Not loose enough, by Getson's relentless standards. He'd like to see Benton use its option to increase its investment to $5 million--and soon. After that, he knows exactly where his next milestone awaits. "I'm going to raise $10 million, and then I'm going public," he announces. "I'm young, and this is only my first deal. It's not even the best deal I'm going to offer them."
Joshua Hyatt is a senior editor at Inc.
You may have already invested $10 million!
When it comes to prodding his investors, Howard M. Getson isn't above using what he knows about martial arts. Not that he resorts to chopping, shouting, and sweating. For him that would be much too subtle.
On August 13, 1996, Getson--in the midst of a $2-million private placement that was progressing "very slowly"--dashed off a letter to past and potential investors using the same principles as a direct-mail piece he had received, which touted a martial-arts video. Three days later software-maker IntellAgent Control Corp., of which Getson is president and cofounder, hit its $2-million target. "I crafted it so carefully it looks like a business letter," he says with abundant pride. "But it's really a well-thought-out marketing piece." Here, Getson uses excerpts to dissect his performance of that not-so-delicate magic:
1. "Your support and trust helped us get here. You should be rewarded."
Translation: By lauding his investors' (and potential investors') "support and trust" in the memo's opening, Getson believes he's creating a sense of obligation on their part to reciprocate. Reminding investors of their previous involvement also brings out their natural urge to be consistent. "If they have already invested, they want to believe they were right before," Getson says. That's certainly more comfortable than admitting they were wrong.
2. "As we close out what probably is our last round of private fund-raising, Dan Jobe (our CFO) and I agreed that this is the most undervalued financing the company ever agreed to accept....Since the valuation is so favorable, we felt obligated to offer you the opportunity to participate."
Translation: As the makers of any hot product will attest, scarcity creates its own demand. "This is saying, 'Next we're going to go after institutional money. Here's the last chance for an investor like you,' " notes Getson. And at a rock-bottom price, too--or a nonnegotiable one, anyway. By suggesting that the stock is undervalued, Getson points out, "I'm giving you a compelling argument that says you are getting a good deal. It also means you can't negotiate with me."
3. "Here is your copy of the letter I sent to key investors this round....Enclosed is a reprint of a chapter in a new book... I think it will give you a good understanding of what we do and how we do it."
Translation: Including the letter enhances investors' feelings of exclusivity. "It gives them the sense that they are looking at something that other people wouldn't get to see," notes Getson, who also plastered the word CONFIDENTIAL at the bottom of the page. "They become insiders." As for the chapter, third-party endorsements go down much easier than first-person bragging. There's something Getson doesn't mention in the letter, though. "I helped write the chapter in the book," he says. "This way, I get to tell them how the company is doing great things, but without me saying it. They figure if an industry analyst is willing to say those things, it must be true."
4. "Our product is one of the best-selling enterprise relationship management systems for corporate workgroups. Our current platform of choice is Lotus Notes. However, early next year, we will be releasing a version that will work with Microsoft Exchange....Even today, the Internet is an important part of our strategy."
Translation: Since not all the letter's recipients possess technological savvy, it stands to reason that they will consult their better-informed friends. Getson is betting he knows the answer they will receive: Lotus Notes is fine, but you can't bet against Microsoft. And what about the Internet? "Even though we're the best in one space, we're telling them that we'll use their money to invest in new spaces," says Getson. "Manifest destiny is important."
5. "Now is a great time to invest. I encourage you to invest at the level you feel most comfortable. Please complete your subscription agreement and send it in to us....Please decide to invest more with IntellAgent Control. Look over the Private Placement Memorandum and fill out your subscription agreement today."
Translation : To close the letter, Getson alternates between openly brash statements and softer ones, each conveying the same basic message: IntellAgent Control wants your money. Now. "I make an incredibly bold statement, then I smile in case somebody is upset," he says. "Suddenly, for that person, I am a nice guy again. I'm telling you, this is artful. I'm not just some shyster sending them a direct-mail piece."
