Organizing to Raise Capital for the Startup and Small Business

Big Red Car here.  Oh boy, what a day!  Here in the ATX all is good.  On Earth as it is in Texas, ya’ll.

The Boss has been to a couple of meetings already and was giving a young startup CEO a bit of his accumulated wisdom on how to organizeh is affairs to hit the fundraising trail.

“Get a tin cup!”  Haha, Big Red Car, you are a wag.  The Boss did not tell the CEO to get a tin cup.  Well, yes, I guess he did.

OK, Old Sport, let’s start with the most basic truth.  Raising capital is all about telling a story.  All we are going to do is to organize your efforts to tell the best story possible.

[pullquote]Raising capital is all about telling a story.[/pullquote]

You can do it, Old Sport.  Just like your generation did not invent sex, folks have been telling stories and raising capital for a long, long, long time.  You can do it.

The Boss could teach a Chihuahua how to raise money.

Hard truth — this is a CEO’s job and one of the only things that it is virtually impossible to delegate during the green shoot days of a startup.  So this love’s for you, CEOs.

Organizing to raise funds

Like any endeavor in business, the ability to organize one’s affairs and to reduce it to a process will always beat the crap out of doing it by the seat of your pants.

So, how does one organize to raise capital?  Here is some wisdom from a guy who has raised a jillion dollars from a myriad of sources over a long period of time for multiple industries.

Do your have a clear basis for the enterprise?

It is a bit old school but first you have to check, doublecheck and re-check if you have the Vision, Mission, Strategy, Tactics, Objectives and Values down tight.  This will all help to define your Company Culture.

If you want a nudge in that direction, look here.  Vision, Mission and all that Jazz

The tools of the trade

Once you have a clear review of the Vision, etc, then you have to develop some specific tools to be used to make your pitch.  Here are the basics:

1.  Pitches come in different sizes and colors:  elevator pitch, taxi cab pitch, Board room pitch.  Read about them here.  Pitching Hard Fast and Tight

More importantly, script them and practice them.  You should know them well enough that if your beloved nudges you out of bed in the middle of the night, you wake up and get back in while reciting your elevator pitch.  That’s right, Old Sport.  You have to get this stuff down tight.

Pro tip:  define the desired outcome of every pitch.  If you unleash the elevator pitch on some unsuspecting elevator occupant, the objective is to get a meeting.  Know your desired outcome before you even start speaking.  What is the call to action?

2.  Your business model canvas which shows graphically how you have organized your business engine.  Read about that here.  The Business Model Canvas  Clean this up for presentation purposes.

3.  Now you need a short — short, Grasshopper — Power Point presentation.  The Boss has not turned against PPT as is the vogue but however you craft your presentation is going to be just fine.

The presentation is not the story, the presentation is the touchstones between which YOU tell the story.  Remember, raising capital is all about telling a story.

4.  Now you need a target list of possible investors.

5.  You need a very simple means of keeping score.  Something like can work for you.  A simple Excel spreadsheet can also work.  Keep score, Grasshopper.

The target list

Before you start writing down names, know what kind of money you are intending to raise.  Take a look here to differentiate the type and stage of funding that you are pursuing.  Take a look here to understand what stage of funding you are seeking.  Funding A Startup Or Small Business.

One small quibble since that article was written — it seems like there is a bifurcation amongst Angel Investors in that there are two worlds evolving.

There are Angel Investors:

1.  who are substantially more organized and professional and who conduct excellent due diligence and invest as a group pooling their money; and,

2.  there are what we have come to know as a more earthy bunch of high net worth individuals who are a bit more seat of the pants in their investing operations.

I point this out because you may now find two levels of Angel Investors in the continuum and there may be an Angel Round I and an Angel Round II with the differentiation being that Round II is this emerging pooled investment operation.  This is a reality now.

So, now you are making a target list.  Start locally and then being to move outward from your local base.  If you live in Austin, then begin with Austin and then scan Dallas and Houston before looking at Boston.

