Sunset at DoubleM Systems (, Del Mar, California

Tuesday, June 11, 2019

Let There Be Cash (Elements of a Fundraising Process)

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Fundraising is a Continuous Process

If I had a client who needed to raise capital FAST,
here's what I would advise them to do:

1. Commit to Fundraising as a Continuous Process
that has many steps and interactions with prospective investors,
and others.

This "Continuous Process" occurs every day
Some portion of every day must include energy and resources
applied to the Fundraising Process.  

The shorter your Runway
the more time you must spend each day on the Fundraising Process.

Here's a rough guideline:

   Runway         CEO time in Fundraising Process
12 months              1 hour per day
  6 months              2 hours per day
  3 months              6h+ hours per day
  2 months              12-14 hours per day - Total Focus 

The most fundamental mistake a startup can make is to 
start their Fundraising Madness when they are out of money.

Actually the true mistake is stopping the process
once they get a little bit of money in their pocket.
Taking a break from fundraising can have fatal consequences.

Therefore, heed Commandment #8 carefully:

VIII. Let There Be Cash

Project, monitor, and conserve cash and credit capability. Cash flow is the blood of a growth business. A company's ability to continue is determined daily, not at year end, by the contents of the checking account rather than the financial statement. Keeping money in hand or readily available for both planned and unplanned events is not only prudent but necessary in unsettled times. Cultivation of financial sources is an enduring duty.

Fundraising Madness is a condition that occurs when the 
CEO/founder realizes that they can't make payroll all of a sudden.
There may be no recovery from that level of madness.

It may be counter-intuitive, but
you must raise money when you don't need it,
so that you have it when you do need it.

Fundraising is a Relationship Sell.
Relationships take Time and Trust to develop,
Many founders are Product oriented
and this Relationship building may be uncomfortable territory,
but it needs to be done, 
so relax and enjoy becoming a Master of the Process.

We are what we repeatedly do,
Excellence then, is not an act, but a habit

Think of building a process that provides all the cash you will ever need,
if you just continue the Process.

Showing up out of the blue,
when you're broke,
is a sub-optimal relationship strategy.

2. The Fundraising Process takes Time to bear fruit,
but if we Iterate quickly and Learn quickly
we can see Results that are undreamt of by most startups.

3. The Process must be Written Down, and followed as Written.Measure Results,
Continuously Improve the Process as you go.
(Do it, Document it, Delegate it.)
This is commandment #4:

IV. Write It Down

Prepare and work from a written plan that shows who does what, by when. Until committed to paper, intentions are seeds without soil, sails without wind, mere wishes that render communication within an organization inefficient, understanding uncertain, feedback inaccurate, and execution sporadic. Without execution, there is no payoff. The process of committing plans to paper is easy to postpone under the press of day-to-day events. In the absence of a document, fully coordinated usage of the resources of the business is unlikely. Each participant travels along a different route toward a destination of his or her own choosing. Decisions are made independently, without a map. Time is lost, energy squandered.

A Simple 10-step Fundraising Process:

1. Initial Contact - Top of the Funnel
     Cold Call - have a written agenda, talking points, the sole purpose is to qualify the investor to see if they make investments now, in your industry, in your stage (friends and family, seed, series A, etc).  If they qualify as an investor, then you want permission to send them your exec. summary.  They might want you to send your pitch deck, but resist the urge. Stick with the Process. Send them the exec. summary. You'll get a lot of voicemail, so have a powerful scripted message that will make them want to call you back Now. Practice it. Be enthusiastic! DO NOT WING IT. 

2. Send Executive Summary
      Cover Executive Summary in PDF format attached.
      The cover email must be well thought out. 
                  See direct mail advertising principles.

      The purpose of the Executive Summary is to get investor to take next step.
3. Follow up Exec. Summary
       They contact you, or you contact them, and 
           they will be not interested (get reason) or want your Pitch Deck.
           Never send Pitch Deck unless requested and Exec. Summary sent first. 

4. Send Pitch Deck (PDF format)
        Before you send the pitch deck you want to know that they want it and that they are a qualified investor prospect. The best thing you can do in a relationship Process is to give the investor plenty of opportunities to disqualify themselves, to opt-out of the Process. This save you a lot of time and gives you greater productivity dealing with the ones who opt in.

5. Follow up Pitch Deck.
         The purpose of the pitch deck is to get a meeting with the investor.
The prospective investor will signal their interest, or not (they will no longer respond to your calls, email, etc, so just let them go. They are interested or not. Keep them in your database to send your Quarterly/Monthly Newsletter (Progress Update).

If you call, have a clear script. An email sent before your call. The only purpose for your call is to schedule a meeting as the next step.

They may barrage you with questions. This is good. Write the questions down. Answer best you can if on a phone call, but in any case respond to all questions in writing as soon as possible. This is an Absolute. Doing this establishes Trust and helps build the Relationship. You will get pretty much the same questions, so it will be easy to have a library of questions/answers so all you do is cut/paste to reply. Again: Write it Down.

6. The Pitch Meeting. See Pitch Anything. Follow the process. 

7. Due Diligence. Have the documents they want (online "data room"). Be completely open.
Reply to requests in writing.     
    This step takes so much longer than you ever think it will. Lawyers are involved.

8. Term Sheet.
    This step takes so much longer than you ever think it will. Lawyers are involved.

9. Closing Documents.
    This step takes so much longer than you ever think it will. Lawyers are involved.

10. Party. (Cash is in the bank)
   This is the bottom of your Fundraising Funnel.  Congratulations.  Now...

11. Repeat.
    Do not skip this step!

1. Delegate much of the process if possible, Administrative details such as scheduling and emailing, answering the phone, etc.

2. Start with google searches for each step to achieve massive learning in a short period of time. For example, there is a very standardized format for Pitch Decks and Executive Summary documents, so it is a waste of time and effort to figure it out from scratch. Investors want their communications in a standard format because it is faster for them to deal with. Distinguish yourself as a person who understands this and respects their time. Talk to them in the language that they want you to speak. Follow the rules, respect the Process.

3. The current status of each investor must be recorded in your CRM database. Measure your productivity by creating reports from this database.

4. You will be tempted to change the steps and the order of the steps, but resist the urge until you have Tested the results and know the change to be better. This is commandment #10:

X. Test

Anticipate incessant external change by continuously testing adopted business plans for their consistency with the realities of the world marketplace. The past will not come again. Neither isolation nor insulation from tomorrow is possible. The problems of the times are the opportunities of the times, as always.