This week’s million dollar monday focuses on one big question: How do I sit across from someone, look them in the eye and ask them to invest in my business?
Knowing when and how to raise money can be one of the most difficult aspects of starting a new business, especially for women. Yet there will come a time in your business cycle, especially during high growth periods, where you will need capital to take your company to the next level and if your business is not yet throwing off cash, you will need to bring in investors to help you have the runway to scale up. No matter how much training you have and how well you know your pitch and your numbers, when the time comes to “make the ask,” it can be intimidating.
Most women bootstrap their businesses (meaning, just keep costs extremely low and self-fund) rather than raising capital. I think a big reason is that many women try to (and even feel that they must) do it “on their own” instead of seeking the investment, which limits their growth. Most women start their businesses with six times less capital than men, and their revenues are just 27% of businesses run by men in the same industry. So how can we start to change this? I want to help you learn how to ask for investment, and propel your business forward. For a quick overview of the types of capital and tips on where to begin, read my Top Ten Tips for Raising Capital or sign up for my next Million Dollar Women Workshop (New York City, December 9th).
My secret to fundraising
I recently was talking with a good friend and angel investor of mine, Isabel. She had asked me what was my secret to fundraising? I thought about it for a moment and answered that I don’t think I have a secret, but I also don’t think I have ever “asked” for money. I’ve only given people opportunities to invest in projects I think are fantastic and that they would be proud to be associated with. I never felt like I was hat-in-hand; whether it was fundraising for nonprofits or seeking investment for my company, I always approached it from the mindset of, “I’m bringing you this exciting investment opportunity. Do you want in or not?” Sometimes people said no and that was okay. Maybe it wasn’t the right fit for them. Plenty of others said yes.
The 3 Cardinal Rules of Asking: When, Who and How
1. When: Try to be 90% sure that the person will say yes
Making the ask for money should come after a well-executed “get to know you“ period, which usually lasts a few weeks or months. Every so often you get lucky and someone jumps right from learning about your company to making an investment, but those are the outliers. During the “get to know you” period (officially called “due diligence” by investors), it’s your job to keep moving the conversation forward, sharing more and more information about the company and your vision that will lead to a yes and a check. If you’re walking into the “ask meeting” less than 90% sure they will say yes, then you probably haven’t spent enough time getting the person comfortable with your model, your strategy and who you are. Also keep in mind that no’s are a natural part of the fundraising process. “No” often doesn’t mean no. It doesn’t mean that your business is not a good investment. No’s can mean “I don’t know enough yet” or just “No, not now.” It’s normal to get 20-30s no’s for every one yes, so when you hit a No speed bump, just keep driving! Some of those no’s may even turn into yess-es down the line, if you are gracious about the first no, make efforts to keep in touch, and regularly share news about the milestones your company is hitting.
2. Who: Find a “natural partner”
So many factors are at play in person’s decision to say yes to you—including his or her business and personal experiences. If you’re having lunch with an investor tomorrow and you find out she has just lost half a million dollars in the stock market the day before, or his sister was just diagnosed with cancer, do you think that will affect his decision about making an investment? Of course it will. This is why you need what they call in the nonprofit world a “a natural partner.”
A “natural partner” is someone who knows the person of whom you’re making the ask—the best ones are mutual friends, colleagues or another CEO who was funded by this person—and who can touch base with you about what is happening in that person’s life prior to your ask. Timing can greatly influence whether someone says yes, and a natural partner can help you determine whether now is the most opportune time to make the ask and how the person’s other investments are doing.
You won’t always be able to find this magic person, of course, and if you don’t have access to a natural partner, you can still look at the investor’s social media and/or blog if that is available, to do research. It may not be the in-depth, ultra-personal insight a natural partner can provide, but finding out as much as you can will help you understand where they’re coming from, how and when you should approach them and whether this is optimal timing for them to say yes.
3. How: Adopt a peer to peer mindset
What often makes or breaks an ask is the way you position yourself with the investor. You can’t go in feeling like they hold all the power and you’re the eager entrepreneur who needs their check. The fact is that this person has funds to invest and you have an opportunity worth investing in. A peer mindset allows you to look at the situation like an exchange, not an ask, because both are equally valuable. Without you, he or she will not be able to make a great return (have you seen bank interest rates lately?). So think of it as an exchange and be sure to project confidence, which I know can be especially challenging when there are big age or social class differences. If you need help getting into a place of confidence, I encourage you to read my previous blog on Closing the Confidence Gap.
Why are women so hesitant to make the ask?
Let’s ask Amanda Palmer, lead singer of the Dresden Dolls and creator of the most successful Kickstarter campaign ever launched by a musician ($1.2 million)! She addresses this question in her book The Art of Asking: How I Learned to Stop Worrying and Let People Help and in her popular TED Talk. Palmer’s book explores why we struggle with asking for what we need, if you think that is one of your issues, I strongly recommend her book. Because the fact is that a woman who wants to take her company big must figure out a way to overcome the fear and anxiety about asking for anything, not just capital.
Making the ask will make you braver
Each time you make an ask you get a little braver. Or course it’s hard! Being brave has nothing to do with being fearless. That’s why one of my favorite #MillionDollarWomen Mantras is “Have the fear. Do it anyway.” Remember, amazing things will happen once you go outside your comfort zone. Good luck making your ask, and share with me what happens when you do!