How to Hack Your Way into Getting an Investment Deal with an Investor
Note: This post was originally posted on Medium by our CEO, Ray Walia, on August 24th, 2015.
With every entrepreneur comes a unique story of success, failure, confusion, late night discoveries, and more. We started Launch Academy with the goal to create a supportive network for startup entrepreneurs to build and develop their startup idea — and eventually, for them to become investment-ready. With this mindset, we’ve incubated over 350 early-stage technology companies who have gone on to raise over $38M in funds and collectively, created over 500 jobs. While this was a huge milestone for us, we’ve also told our startups to be very strategic and selective when seeking investment.
With the launch of Victory Square Ventures this past June at the Traction Conference, it was our opportunity to open the doors for early-stage companies — specifically in entertainment, health and sports. I’ve seen countless entrepreneurs walk through the doors of Launch Academy — some becoming wildly successful or others, hitting a brick wall — but through all the ups and downs, all have managed to pick themselves up, and carry on. One of the biggest oversights I’ve seen from first-time entrepreneurs, however, is that they don’t understand the process of getting an investment.
People automatically think, “I’m ready to raise money and start knocking on doors to get an investment” — but that’s the worst time to look for money. Angel investors and early stage VC’s don’t just hand over money to people they don’t know (while this seems obvious, entrepreneurs often question why investors take so long to give in). You need to build a relationship with the investors you want to work with because investments are ultimately a partnership between the founders and the investor.
In the words of Pitbull, “Ask for money, get advice. Ask for advice, get money twice”.
If you land a meeting with a reputable investor, they’re likely taking the time to meet with you because they’ve been referred to you from someone in their network or, they are interested in your industry and want to hear what you have to say and provide some insight and feedback. I’ve lost count of how many times I’ve heard entrepreneurs talking about how dejected they are after a first time meeting with an investor expecting interest in investment, but only to come out with some advice and feedback on their company and team.
Now, on the flip side, if you reach out to investors asking for feedback, they will give you advice and feedback — then the ball is in your court, it’s your turn to determine if you agree with the feedback and advice and if so act on the feedback you’ve received. This is also the time to prove to yourself and the investor, whether you’re serious about your company and the steps you are willing to take towards progress.
The next logical step is to take the results from the adjustments you’ve made and go meet with the investor the second time. If you land a meeting the second time, it’s a good sign they are truly interested in you and your company. For the second meeting, go in with results — good or bad — that way, you’ll get immediate feedback on the next steps for your business.
For good outcomes, they’ll give you more advice, and for bad outcomes, the opportunity to discuss strategies will arise, or clarification on any miscommunication.
Most investors and advisors are Type A personalities, so they’re going to roll up their sleeves and analyze what went wrong. Maybe you executed wrong, or I, as the investor gave you the wrong direction — but they’ll want to dig into the problems that resulted from the feedback they provided and find solutions.
If that scenario happens for you, green lights should be going off. The investor has shown that they’re vested in your outcomes, and because they want to see positive outcomes, they will analyze the negatives and help build a solution. That’s a tell-tale sign that this person has an interest in you and your business.
You also have to realize that this just doesn’t happen over a week — it takes months at a time — meeting with them in person, discussing outcomes and strategies, but keep in mind that their lives don’t revolve around you and your business. They may have other entities or projects that they’ve invested in, or they may have families to prioritize — but when you start getting into the cycle of taking in advice and presenting actions and outcomes, you’ve now established an advisor-mentor scenario with this investor.
When you’ve reached a reasonable time to solicit investment, this person now knows how you perform, how your team executes, and the outcomes you can produce — and will be waiting for you with a cheque book in hand.
There are also scenarios when they maybe giving you their time and energy for advice, but can’t write you a cheque at that moment in time. A few reasons may be that you’re not in their preferred industry, but they would likely recommend you to a friend — and what better referral can you get from someone who not only knows you but can find someone else to help your business grow. Other scenarios could be bad timing. They may be dealing with other investments, but if that investor has invested their time on advising you, chances are they will find a way to help you.
That’s the key to what we are building with Victory Square Ventures — at the core, not only are we investors but entrepreneurs as well. We work directly with the startups we invest in and help advise them on the process of growing their companies and position them to compete globally.
There’s no growth hacking strategy to get an investment from an investor — but rather, see it through the eyes of the investor on building trust.
Always think, if you had the same amount of money you were asking for, would you blindly write a cheque for someone you don’t know? Trust in the process of building a relationship with the investors you want to work with — because, in the long run, building on these relationships can pay dividends in the years to come for future opportunities.