Capital raising for startups operates under the same principles in which our entire economy follows - supply and demand.
If only a couple investors are interested in your startup, you won't have a lot of leverage in the negotiating room.
Conversely, if you have 20-30 investors interested, you'll be in a much better position to call the shots when it comes to monetary amounts, company valuation and control.
Creating a fear of missing out (or 'FOMO') is key to raising the demand of willing investors in your startup. People want to invest in things that other people want to invest in.
So, how do you create FOMO?
Create a list of 100+
If you take the approach of only asking your top 3 ideal investors, you will find there is a good chance they won't follow through.
It may seem natural to sugar coat the challenges you have faced on your startup journey, particularly when talking to potential investors. But investors will often see through this.
Be transparent about the ups and downs of your entrepreneurship journey:
(a) it builds trust and understanding with potential investors around your business.
(b) it shows you have plenty of options. They know they’re only 1 of many people you are bringing on the journey.
Leave the Instagram filter for Instagram.
Your lead investor is the first person or company who invested in your startup.
They generally do a high level of DD (due diligence) as they're the first in and assume a high level of risk.
The more credible or note worthy your lead investor is, the faster your round will be. It's not easy to secure a killer lead investor but if you do, they are worth their weight in gold.
Setting a deadline for your round is a great hack for creating FOMO. Notice how every special or offer has an expiry date?
If you leave it open-ended and people can stay in the “maybe” basket forever. Set a deadline and get a quick yes or no. Setting a deadline is particularly powerful when you have a lead investor.
e.g. "We've just secured this amazing person/company/fund as our lead investor. They're investing $100k - we're now opening our $300K pre-seed round - so 1/3 is already taken. We're looking to close out this round in the next 4 weeks. If you'd like to see our deck or chat further please let me know as soon as possible."
If you would like to talk to someone from Pitchblak about getting investment for your startup, click here.
If you are interested in investing in awesome startups, click here.