Target investors — we are talking venture capitalists — who are appropriate to the stage of your investment needs and who have some outward indication that they are interested in your industry.  This is just simple logic.

Know this — your list will be big to start with then it will be whittled down fairly quickly.  But start big, Old Sport.

Where do you find these names?  Uhh, you Google for them, you read VC publications, you scan the Austin Business Journal — you get your geek on, CEO.  Now is not the time to get lazy on me.

Qualifications and introductions

As you begin to make your target list, don’t worry initially how you will access these folks.

When you have finished your list, then go back and see who you know, who you might get to provide an introduction and what common links might exist (e.g. common grad school background).  Grade each target by their accessibility.

You will likely only get to pitch about half of those on your list and about 5-7% will give you any real traction.

Grasshopper, get some lip balm because you are going to be kissing lots of slimy frogs.  Deal with it but know that this is perfectly normal going in.  Perfectly normal.

A word about cold calls:  you will have to make them and there is a way to do it.  Don’t just ship someone your deck.  Approach them with a visit, Skype, phone call or email — in that order, Old Sport, and tell them what you are doing.  Do not pitch them.

Tell them that you are going to be in their neck of the woods and ask if you might come by and spend a cup of coffee with them.  It’s all in the style with which you ask.  The Boss once told an investor that he was going to be in Hong Kong next week.  He got the meeting though he was never planning on being in Hong Kong.

This is called networking

As part of the entire process of fundraising, you are going to be meeting folks who can and, believe it or not, WANT to help you.  You have to network with these folks to make that happen.

I will not insult your intelligence but remember MeetUp, the Chamber of Commerce, Entrepreneurial and Angel networks.  Get your network on, Old Sport.  Get it on.

Is networking something you naturally like?  Who cares, it has to be done.  Every had your prostate inspected?  The annual stirrup equipment inspection?  Same kind of deal, Old Sport.  {Hey, the Big Red Car is an equal opportunity insulter and destroyer of good taste.]

The most important thing?  You CAN do this, Grasshopper.  YOU CAN DO IT.

The pitch

Remember most of your pitches will result in a NO.  You really only need that first YES to change your world and to get the funds to change the whole damn world.  So learn how to take rejection  and turn it to your benefit.

Your Board room pitch should be not more than fifteen minutes.  No questions, no interest — go home.

Before you leave, ask the following questions:

What can I do to improve my pitch?

What was the most interesting and enticing element of my pitch?

Do you know anyone who might be a good fit for us?

Can I keep you informed of our progress?

These questions will help you improve your pitch and to develop a network of folks who can help you in the future.  A guy who has just pissed on your campfire can still be a guy who can make a great introduction if you don’t allow your hurt feelings to get in the way.

Want consistent positive feedback?  Invest in a Black Lab.

Follow up

When you leave that meeting while it is hot on your mind regardless of the feedback, send the person you met with a handwritten thank you card.

That means you will need to invest in some very nice, heavy stock note cards, Grasshopper.

The handwritten note card is the secret of success that may make a long term difference in your efforts.  Pro tip.

You will find that as you kiss frogs, you will begin to become more comfortable.  Your pitch will become more refined and economical.  You will begin to hone a sharp edge and one of those frogs will blossom into a Prince or Princess.

The ask

Grasshopper, nobody is going to give you anything unless you ask for it.  You have to remember to ask for the money.

Tell them what the valuation is supposed to be — who cares, they won’t agree to it anyway.  It’s just the point of departure, like bidding your cards in bridge.  You do know how to play bridge, don’t you, Grasshopper.  Oh, Grasshopper?

Ask for the money and tell them what their ownership is going to be after they invest their money.

Do not forget the ASK.  You are raising capital here.

So, there you have it, Old Sport.  And YOU CAN DO THIS if you just get organized.  Call me if I can help you.  I’ll tell The Boss and he can get back to you.

But, hey, what the Hell do I really know anyway?  You’re talking to a Big Red Car and what does that say about you?  Haha.















One thought on “Organizing to Raise Capital for the Startup and Small Business

Comments are closed.