How To Raise Money For Your Company Effectively
Doreen Bloch, Co-founder & CEO of Poshly, is giving us 5 amazing strategic tips on how to raise money for your company effectively. According to her, they are battle tested and are proven to show success in growing a business.
1. Frame Your Market Size
Keep in mind that every investor out there will always be looking at the size of the market of your company. While there are numerous ways to approach this calculation and no matter what number you determine, make sure that you present it in a way that resonates with the investor you pitch.
One simple tip: don’t present your market size number in a vacuum. Rather than saying your market size is $50B, for example, you should enhance that statistic by mentioning a comparative number from an industry that the investor knows well.
I saw this quick change work wonders in my pitches. When discussing Poshly’s first market – beauty and personal care – I often told investors that this is a “$382B global industry.” Unfortunately, many investors felt unfamiliar with the beauty industry and the $382B figure alone would be hard for anyone to scope when not presented alongside another statistic.
I adjusted my presentation to include comparisons to other industries, such as Consumer Packaged Goods as a $2 trillion global industry, and suddenly my original market size figure came to life in a more vivid way.
2. Talk About Money Early and Elegantly
Early on in my fundraising experience, I made the rookie error of delaying the money conversation, expecting that merit would generate funds and that explicitly asking about money was in bad taste. This sentiment is not uncommon, it appears, and may stem from deeply ingrained gender cultural norms.
As I learned more about this behavioral tendency that plagued women entrepreneurs, I crafted a phrase for myself that enabled me to talk about money without feeling brash. Once I nailed it down, I made sure to use it early-on in conversation with investors – within the first 10 minutes of an introduction call or meeting. The key question: “What are your investment interests and typical check size?”
This was the key phrase that enabled her to quickly to determine if an investor was fit for her company’s fundraising strategy. Get an understanding of their thesis and funding strategy early. This will enable you to save time in getting new investors.
3. Have the Investor Suggest the Milestone… Then Get To It
Its critical to set goals for yourself and your business team, but you also need to ask yourself how well those goals will align with your investor expectations. Make sure to talk about the milestones they see for your business and once they give you a basic outline of what they expect, you need to meet AND exceed them.
Early on at Poshly, there was a question from prospective investors about how we would scale our user base. We decided, with the agreement of many of those prospective investors, that partnering with a publisher would be a great way to scale. I actively kept in touch with investors who felt this was a great milestone for our business, and once our team reached that milestone, it made fundraising fast. In fact, we closed Poshly’s second round in just a few days.
Rather than planning our milestones solo, we involved prospective investors. This enabled us to engage new investors, build trusting relationships in which investors are rooting for your success, and inspiring confidence in our team’s ability to execute which makes the subsequent funding conversations with those investors more seamless.
4. Update Prospective Investors Regularly
Fundraising doesn’t just happen, its an intensive and time-consuming process. Communication, much like in anything else, is essential.
Early on, make sure you have a well-defined process for keeping prospective investors updated about your success. Whether you send a monthly mass email with metrics and news, or take a more personalized, CRM-centric approach, having a structure for keeping investors in the loop is critical.
Don’t be afraid to include one or two strategic challenges or asks in your communications, too. Investors – even those who may not invest – are often well-connected and have valuable advice. You don’t need to heed all counsel you receive from prospective investors of course, but giving them the chance to support you can segue into funding or business development opportunities down the line. The key is being as consistent as possible with your updates in terms of timing, form, and content, which also showcases your leadership skills.
5. Get As Much Feedback As You Can
Be honest and transparent with investors whenever possible, and ask for advice. They will value your company and leadership all the more.
Engage your investors in conversation by asking for critiques and feedback. The more involved they are with the growth and direction of your company, the more they will want to stay involved and watch the impact of their guidance. When they invest more than just capital, they become invested on a deeper level with your company and its future.
There is no “one size fits all” guideline for successful fundraising. There are multiple factors that affect the process and many tactics that can lead to securing capital. My experiences point to the importance of cultivating a positive relationship between your business and its investors – new and existing. Building these relationships will lead to successful fundraising and, overall, company growth.
Source: Women 2.0