Startup Business Financing: The Money People
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“Dream financiers” – you know who they are – bankers, venture capitalists, those extraordinary high net-worth individuals called “angel investors” who can make your startup business financing happen. Knowing who they are is one thing, but getting to them is another thing all together. In all of the murkiness of raising funds for a new business, one thing’s for certain: someone is getting through. Angel investors backed 48,000 companies to the tune of $22 billion in 2004 alone!
So how can you turn these “dream” financiers into “your” financiers? We’ve successfully raised tens of millions from angel investors to provide startup business financing, and below is a little street wisdom we’ve accumulated about how to network with the money people.
Prime the pump
Imagine you’re a big-time investor or perhaps a lender. If a total stranger approached you for money, would you be likely to jump in? But what if you already had a months-long rapport with the entrepreneur? Or what if you were introduced by a trusted contact? Then would you give it more serious consideration? Statistics indicate that, yes, you would.
Familiarity always increases the odds of business financing success. It’s all about building and maintaining relationships, especially before you actually need the money. When you’re needy, it’s the worst time to try to get startup funding because you have no leverage. So think ahead and develop relationships now with the people who have the potential to provide you money in the future. Then, when you actually do need cash, you’re simply explaining the next evolution of your business to your “primed” financiers.
To create this rapport, it can be as simple as sending an email with periodic updates to your network to keep your project top-of-mind, or penning a quick note and dropping it in the mail the “old school” way. Remember, most investors fund projects they are excited about, and it’s up to you to create and nurture that excitement.
Tap the startup business financing professionals
“A lawyer, an accountant and an entrepreneur are walking down the street…” Sound like the beginning of a joke to you? Well if your network of financiers is running thin, it’s anything but funny…it’s a serious opportunity. In our experience, reaching out to accountants and lawyers is a great way to broaden your network of money people when you’re looking for startup business financing.
Give this a try: Drop a line to your legal and accounting professionals and ask them to introduce you to acquaintances and clients who might be able to help you. After all, their clientele typically includes angel investors, venture capitalists and other successful entrepreneurs who see them as confidants and trusted advisors. And if they do help out by connecting you to their contacts, this can add tremendous legitimacy to your project and credibility to the conversation any investor will consider having with you.
But don’t stop there! Since law firms and accounting firms typically have multiple colleagues, each with their own roster of clients, be sure to ask for referrals to the appropriate partner within the firm who just might have that magical contact for you. It reminds us of Nancy, an entrepreneur we’ve had the chance to coach, who has a baby products business. She talked to her attorney about the money she needed, but he indicated his network was no good. Did Nancy stop there? Of course not! She asked him to refer her to a partner at the same law firm who would be interested in helping her find money people. This new attorney was the right connection; he introduced Nancy to a few of his successful, high net-worth clients in the manufacturing industry who have an appetite for making deals. Voila! With one referral, Nancy expanded her network to include several key investors who could actually help her significantly in the near future.
Brother, can you spare a lead?
With 23 million small businesses in the U.S., no matter what direction you turn, you’re bound to notice plenty of your peers out there who have succeeded in securing startup business funding.
Given that they probably have their own established networks of financiers, as we see it, it’s high time for you to introduce yourself! Start by finding the companies that have been successful. Then contact the head honcho and explain your situation. Many times, they will be sensitive to your situation and will try to be helpful. If you sense that they’re generally supportive, be direct and ask if they’ll connect you with their financiers.
If you’re having a hard time even getting through to them, go to conferences and seminars they attend, introduce yourself in person and dazzle them with your charm! Also, frequent networking events in the community, local business clubs and join your chamber of commerce.
Good old hobnobbing
If you have some extra cash, just not enough to pursue your startup business ambitions to the necessary degree, it might be time to “join the club.” You know – it’s that special place where the crème de la crème of your business community play golf, swim, yacht, attend weddings, etc. The wealthy gather at watering holes, and that’s where you need to go to interact with them. If you’re like us, you’re probably saying to yourself, “I’m so busy, I don’t have enough time to throw the tennis ball to my dog, let alone play eighteen holes of golf at the country club.” But it’s true what they say, “business gets done on the golf course”. There’s just something very conducive about being away from the habi-trail of everyday life, and being out with the birds and beautiful environs that puts people in a receptive state of mind.
Grow the network
Once you make the acquaintance of one potential financier, it can be the beginning of something big…ideally the beginning of a “big network” of money people interested in what you’re doing.
How do you make the leap from one relationship into a broader network? Again, it’s all about relationships. Typically, angel investors and other financiers have cronies who are also potential sources of funding. To beef up your Rolodex, ask the financier you’ve already met for introductions to other startup business funding sources. Ask if he or she would make a phone call or two, maybe arrange a dinner, or set a meeting at the office. You’ll see, in the beginning, you find yourself drawing on someone else’s network, but in no time – if you’re smart – that network becomes your own.
Keep in mind that more often than not, friends like to invest together, and they’ll often look into each other’s eyes and say, “I’m in” or “I’m out” together. It might be smart for you to lobby the most influential investor in the group to encourage others to get on board.
Our Bottom Line
It’s true that a lot of people are frustrated by lack of access to financing. But with the right preparation and by exploring some of these strategies, it’s possible to replace frustration with progress. In fact, you might just see that you can transform those “dream” financiers into your startup business financiers. So start networking with the money people!