Recently, my company graduated from the 500 Startups Accelerator Program. As I expected, demo day and the week after was complete madness. I found myself having 5 meetings a day one after the other, and I noticed it started becoming a distraction to running my company. Although fundraising is not that much fun, it's always nice to have investors chasing you.
With that said, I quickly noticed how much time can be wasted raising funds. Most investors love to take meetings, but they like to wait a long time before cutting a check. As an entrepreneur, every meeting you take pulls you away from your business, and in your case time is not your friend. Investors can wait as long as they want, as an entrepreneur you need funds to keep the engine moving for your business fast.
To be most efficient in the fundraising process, I've listed some advice below. These tips will help you get the most out of every investor meeting and will help you close deals faster.
1) Get to a yes or no as soon as possible and move on
Many investors won't tell you no. They'll either act really interested and then slowly stop responding, or they'll say maybe. Both of these scenarios are a huge waste of time. Avoid the investors who won’t give you straight answers.
When investors show interest and it seems like they're ready to put in money, email them a term sheet and move one. If they don't respond to the email, you can follow up once but after that it's time to go to the next one. If you're going to really go out and close a round of funding, you need to be building a large pipeline of leads. That way, moving on from a maybe or a no is a lot easier. Investors can smell desperation a mile away, and to them being too needy for money is a huge red flag.
2) Stick to the schedule
Not sure if it’s just in Silicon Valley, but it seems like almost every investor comes 5-15 minutes late to meetings. As an entrepreneur you learn to live with this, but then you also run into investors who cancel last minute. They then follow up asking you to meet the same day a few hours later.
This should be a major no no for you. If you're raising money, your schedule should be booked. And when it's not booked, you should be helping out your team. In these situations, take a stand and reschedule the meeting for a different date that fits your schedule. You may think that not bending over backwards to meet hurts your chances at closing funds, but in reality the opposite is true. Investors will respect you if you let them know you're busy, and you cannot move things around last second for them.
3) When you get a commitment, close the deal
When I have a meeting with an investor and he or she shakes my mind to commit to the round, I don't waste time. As soon as the person leaves, I send him or her my term sheet and add him or her to Angellist. In the email with my term is sheet is the routing information, and I end asking if there's anything else needed to get the papers signed.
The reason I do this is because once an investor commits to our round, I want to get the money in the bank and move on. Not until the term sheet is signed do I feel that an agreement has been made. With that said, almost every investor (especially in the valley), will not give you a commitment unless he or she is serious. Reason being, every entrepreneur in an accelerator or incubator talks to one another. At 500 Startups, if an investor pulled out of a deal after signing a term sheet, we'd all tell one another. No investor wants a bad reputation like that, so it's rare someone will sign a term sheet and then bail. But until you get that signature, make sure you see the deal all the way through before celebrating.