If I can do it, you can do it too. The following is what I learned over the years while raising well over $10 million in cold hard cash of other people’s money to invest in my deals.
There is no one document that will spell it all out for you, and a lot of it comes from gut and experience, but here are a few things to keep in mind.
First, looking and acting the part is not enough. You need to be the person they want to invest with/in. What I mean is you need to know what you’re doing. You need to be an expert, and in fact, the expert. You can’t fake it. You need to be prepared and know all of the answers before they even ask their questions. You need to anticipate every possibility that could happen and have a plan for it. Think the deal through.
There is a lot of money out there looking for deals. You need to give investors a reason to invest with you and your deal. I am a firm believer that smart money goes to smart people with good deals. Some practical tips for you are:
1. Look and act the part. If you look and come off like a goofball and the life of the party all the time, you may not instill confidence. If you are at the bar drinking beer and telling off-color jokes, it does show that you’re serious. But if you are a hardworking, serious person, they will think of you that way. Here is a short story to prove my point. A year or so ago, I was at a dinner meeting with a few gentlemen, all of whom I held in high esteem. At one point we were joking with the waiter about something, and Mr. X asked him where he could get an escort in the area. The waiter answered, and Mr. X marked it down. At first, I thought they were joking, but it became clear that it was not a joke. Now, I am not making any moral judgment. That’s between him and his wife. I can also get off color at times, but knowing the right time and place is important. I never did a deal with Mr. X because my opinion of him diminished a little. Again, not for doing it, but the way he talked about it over a business meeting. You can’t fake it. The bottom line is you need to be serious and professional at all times in business.
2. Do not be too optimistic and fall for the deal. This is a very common pitfall. You only see the good in the deal, and it looks as if you want the deal too much and are blind to reality. Go in with your eyes wide open to all the rewards, but also have a good understanding of the risks involved.
3. Do not ask or beg investors. Instead, get them to want you and the deal. If you play your cards right, they will ask you. Sometimes, keep them asking for a while. It’s like a seduction.
4. Sometimes say no to the investors, and do not be afraid to say no to a deal prior to closing. While expensive and not fun, I have walked out on deals at the 23rd hour for one reason or another. That’s part of the business. As you get closer to the deal, you learn things, and sometimes your best deals are the deals you do not make.
5. Do not be afraid to show your weakness. We all have them, and they will come out loud and clear anyway. Don’t be cocky. Be humble, and if possible, laugh at your weakness.
6. You may not want to hear this, but be prepared for it to sometimes take years for an investor to develop trust in you. Even if an investor says no a few times and passes on deals, do not burn that bridge. Rather, use it as a setup for the next deal. Here’s a funny story. My best investor always beats me up at every opportunity about some points that cause endless negotiations. He’s always trying to get an edge, but I usually work it out with him. In one instance, I put together a large deal in which I did not invite him to invest and never mentioned it to him. I knew that sooner or later he would find out, and he did. The first thing he asked me was why I didn’t bring the deal to him. Hopefully, that instance made him realize the value in me and my deals. With each potential investor contact, think of yourself as a farmer. You plant a lot of seeds, water them and then wait for some of them to grow and provide fruit. But you need to do the planting and watering before the harvest. For me, it’s a long-term process anyway.
7. You will never find investors unless you look for them and are around them. So, make it a point to meet, associate and stay in touch with those capable of writing a check. This is very critical. If you only are around and stay in touch with people who cannot write a check, you will never get a big investor. So get out there any meet and stay in touch with those with that capability.
8. This may seem obvious, but only present solid or great deals. Do not waste your capital-raising credibility by presenting anything less. Also, do not present deals until you do a lot of work on them. Again, you need to know the answers to most questions when they are asked. You only have one chance to make a good impression.
9. Ask yourself at all times what is the value that you add to the deal and the relationship. If they are bringing the cash to the table, what are you bringing? Can they do this deal without you?
Again, this is not meant to be all encompassing, but part of the big picture of what’s needed. More on raising money and partners in some of my other articles.
Written in the November of 2011 by Jack Miller, no part of this maybe copied or reproduced without the express written permission of the author.