Every entrepreneur hates raising money. Raising money is like being stuck in the Lincoln Tunnel on a weeknight just after the St Paddy's Day parade. Yes, that happened to me last week. Raising money is actually worse.
And it's even harder to raise money now because the fists around those wads of cash are getting tighter. Companies are experiencing "down rounds." Valuations are being cut. Stock markets are looking more uncertain. Trying to raise money with a grand idea can seem foolhardy.
Which is the perfect environment for a guy like David Balter who has subjected himself to the torture of raising money several times. His latest fundraising is for a company called Mylestoned, and it took him only 56 days. Years before, he tried raising money for another company and, in his own words, about 200 investors told him to "go screw off." I think sometimes the harder it is, the more fun guys like him have, incomprehensible as it seems. Serial entrepreneurs are a strange species.
From all those experiences, Balter has a few words of wisdom for any entrepreneur looking to raise money. Here are his top five tips:
1. Be loyal: One consistent thing that Balter has done time and again is go back to his original investors to raise funds. Some have invested again, others have not. Not only does it give you momentum if you have investors repeatedly investing in you, it also shows you have a great reputation.
2. Desperation smells. So what if you don't have anyone biting at your company? Keep going, but don't look desperate. "Desperation smells like body odor, and other investors can smell it like horses smell fear," Balter says. If an investor doesn't seem interested on first pass, Balter says move on. Don't give off the feeling that you absolutely need them to survive.
3. Get a big commitment early. Go to your easiest investors first--the ones who know you well--and try to get as big a chunk out of them as you can, Balter says. Make them your lead investors as early as possible. Once you have that validation, getting others on board is so much easier. It takes a lot to get that lead, but it's extremely critical you do.
4. Close the crap out of it. No commitment is a true commitment until the documents are signed and the funds are wired. Balter says he gives two weeks from commitment to signing, and does everything he can to close the deal. "If anyone didn't seem responsive within 12 hours, I called them," he says. "Damn it people, use the phone to close." In any deal, momentum is important--if you wait too long to close, a deal can go stale pretty quickly.
5. Plant the seeds for the next raise. As an entrepreneur, you're always raising funds. Once you close a seed round, your series A fundraising begins, when you meet with institutional investors. A mistake people make, Balter says, is not meeting with them until it's too late (i.e., you're actually asking for funds). You should be meeting with these institutional investors long before that, having coffee with them and establishing a relationship, so that by the time you're serious about pitching them, you've got some goodwill in the bank. One caveat: Make sure you steer clear of turning these early meetings into pitches. You'll find yourself being told "no" before you're even ready to ask.