When raising funds, relationships count
“Money isn’t hard… it’s about relationships and process”
Linda Jenkinson is a serial entrepreneur who has built three multimillion dollar companies – all seen through to successful exits – and raised over $300million to date.
How did she do it? She attributes her success in part to the network she established and bonds she formed from the beginning of her career.
“Relationships open doors,” said Jenkinson. “It’s that simple.”
Raising funds isn’t just about taking money from the closest person willing to invest in your business. It’s an ongoing give-and-take for the duration of the deal and well beyond.
Investors should be bringing more to the table than just capital, including insights and experience. Building a strong connection and trust is the way you’ll get the most out of your relationship – for both parties involved.
“And I never had to pay for gin and tonics,” said Jenkinson. Certainly a plus.
Seek to attract people, not dollars
It takes time to raise capital for your business. You’ll be spending time with your potential investors – the better part of a year in some cases – so they should feel like your team members. And getting the right people is more important than what the numbers are saying in nearly all cases.
Ben Williamson agrees; he is cofounder of dealPad, a company that helps investors find, manage and close financial deals.
“Do I like them? Do I want to work with them? Do I trust them?” said Williamson. “You need to remember that investment is the outcome of a great relationship, not the beginning of one.”
Just like anything else, it’s a process. Not a one off, ‘can I please have some money?’ – that’s simply not how relationships work. At least, not healthy ones.
You need to put in the time to get to know your investors. A ‘one-night stand’ approach will get you nowhere.
Understand who’s looking to invest in your business
Look through their portfolio and talk to the founders who have worked with their firm. You should try to learn as much about them as they’ll be looking to learn about you and your business.
And put them to the test. Jenkinson compares the process to Survivor, where you put your investors through a set of actions to find out who really has strong character and integrity.
You need to know that your investor of choice will stick it out during the bad as well as the good. “You might have a swanky ‘I’m worth a mill’ investor who never shows up for board meetings,” says Jenkinson. “I’d make them shear a sheep – see if they’ll really be there in the tough times.”
First impressions count
Allison Robinson, founder and CEO of The Mom Project, credits her father for instilling this value in her, which she lives by. “You never get a second chance to make a first impression,” she says. “Be ready to shine.”
To put your best foot forward, you need to be ready.
Despite the pace of business and threat of disruption today, most companies still take 3-9 months to get ready to present themselves to a third party. That’s nowhere near good enough.
Whether it’s failing to reach your highest valuation, wasting significant time and cost, or being completely in the dark about risks and opportunities, not being ready is a massive risk to your raise. Your gambling with your business, career and reputation, simply because you aren’t aware – because up until now, there hasn’t been a better way to do it.
To reach your full potential, readiness needs to be a constant state. Our Material Information Platform is automating readiness to give you full visibility of all the risks and opportunities facing your business – before a third party gets involved – so that you’re confident you can wow them.
The capital raising experts quoted above were among the esteemed guest speakers at our first Readiness Series events in Sydney and Chicago last month. Their tips and advice were invaluable, and you’ve only had a small preview. If your capital raising plans are starting to take shape, reading this article is without a doubt the best place to start.