Startup Founders: What is your best tip for closing a lead investor? How did you manage follow-on investors?
To help you close a lead investor, we asked experienced entrepreneurs and startup founders this question for their best tips. From having a backup plan to leveraging your network, there are several tips that may help you follow up and close a lead with a prospective investor.
Here are five tips for closing a lead investor:
To close a lead investor, you must have a backup plan beforehand. If you truly don’t have sufficient time to offer timely responses, hand over the process to another teammate. However, being outside the diligence process could be perilous; in-person meetings can go bad if you don’t have a powerful grasp of the numbers.
Ending a lead is an intimidating part of seed fundraising. So, if you plan it upfront and apply the right process, you can increase your chances of getting the right lead investor. Managing follow-on investors was easier as the deal itself helped me understand everything. The key was to keep your eyes open and carefully go through the term sheet.
From day one, we wanted to create a business, not necessarily a startup.
We wanted it to be an established business with revenues, profits, losses, and unit economics from the get-go. So we used our existing runway from STADIUM to build SnackMagic.
We put together a robust investor deck outlining our strengths and product-market fit, and produced a video series on how we launched to how we scaled from $0 to $20 million in ARR in just 8 months.
We also asked investors to come and pack up a few boxes to understand the process from beginning to end. It was important that they understood the efficiency of our process firsthand. We raised $15 million in our Series A round of funding, which Craft Ventures led.
Give your potential investors a clear understanding of what you’re offering and how it will produce income, even if it comes in smaller test settings.
For our company, it was vital for us to develop our app early on, so that investors could see the benefits and profitability of our model, before we released the product to the general public.
By showing the success of our model in limited settings, we were able to secure funding we needed to be able to make our business model more broadly accessible to consumers.
Have a Clear and Concise Pitch
Your best bet for closing a lead investor is to have a clear and concise pitch. In my experience, I was able to successfully close a lead investor by being clear and direct about my business goals.
After our initial meeting, I also made sure to follow up with the investor to solidify my interest in working with them.
Communication is critical when closing any deal, so make sure you're clear and concise in your pitch, and don't be afraid to follow up afterward!
Investors seek individuals they trust and reaching out to your personal network ( i.e. college friends, internship colleagues, co-workers) can bridge the trust gap. Linked in is a great tool to expand your network and grow by word of mouth.
Recently, I was able to leverage my MBA student body to raise $1M in capital for a real estate investment and I was able to do so within a month.