Raising money is a sales process, one in which a very small percentage of customers want what you are selling. Following on “If you think it… they will fund“, if you actually want that funding, you’ll need to talk with investors.
How many investors??? More than most entrepreneurs think.
A conversation with a potential fledgling led to this post. He was frustrated at failing to find any seed funding, and when I asked him how many investors he had talked to, his answer was 40. Forty to him was clearly a lot. Far more than he thought necessary.
I too am an entrepreneur, one who has spent over 20 years starting companies, and most of that time raising money from investors. I can thus relate to how hard the process is, and how much of a distraction it feels vs. running the business. None the less, the only way through the fundraising process is by talking with investors. A lot of investors.
For my own fundraising effort, I keep detailed records on every potential investor I’ve ever talked to. Looking back at one of my startups, that list grew to 800 people before the first year was over. Not all of those people were investors, but you never are quite sure until you ask, and even if they are not investors themselves, they may be able to introduce you to an investor or two that they know. By the time the company was three years old, that contact list included over 5,000 people in total, and over 400 potential investors.
Fewer than 1 in 10 of those 400 investors made an investment. That means fewer than 1 in 125 of those 5,000 people turned out to be actual investors, willing to write a check to support a conscious company.
That 1 in 125 ratio is just 0.08%. A tiny percentage, but one that is not unreasonably low when it comes to fundraising.
Which leads to my advice for entrepreneurs who think they are raising money. Set aside time every day to find at least one new potential investors. 1 per day for 300 working days per year is just 300 potential investors. Match my 0.08% close rate, and you’ll have two investors by the end of the year. If you need more investors, find 2 or 3 per day.
That may sound like a lot of work, but it is two more investors than you have today. And once you have any investors, the process gets a little easier.