2009 fund raising cheat sheet

September 11th, 2009 — Mark Littlewood

Given the huge amount of interesting deals out there (see previous post), how can you maximise your chances of getting your hands on investor cash?

Interesting insight last night from investors at ourĀ  BLN discussion dinner in Cambridge. Guests included active angel and venture capital investors who have all made investments this year. It was a good opportunity to see what has changed in the past 12 months and hear how investors think entrepreneurs should approach them.

Wood panel panel

Wood panel panel

Of course the basic ingredient has to be there – you need an idea that will make enough money to give an investor a reasonable return. This should be obvious even to Homer Simpson although people often lose sight of the fact. Comments from investors focused on softer stuff – here are the top three tips for raising money from investors

  • Investors want honest conversations. Investors need to feel that they are talking to people that they can do business with in difficult times as well as good. Growing a business is never a simple process and people behave differently in different circumstances. One VC said over dinner that when they look at a company seriously, they will engineer a point of conflict in the discussion process. Investors look for obsession and experience in entrepreneurs and they can learn more about an entrepreneur in a high stress situation than they ever will in a nice friendly meeting. Be convinced your idea is excellent. Be committed to it and be committed to working together with your investors.

This becomes much easier if you know them first…

  • Relationships. Fund raising is a highly competitive process and very few companies can leave it until the last minute to get going. It is NEVER too early to make contact with investors. VCs rely on trusted networks of people to get good ideas and you can increase your chances of fundraising by being a known entity in the first place. Find excuses to meet VCs, talk to them about your market, ask their advice, get in their faces. As a minimum, try to have three points of contact before you think about pitching. Remember though, any contact with a VC counts. Drunk, sober, formal, informal, off the record, on a conference panel, any contact will count towards an investor’s impression of you and your business.

Developing relationships is easier if people in the ecosystem know what you do and can introduce you…

  • Advisers/networks. The best advisers and networks see a huge amount of entrepreneurs and have regular contact with the investor community. They have a trusted relationship with investors and can be very useful people to connect you with the right investors. Talk to them and work out which ones know what they are talking about (one good indicator is the number of deals they have worked on recently). Don’t be afraid to ask for their advice over coffee or a beer but respect the fact that they make their money by selling their expertise. By spending time with you at an early stage, you are both investing in a relationship that will only work if it is of benefit to both parties.

Our panel of investors included Andrew Nutter (Balderton), Sandy McKinnon (Pentech Ventures), Eike Marx (TLCom), Henrik Kjellin (Angel), Andrey Kessel (Amadeus). Thanks for your honesty in participating so openly.

Supporters of the workshop and discussion dinner:

BDO Stoy HaywardBDO Stoy Hayward
.
Gill Jennings EveryGill Jennings Every
.
Taylor WessingTaylor Wessing

2 Comments Feed

***** thinking.

Advice for fund raising usually focuses on mechanics, the business plan and numbers. These are important but underestimate the human psychology of the process. We don’t stop being human when we become investors. We buy people before plans every time.

We are far more likely to work with an entrepreneur that we know and have seen grow over time.

Richard — September 12, 2009

Thanks. Too many people focus on the hard stuff like the plan and ignore the important stuff. Business plans are a waste of time.

Neil MacNamara — September 21, 2009