I was talking to a client for several months about their strategy to raise. They had a brilliant piece of tech, a team of 10 experienced individuals, and a target of $1M.
Looking at their team individually, each of them were successful and reasonably wealthy. One of the co-founders had a $7M a year business. Their marketing guy was ex-VP of Microsoft.
Who wouldn't want to invest, right? WRONG.
The core problem for them was perception. How do investors perceive such a team with a finished product and a $1M ask? They perceive it like this: ''Why haven't they each put in $100K and raise themselves''
Now if they had been asking for $10M, then that is actually more reasonable and makes far more sense.
From listening to their team, they weren't looking to invest themselves. They wanted other peoples money and that is a big red flag when raising. Investors want you to have put in huge amounts of time and money before you come to them for anything. They want proof people want to buy your product. They want you to explore every possible route. They want to see how far you got without money before you ask for theirs.
I have raised twice. I've helped numerous companies with strategy on raising including creating the documentation and guidance on how and when to raise if they really want to/need to. I often advise them not to raise because they have something that they can sell now.
This company I'm talking about above were so focused on raising, that they missed the opportunities siting right in front of them, such as how one of their founder's clients, was DELL, and looking into their space!
I meet so many wonderful entrepreneurs trying to raise and I would say out of 10:
- 1 shouldn't raise because they can grow organically.
- 8 can't because their strategy is wrong or there is no product/market fit.
- 1 can because they're got everything right, done all the hard work, and know what type of investor they should go after.
If you want to raise, take a good look at how you could be perceived by investors. Is your team too strong for the money you're asking?
Good luck!
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