Startups: Access to capital is everything.
Access to capital is a process that starts well in advance before you even need capital. Investors typically don’t want to invest in companies that have a few days or weeks to live, because that says a lot about the Founder(s). A credible Founder would never leave it so late.
In order to achieve access to capital you need trust. Trust is a relationship that’s built over time, and does not happen overnight. If you have time you can be patient. If you lack time due to your bank balance, you are forced to “sell” the investment and risk of being too pushy. No investor wants to be pushed into a situation like that.
So how do you secure your access to capital?
From day one, start building relationships and document updates similar to a diary. Perhaps the easiest way to illustrate this is with an example.
Our own example, Rundit: After founded in 2015, we raised a €200k seed round. As everyone knows who have raised investments know; ”It ain’t easy”. The first business generated around €150k revenue, which was nothing substantial but certainly not the millions that we had sold to our investors. Surprise surprise!
An ok idea and a great team is said to be a more favorable investment than a great idea and an ok team.
Most things in life have been discovered by failing on something else. Christopher Columbus was looking for Asia, but found America. Investors invest in people, Founders and the core team. The reason being is because a good team will much more probably figure out a business model that works.
Throughout our journey with Rundit we managed to figure out a completely different business model that would work. However, if we lose our trust with our investors and lose the access to capital now, all of our hard work has gone to waste and Rundit is history.
About a year ago Rundit pivoted its business model which brought us to the present business model and again we needed more capital. Again, huge sales effort was needed before we managed to raise €300k more capital.
In August 2017, we published a beta version of our new Investor Communication Platform. Since that we started to update our investors monthly of our progress. Monthly, we told them what we’ve done, what were the highlights and lowlights of the month and how we were doing financially. So simple as that, we started to communicate.
Now, 2018 January when we started to raise our new funding round everything was much easier. This time, all we needed was two phone calls to our previous investors to make their investment decision. Why? Because of this six months regular communication they knew what we were doing, we had built a relationship based on trust. We seemed much more committed and professional team and the investors felt that we care what happens to their money. All the startup investors invests to the team and the team only, especially seed investors. This is a 100% human business.
Talking to the investors is sales as any other sales. By selling I don’t mean closing a deal by any possible way. It is a sales where you earn their trust and convince the investors that you will do all what is needed that you will look after their money.
All the startup blogs are full of ”10 tips how you succeed in fundraising”. If we don’t think about at alI the actual business case, I think you need only one advice; ”Earn your trust by communicating”. You hear often how entrepreneurs are discussing that ”How should we play this, that we’ll get this funding raised”. For me, there is nothing to play. For me, raising funding is like any other relationship. You have to be plain blunt what you say, you can’t lie or tell untrue things as you shouldn’t in your civil life.
This is what I just wrote to our potential investor when he asked about our predictions presented in our Excel sheet;
”Regarding this spreadsheet, only one thing is for sure, none of these is true. We are now in great growth stage where our current clients are these companies here listed. Our piloting customers are also listed there. If we’ll succeed in all of these pilots, we have captured substantial part of European market. You are investing to our team and the potential. If you believe in us, you know, that at least we’ll do everything we can that your money is used well and you will always know where the money is used for. We promise to communicate.”
As said, this is 100% human business. Only way that you earn the trust and respect is by being honest and being straight.
We Finns are famous of not so fluent communication. What is normal to us Finns, is that we are really honest, we tell what we really think what worked and what didn’t. These things are actually the only things that all of the investors or the clients want.
We’ve been now researching over a year what investor communication means. During this year we’ve become pretty good at this. Our investor relations tool solves quite many problems in day to day life of startup and their investor. Keep your enemies close, and your investors even closer.
How do you get client to buy or your investor to invest? Earn their trust!
How do you get help from anyone? Communicate. Talk to people and ask for help.
Summa summarum, when it comes to raising funding for startup; Product is one thing but communication is everything. Communicate with your investors because this is why we created Rundit.com.