When you start raising money for your startup, people will tell you, “If you want advice, ask for money. If you want money, ask for advice.” You might dismiss this as generic, cookie-cutter advice, but there’s definitely some truth to it, particularly the second part.
If you want money, ask for advice.
Recently, I was in touch with three entrepreneurs (two via the phone, one via email), and in all three cases they wanted to give me an update and ask me some questions. All three are fundraising. None of them asked for money.
Maybe they don’t want my money. Maybe they don’t know I’m an investor (which seems unlikely). Or maybe they’re leveraging a little psychology to their advantage.
After each of the interactions, I thought about the startups and entrepreneurs for a few days. The updates were all positive (although they openly talked about outstanding issues too, they’re not being dishonest about things), and that positivity grew inside my brain over time. I was left…wanting more…
There’s a big benefit to updating people (advisors, investors, potential investors, etc.) on a regular basis.
Maintaining communication gives you the ability to shape and direct conversations and perceptions. You stay in control of the situation instead of leaving things to other people’s imaginations. My perception of the three entrepreneurs and their startups improved after getting an update. In one case, the update led me to ask if I could invest. After signing the papers and sending the money, I realized that I was manipulated (in a good way!) from a “no” to a “yes”. It’s so easy to say “no” and if you ask me right away if I want to invest that will likely be my answer, because I haven’t had time to let the opportunity process in my brain. This is especially true if we don’t really know each other, and there isn’t a strong enough relationship.
Build relationships over time and nurture them.
Fundraising starts long before you actually fundraise. The actual fundraising process should be as compact and tightly run as possible. It’s a process that you want to maintain control over, and diligently march through. Fundraising can take a long time and kill a company’s momentum if it’s not done right. But before you ever get to fundraising, there’s huge value in building relationships. That’s how trust gets built, and that’s how you can own the perception of your startup vs. the investor crafting it for himself.
Find an angel or two that can serve as mentors/advisors, even in an unofficial capacity. Lots of venture capitalists are very approachable as well and willing to help people out. Make sure you establish a regular channel of communication to feed them information about what’s going on. Ask for help. And when it comes time to kickstart the fundraising process, you just might just have your initial investors chomping at the bit.
People like feeling wanted. And people like being “in the know.”
This may seem like pop psychology (or Psych 101), but it works. People like to be wanted, appreciated and listened to. Asking for help is an easy way to indicate to a potential investor that you value more than their money, which most investors appreciate. And trust me, it feeds the ego too.
Investors also like to know what’s going on all the time with everything. It makes them feel like they’re at the epicenter of the action. It’s an ego boost. But it’s also strategic–knowing what’s going on usually means having access to more deals, being able to get into the deals you want, and being able to add more value.
Asking for advice and providing regular updates is tantamount to wooing an investor.
And who doesn’t like being wooed once in awhile, right?
This might not always be the case. Investors are busy and they’re often bombarded with tons of new opportunities. But once you find a potential investor that’s willing to help, you need to put the effort into keeping that person up-to-date, so they feel connected and wanted. You have to craft your startup’s story in their minds for them, guiding them to building the case for investing (vs. quickly saying “no”). Investors will do their own homework and diligence, but you can absolutely shape the process in a positive direction for yourself.
Photo courtesy of digitalsextant.