It’s okay to admit it — raising capital for your startup business is very much similar to walking into one of those haunted houses during Halloween as a little kid. It feels like such a lengthy process to go into all the rooms with all the scary monsters, when all you want to do is go trick-or-treating (metaphor for the growing of your business, products and services).
Salespeople know this really well, actually. It’s almost like a baptism by fire. Sometimes getting that “no” in the face when you’re selling a product can sting. Really, raising capital isn’t much different, and it shows in the statistics — in the third quarter of 2013, we saw startup fundraising benchmarking at $559.4MM as stated by Elsevier Business Intelligence, which fell from the last quarter’s rush of $907.2MM. What does this say then? It’s simple —
It’s All About the Effort You Put In
Expect to make several calls — at least four or five — to really get some kind of action going with your capital fundraising. You’re not going to generate funds by sitting on your hands. Unless you’re one of the lucky ones with a steady record of corporate success and dynamite sales strategy, you might have to pick up that phone.
The general consensus about entrepreneurs finding their financial niche is the need for maybe ten investors to sign on the dotted line for funding. Sure, it’s a reasonably small number compared to maybe 50, but in the long run, several calls for one investor can then end up, if you do the math, to take an enormous amount of time.
But you’ve got to do it, period. However, we can help you with some surefire steps to speeding up your finances for your business, increasing close rates by 50%, starting with….
Making Your Story Mean Something to the Prospect
Sure, it means everything to you. But how do you make it mean something to somebody else? Be clear about why you need it.
You have to know just how much you need to raise, too. Moreover, a little incentive for your prospective investor couldn’t hurt, as that definitely tells the investor that it not only means something to you, but should mean something to them.
Let them know their money will be a benefit to, well, everyone. Not just you.
But, of Course, Stop Babbling About Yourself and Listen!
Nothing turns an investor off — and others, for that matter — then the person who just won’t shut up. This is one of the key rules of negotiating, really, is the ability to just be quiet and let your prospect say whatever he or she has to say.
Ask them about their doubts, their worries about forking over the money. Address any concerns they might have. Play damage control, basically — and, of course, expect that there will be some damages they’ll address, as always when paying money for something intangible. It is very much like fundraising, because they automatically don’t know what they may be getting out of the transaction.
And This Is Why Options Are Key
Options make people feel fuzzy inside, comfortable and without any stress. Think of retail and all the numerous possibilities you have in buying a pair of jeans. Ever look at a restaurant’s menu? All you want is food, but ultimately, while you might be overwhelmed with the number of choices, you couldn’t be happier over the fact that they do have choices.
Have two or three options for your investors in which to participate. It could be different amounts, maybe term periods and even options for repayment. Diversify it a bit. That makes your plan that much more appealing.
It Goes Without Saying That You Have to Communicate This
The business relationship you develop with an investor is exactly that: a “relationship.” It’s almost like you’re courting the other person, making yourself look desirable, wanting that investor to want to call you back for a second date.
If you communicate constantly — following up after meetings and reiterating messages — expect to have an investor that’ll always have you on his or her mind, enamored with you, wanting to sign on that dotted line. Truthfully, a business lawyer communicates with a client just the same. How else do they maintain business and reputation?
Of Course, Set Your Closing Date, But Don’t “Enforce” It
The final strategy of really good sales technique is this — “while supplies last.” That undoubtedly plants that seed in the brain that a person must act now. Or else it’ll be too late.
Don’t spoil the seed or plant, though, by trying to enforce it, constantly reminding the prospect of the date when the “supplies run out,” because no one likes stress. Prospects will just move on. If you simply quietly let them know when the supplies will run out and then leave it at that, they may just make the decisions for themselves to walk through the door and buy.
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Matt Faustman is the CEO at UpCounsel. You can follow his business insights on Twitter at @upcounsel.