1 min read, from the “Fundraising Process” series
As you gather your list of investor prospects and progress them through the funding “funnel”, it will come time to close an investor. But how?
Some investors are transactional. They look at the deal, and then make a decision.
Most investors, however, are not. They look at the deal and continue to study it for evidence of traction and momentum.
Because of this, it is important to provide continuous updates showing progress and reminders that you are still actively raising funds.
The lead investment is the hardest to close, so that it will take extra effort.
No one wants to go first, and for your fundraise, you are looking for a lead investor who will take that charge.
After that, you have the benefit of saying, “we have $150K of our $1M round closed.” This is the first big hurdle to overcome.
Once you hit the 50% mark, you’ve achieved your second hurdle. After 50% has been raised, it gets much easier to raise the funding, as the perceived risk that the round will not close goes way down.
At some point, it comes time to close an investor. A few techniques include:
FOMO: Near the end of your raise, you’ll have some investors who are still on the fence. Scarcity helps motivate people to move along. In closing the round, you can release a statement saying “$850K of our $1M round is closed with only $150K left.”
Incentivize: In some situations, you can offer an incentive to investors to move forward. You can offer a better deal to those who close before a certain date. I heard one entrepreneur who offered two warrants if the investors closed in 60 days, one warrant if closed in 30 days, and no warrants thereafter.
Investors who wanted to be in the deal would make an effort to get their diligence done and their investment in.
Hall T. Martin is the founder and CEO of the TEN Capital Network.TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: firstname.lastname@example.org