The well-known adage for startup founders raising money is the phrase – “ask for funding and get advice, ask for advice and get funding”
I recently turned to the ‘other side of the table’. I’ve been a founder of a tech company for the last 3 years, raised over 1m dollars and grew my team and business to relative scale. I’m now managing investments via an angel syndicate. I’m now talking to founders about fundraising and many of the other problems that they face in the early days. I’m also getting pitched, a lot.
Real face of reality
I understand this phrase as a founder, I now understand its full importance from a different perspective. From the investor perspective, it is just as important.
For founders, these words of wisdom are incredibly important, but they have a different meaning. They underline the importance of building a relationship with your investors early, getting to know them and finding people who truly buy into you and your vision. These words implicitly state that cash isn’t a commodity and that you should put the people who invest in you first and their cash second.
These words provide guidelines too, on how to go about the fundraising process; starting the process way before you need money, qualifying your investors by experience and finding people who will add value.
In some ways, this tiny snippet of advice is the only advice a founder really needs on fundraising. It says a lot.
Yet, not every startup heeds to this mantra, and instead, they incessantly pitch Angels and VCs they have only just met, or on LinkedIn messages and cold e-mails. They take the approach where they seemingly do not care who invests in them, cash is just cash.
When I was in crowd
No doubt, I made these mistakes too. I am sure I pitched people I barely knew and asked for money before I’d even asked ‘How are you?’ Thanks to my new experience, I know why this is so important to investors because I know how it makes them feel.
It makes them feel like all they are is a £ symbol. It makes them feel like all they are is money and that the only reason they are valuable is because of their bank balance. It makes them think that you are only bothering to talk to them because they can write a decent sized cheque.
Forget their experience, forget who they are, forget their values and forget how they might help your business. They are just money and you need money. When you ask for funding pretty much straight away then the whole relationship is transactional and material.
I’ve been doing this for 3 months and when I get asked if we’d like to invest after a 20 min meeting it makes me feel pretty worthless. It also makes me angry, because the founder shouldn’t even be asking us yet, how do they know if they even want us as a part of their business after 20 mins?!
Ask for advice first and there is a chance of building a genuine, personal and intimate relationship with an investor which can last a lifetime. Ask for funding first and you’re not only devaluing the integrity of your own company, you’re demeaning the potential investor too.