How To Line Up Multiple Investors
Fri, 11/09/2012 - 4:26pm | by Guest Writer
There's a saying in business that "1 is the worst number." Having one client, one source of income, one supplier, etc, can cause big problems when something goes wrong because you have no fall back. The same is true with investors - you should never spend all of your time trying to please just one. There is no way to know if the one investor you want to work with most will offer you the best deal, or even pay attention to your proposal at all.
Far better is to line up multiple investors, all of whom are willing to make you an offer to consider. If you can succeed in doing this, you have taken the power back into your hands, since you now have the opportunity to evaluate each deal and pick the one that makes the most sense for your start up. Today we explore the most effective ways to accomplish this elusive funding strategy.
Attend An Industry Conference
One way to meet lots of investors and generate interest in your new business is to attend an industry conference. No matter what type of company you are starting, from computing to bioengineering, chances are there is a conference that pertains to your area of focus. To get in the loop, find popular bloggers and figureheads in your field and listen to the events that they promote. Chances are, if several industry leaders are going to the same conference, you can expect to meet plenty of useful contacts there.
Some of the people you meet may be able to refer you to several investors, while others might be venture capitalists scouting for prospects like yourself. Bring plenty of cards to pass out, and don't be afraid to ask for a meeting outside of the conference with key contacts you need to impress. Industry conferences are great for meet and greet sessions, but the real business usually gets discussed over dinner later that night.
Focus On Branding Before Seeking Investment
Before attending a conference, prepare everything your new contacts might see. Don't get in there among the pros and pass out napkins with your phone number or send new contacts to a problematic website. This behavior smacks of amateur, and is a total turn-off to most investors. Image isn't everything in business, but it plays a big enough role in the early stages of a deal that it demands your immediate focus.
Take the time to prepare professional looking cards that bear appropriate titles for your team members, and put together a brief, visually stimulating overview packet for your new contacts to look over. This should be no more than a couple of pages, and should contain consistent branding (colors, fonts, logo, etc) with your cards and website. The goal is to come across to investors like a company that has its act together and knows exactly where it's headed.
Be Confident, But Not Desperate
Courting investment from multiple investors is a lot like trying to get dates from the hottest dates in a nightclub - you must convey confidence, never desperation. The message you should try to convey is that you're destined for greatness with or without their investment, and if they'd like to come along for the ride you are open to discussing it, but if not there are plenty of others who will.
You can create this image both through branding (discussed above) and also in the way you speak to them. Don't let on that your company is aching for money, even if you're still sitting at a cardboard box desk in your garage. Keep your current assets and other sources of funding a secret in early discussions - there is simply no reason for them to know how badly you need their money to accomplish your dreams. The moment an most investors catch a scent of desperation, they will either kick you to the curb or offer a deal stacked high in their favor.
Perhaps the most effective way to get multiple investors calling your phone to talk business is to create competition between them for your contract. This sounds almost impossible at first, after all, it's generally you who has to fight for their attention, not the other way around. However with some careful planning, it is possible to have investors fight over you. First, you'll need to demonstrate one of two things - a prototype of your new product that will blow away anyone who holds/uses it, or positive cash flow into your business.
Cash flow indicates that the system you have in place already works, and if an investor supplies you with more money, they have a high chance of getting paid back quickly. A prototype that exists in the real world and not just on the pages of your business plan shows the investor that the idea is doable, and it already works.
Once you have one (or preferably, both) of these prerequisites in place, casually mention to investors that you are seeking investment from multiple venture capitalists and intend to act quickly on the best deal that comes across your desk. This adds a sense of urgency to the situation, and increases the chances that several interested investors will make you a good deal the first time around.
Put Together An All-Star Team
If you lack both cashflow and a working prototype, your best bet for inspiring confidence and excitement in investors is to assemble a proven and accomplished team. If an investor can't interact with the product, he or she can at least invest in people with strong track records of success in the field. Conversely, a team of newcomers to the industry who have never worked for a start-up or held a position at a reputable company in the industry will look like a much bigger gamble, because who's to say whether they can perform at crunch time?
Strive to recruit people with high levels of education in the field (4 years of college or more) and preferably work experience fulfilling similar duties that your company requires. Additionally, certifications from industry groups and letters of recommendation from influential people can also be of help.
About the Author: Sheena Freestone is a freelance writer for FundingUniverse. Funding Universe matches qualified entrepreneurs to banks, investors and other funding sources. Funding Universe helps small businesses avoid scams and rip offs by securing funding from trusted national banks and financial institutions.