87% of Startup Founders Totally Miss This

SO many people just don’t understand that a Capital Raise is a SALE. There’s just so much going on in the market with people spreading misinformation that capital raises are some arcane thing that no one can understand.

A capital raise is a sale. And it’s not a one-time thing.

When I was an investment banker I had a client named Simon. Simon comes from steelworking, or as he put it, “managing a hundred hair-ass welders”.

When we kicked off, Simon was a total novice at raising equity. Sure, he had some lending relationships but the big, multimillion dollar equity raise he was getting into? Yeah, never done that before.

Even as a brilliant and seasoned entrepreneur, with an amazing strategy that would beat out any and every competitor, Simon struggled raising capital.

We went through meeting after meeting.

“Not for us”

“Thanks for coming”

“Let us know how it goes”

“Come back to us for the Series B”

“Let’s stay in touch”

…Yeah, not ideal. Not ideal at all.

One day, we had 5 meetings with investors in London. Packed. Something was definitely going to hit…

Until it didn’t. Not a single true indication of interest.

After all the meetings were over, I took Simon out to dinner. I didn’t hold back.

“You’re not getting investment because you’re not closing. It has nothing to do with your business not being good, or you not being a smart guy. You’re just not selling.”

The real issue: he wasn’t setting up for the close. He got through all the details of the business, the market, the plan… everything. But no hard close.

When you aren’t explicitly asked for money in a perfect manner, then why wouldn’t your response be: “Well that’s really interesting, thanks for coming by.”

?!?!!?

So here’s what was the result of my little heart-to-heart with Simon:

A capital raise is a sale, just like any other. And the only real difference is that you’re asking for a larger check on a single day.

That’s it. Other than that, it’s pretty much the exact same thing.

So, what happens in a sale? You have a period of discovery, you have to generate trust, you have to convince the prospect that what they’re doing is the right decision, and ultimately you have to go for the close which ends up with an exchange of something you give, for their money.

When you boil it down, there’s really not that much difference.

The investor wants to understand your business first and foremost, then they need to trust you, and Then you need to convince them that your business is the right business, and then you need to come out and say exactly what it is you need and where you’re going to spend that money. That’s pretty much it.

So coming back to that sale, why is it that entrepreneurs and business owners are treating a cap raise like it’s just some mysterious, unknowable process?

It’s the exact same thing!

So many business owners get bogged down in the technical details about their business that they lose sight of their final objective. Which is to raise capital.

Business owners that get off-track are not going to create a powerful story for investors. They actually slow down their process immensely, or stop completely.

Take Jim for example. Jim came to us with a pretty common problem among entrepreneurs: “I’ve been at it for so long, I’m just too close to the business to put together a really strong deck for investors. Ask me to sell any customer and I’ve got a 90% close rate. But creating my investor story… I just don’t know where to start or what I should talk about!”

“I know exactly who I want to approach with this, but I just can’t do it with my deck looking like this. It’s just not gonna happen!”

Really it’s more common than you think. A lot of people have trouble zooming out from their businesses, that they end up trying to sell their products or services to the investor. (we’ll come back to this don’t worry!)

This is a major problem because you only get one shot to nail your story with investors. If that investor who can write you a million-dollar check says no to you, chances are there’s nothing you can say to turn them back into a yes. 99.9% of the time, a no is a permanent NO.

Really, there’s an antidote for this, and it’s one of the things we teach. How to zoom out and just focus on the core concepts that’re going to hit all the value points an investor needs to see in order to understand where all your business’s hidden value is.

Unless they ask for it (in the Q&A you’ve so carefully set them up for)... investors don’t want 10 minutes of f**king detail about your system architecture/features/academic achievements.

They just don’t.

But what do they NEED to see?

That you’re as capable of selling your business to investors, as you are at selling to customers.

Why?

Because one day, they’re gonna want to exit. And it’s a hell of a lot easier to get them invested in the first place if you show them that you’re going to crush it when it’s time to sell too.

Because you know exactly what points to hit on, how much, in what order, and how to keep that Investor (read: CUSTOMER!) moving along that line toward the close.

So why not just push for the close and make it extremely easy for investors to get on board with you, and write you that Magic Check?

What I teach is pretty simple. And I say it simple because it’s an exercise in keeping your own story simple.

Much harder than it sounds.

In the following series, we’re going to get into some of the nuts and bolts that completely streamline a capital raise process, and just make it super easy for an investor to say yes, and just ask you where to send the wire.

It doesn’t just start and stop with the pitch deck. We’re talking about from first contact, to signature on the subscription agreement, and everything in between.

A pitch only lasts 6.5 minutes (or at least it should)…

But the process AFTER the pitch can actually take up to 9 months for those who don’t know what they’re doing.