It’s not often reported how stressful and painstaking a process fundraising can be for an entrepreneur. The headlines are usually reserved for the lucrative conclusion to an investment round. However, sleepless nights abound as business owners desperately seek the injection of capital that will help get their enterprise off the ground or propel it to a whole new level. Despite this, maintaining a level head is absolutely essential if an entrepreneur is to stand any chance of securing that all-important investment. Here’s our five-step guide to keeping cool under pressure.
Do your research
Before approaching investors, an entrepreneur must have the utmost confidence in their business proposition and know exactly where they’ll be turning for funding – and why. A thorough understanding of the current investment landscape should ensure they never have to go back to square one. “There are many ways to raise funds and often mistakes are made in the initial stages, whereby the sheer ignorance of those seeking finance leads them down the wrong path, causing much frustration and confusion later on,” says Bill Morrow, founder and CEO of Angels Den, the investor and crowdfunding platform.
“The first undertaking of the process is to find out as much as possible about the different avenues, the impact they will each have on the business and the way in which this would be managed,” Morrow continues. “Those who go blindly into any kind of investment, without undertaking adequate financial forecasts with figures which crucially they must fully understand, will rue the day they didn’t take the time to look into it.”
Expecting a speedy response from a potential investor is a bit like expecting a rain-free British summer. Entrepreneurs are therefore advised to exercise some patience when awaiting a decision. “Throughout the process of raising funds, we had to keep reminding ourselves that investors don’t move as quickly as we’d perhaps have liked,” says James Hind, founder and CEO of carwow, the car-buying platform. “There are multiple decision-makers and various levels of sign-off on the VC’s side, so it really is a waiting game. As long as you have that in the back of your mind, you will be able to maintain a certain level of sanity.”
Engineering a positive outcome from every meeting can nevertheless help relieve some of the stress. “One of the most uncomfortable moments is trying to get a definitive response from an investor,” says Avin Rabheru, founder and CEO of Housekeep, the cleaner-booking platform. “You should seek to leave meetings with a clear decision, or at least definitive next steps. You want to know how much someone will invest and any conditions attached.”
Spread the load
When it comes to fundraising, putting all of your eggs in one basket probably isn’t the best idea. That’s not to say an entrepreneur should adopt a scattergun approach – but targeting a number of suitable investors, as opposed to just one or two, should boost one’s chances of success and lessen the prospect of disappointment. “We made sure that we had multiple VCs interested, so that we weren’t reliant on just one,” says Hind. “If a VC expressed interest or verbally committed to injecting funds, we didn’t rest on our laurels and stop trying to catch the eye of other potential investors. We kept pursuing other funds to ensure there were as many interested parties as possible.”
And for entrepreneurs hoping to get multiple investors on board, there’s a strong case for starting from the top, argues Rabheru. “Of course, healthy competition and momentum always help,” he says. “I’d always aim to get your most supportive and highest value investors on board first; others will then soon follow.”
Dedicating all of your attention to fundraising can backfire when it means you’re taking your eye off the day-to-day operations. Making sure the company is performing at the highest level during the fundraising process is essential – but it can also help focus your mind elsewhere throughout. “Distraction is a great technique to stay sane during the fundraising stage,” says Hind. “I made sure that the investment wasn’t the only element of the launch that I was focusing on. We put our heads down and carried on growing the business through signing new partner dealers, improving the product and growing the user base.”
Churning out some positive results – or announcing a lucrative new deal – can also serve to reignite the interest of investors who may have gone quiet for a couple of weeks. “While closing your funding round, positive PR or customer wins serve as a gentle reminder to investors to complete the deal quickly, before they miss the opportunity,” says Rabheru.
Don’t do it alone
If an entrepreneur only has his or herself for company during a fundraising process, there’s more chance of emotions getting in the way of rational business decisions. Having a team of trusted advisers or fellow business professionals around you at all times can deliver some peace of mind. “Something which really helped during the investment round was to talk with advisors and entrepreneurs who had been through the fundraising process for psychological support,” says Hind. “If you’ve never sought investment before, it pays to speak to someone who has.”
Morrow concurs with this point. “Without the right support, the process of fundraising can be jaw-clenchingly frustrating,” he adds. “Many business owners will be all too familiar with the dreaded ring-arounds and begging pitches, just to feel like they are always met with the same blank facial expressions.”