How to Be a Champion at Capital Raising
We like to think that raising capital is just like the process of winning a Superbowl. However, no team has ever won a Superbowl before first stablishing a set of plays, playing the regular season, reviewing plays after each game, and working on it all over again to improve it.
Plan your playbook
1. Before the game — Prepare yourself
Surround yourself with a good team, it will be the basis of success. Look for a team with complementary experiences, skills and knowledge; positive attitude; solid network of contacts and fully committed.
Do a strategic planning considering the growth of the project throughout the life cycle of the company.
Prepare the offensive play. The ball is in your hands, if you throw it right, you have the chance to touchdown. Your play are the marketing documents of your project or company
-Teaser and investors’ presentation
Define the defensive play or the main terms to be negotiated in the transaction:
-Amount of capital to be raised
-Type of financing instrument
-Company’s capital structure and scenario dilution
-Other terms such as information right, anti-dilution provision, board composition, among others.
2. Know the field — Research
Understand the different types (i.e. debt, mezzanine finance, equity), and sources of funding (i.e. angels, friends and family, funds) that are available for various projects. This depends on the stage of development of the project and the vertical.
Prepare a list of investors who invest in the vertical and geography of your business and who are active making recent investments. You need to understand the investment thesis, its processes and key people.
Play the game
3. Quarterback-coach communication — Networking
Networking with investors is essential, so it would be good if you approached them even before the need of capital. The main goal is to get to know each other, develop a bond, and start building trust in the relationship.
Industry events are good for getting to know investors. Invite an investor for coffee, not to ask for capital but to get feedback on an idea or project.
Ask friends or acquaintances to introduce you to investors. Or instead, you can send cold emails if so, write where you sourced their data from, who you are and the purpose of the conversation.
4. Know the rules, in and out of the game — Culture
A critical element for the success is the cultural aspect. Understand where the investor comes from, his mental structure, values and habits.
Be empathetic, understand its motivations, what it requires or need as potential investment.
Follow the investment process, do not take shortcuts and try to give the place to each of the investors.
Always act with full professionalism and maturity. Reputation is the most important asset. Therefore, never speak ill of anyone, life takes many turns.
Be humble and simple, the road to raising capital is long, and you can run into the same investor on multiple occasions.
5. Work hard-play hard — Negotiation and due diligence
Once an investor is willing to invest, sit down and start the negotiation. In order to leverage your position, you need to have at least a couple of term sheets from different investors.
Define the times and lead the negotiation process.
As the investor does his due diligence on you and your project, do your due diligence on the investor. Beyond capital, what else does he bring to the table (eg commercial opportunities, experience and knowledge, business networks, etc.).
Always remember to look for long-term win-win relationships.
Monitor — Review your plays
6. Go back to each game and analyze the plays — Follow up
Be proactive and periodically search for the investor. It is in your interest to follow up in order to achieve your goals.
Keep the investor regularly informed about the progress of your project. Prepare and distribute a publication with the main milestones, changes in strategy and / or business model.
Learn and improve
7. Don’t be a sore loser — Learn from rejection, get ready and keep practicing
Every year investors analyze lot of projects, don’t be discouraged when they turn down the investment opportunity. Always ask for feedback, be objective and learn from the situation.
Request introductions with other investors. Keep the doors open with all of them, the opportunity could become attractive later on.
Adjust your project or your capital raising process to continually improve.
Win or loose don’t stop training and always play the game
Perhaps raising capital is as hard as winning the Superbowl, it is a slow and laborious process. You will probably be raising capital many times throughout the life cycle of the project, make it part of your routine, keep training and playing. Remember, you have not raised capital until it is in your bank account, just like a game isn’t over until the clock strikes zero.
Hector Shibata. Director of Investments & Portfolio at ACV a global Corporate Venture Capital (CVC) fund.
Ricardo Latournerie. Investment analyst at ACV.
ACV is an international Corporate Venture Capital (CVC) fund investing globally in Startups & VC funds.
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