future. Learning the difference between enrollment and registration will help differentiate you from those focused solely on their product, market or forecasts.
Find partners that want to see you win.
When you begin to enroll people (in this case investors) in your journey, you develop a kind of aura about you that tells people you’re up to something. This is far more powerful than having the best product, operating in an untapped market or demonstrating the capacity for explosive growth. (Every company says they have the best product, are operating in an untapped market and have the capacity for explosive growth.)
It’s important to think big picture and find investor partners that are excited about joining your entrepreneurial journey. If you’re 100% authentic in your pitch and an investor isn’t buying it, that’s great! Getting a NO is okay and allows you to re-focus on finding people who “get it”.
Your goal throughout this process is not money. Money (capital) is only the outcome of a successful fundraise. Under pressure to move quickly, I often find founders so concerned with getting money in the door that they sacrifice their vision. They change their story over and over again based on feedback from every single investor pitch. This is the wrong strategy and trying to please everyone gets you no closer to getting what you want. Plus, your story becomes a jumbled, nonlinear mess that’s no longer your own.
I get that things move quickly in startups. And I’m not suggesting that you ignore constructive feedback from smart people. But it cannot come at the expense of your vision. Taking capital from the wrong investor could be a poor long-term decision.
When things go south (and they will at some point), an investor who’s enrolled in your vision and believes you’re the right person for the job will help instill confidence and steer you in the right direction. They’ll be along for the bumpy ride and help you problem solve. On the other hand, an investor who registered based on your product and projections may just be angry that you missed targets by 20%.
Sell the Dream
If all of this sounds counterintuitive, I’d encourage you to dig a little deeper. Remember why you started your company in the first place. What’s your vision for the future? What’s your mission? What problem do you want to solve so badly that you forwent a salary and risked failure to solve?
But I’m uncomfortable asking people for money.
I hear this one all the time — “I’m uncomfortable asking people for money”.
Now that you’ve re-focused on your vision and mission, think about what you really want. What is your startup really striving for? Is it money? Didn’t think so! So guess what, you’re not asking investors for money. An investor’s job is to invest. If not your business, than another. So focus on enrolling in your truest vision for the future and building authentic partnerships.
And if you’re still stuck, review Simon Sinek’s “Starts with why”, particularly the piece about Martin Luther King Jr. and the African-America Civl Rights Movement. MLK had a dream and a plan to achieve it.
Hint: he didn’t give the plan speech.
Amass a large group of supporters that believe in the civil rights movement, and march city-to-city standing for the cause.
“I have a dream today!…one day right there in Alabama little black boys and black girls will be able to join hands with little white boys and white girls as sisters and brothers …one day this nation will rise up and live out the true meaning of its creed: “We hold these truths to be self-evident, that all men are created equal…”