How to Raise Startup Capital
While scanning the news just moments ago this article caught my eye. Human immortality could be possible by 2045, say Russian scientists. Interesting subject? Yes, but one sentence towards the end contains two extremely important points for capital raisers. Here’s the sentence:
Now, Itskov is asking the world’s richest people for help in financing the project.
What are the two points? Well, if you are going to chase investors you really should know two things. One is who has money to invest? Two, who has the genuine incentive to back your project? The incentive can be either a need or a desire for it.
Now you’re probably thinking, “Well, duh! I knew that.”
You maybe right about that but it’s one of those things that the vast majority of people forget as soon as they start looking for investors. They just assume that everyone will be interested in giving them money so they waste time pitching everyone and their Uncle Wojtus. The results are depressing.
Successful capital raisers, on the other hand, typically have a very good understanding of not only who has the money, but more importantly, the incentive to invest in their projects. This allows them to target individual investors or businesses and develop a customized offering presentation for their targets. A good presentation doesn’t rely on simply offering vague promises of an IPO or acquisition liquidity event at some point years down the road but rather specifics as to how they will benefit and when. For example, if the deal is to be structured as a Revenue Royalty Certificate, the savvy entrepreneur can explain how the financial backer will be repaid their principal and interest and how soon. No more vague promises of a vague liquidity event at some indeterminate point in the future.
The project in the article shows what it looks like when a person clearly understands who not only has the capital but the maximum incentive to fund the project.
If you are thinking of going after investors but have no idea who they are or why they should invest, you are going to have a tough time of it. Ari Gold was right when he observed:
“In this life, no one is going to invest because you think you can.”