If you’re an entrepreneur raising money for your startup, I hope you have a term sheet. Year end is just a few weeks away, and many of our clients and colleagues in the startup world are busier than ever because they need to get investment deals closed before year end.
If one of their portfolio companies is in the process of being acquired, there is definitely a big push to get that done because the CEO and the Board of the acquiring company want to issue a press release before year end.
Partners and Associates at venture capital firms are scrambling to get deals across the finish line before everyone goes away for the holidays. And the same with the attorneys and others working on those deals.
Startups are always adding to their Executive Teams and many of them want to get those negotiations wrapped up before the holidays. The investors need to interview some of them, and their offer letters have to be approved and signed so that they can give notice to their current employers before the end of the year.
And then there are the 2017 budgets. Most investors and portfolio companies are putting the finishing touches on their 2017 budgets and they definitely want to get that done before year end!
And don’t forget about year-end estimated tax payments. Most investors in startups are high net worth individuals with complex tax returns. Their accountants and tax advisors are scrambling to figure out how much they need to pay before year-end, and then they have to move money around between accounts to get it all done.
How many holiday parties will you be attending in the next few weeks? Entrepreneurs and investors typically have quite a few events where it is important for them to at least make an appearance to demonstrate their commitment to their firm, their portfolio companies, their Limited Partners, and social and family events as well.
And lastly, we all know that high net worth investors have vacation homes and are likely to be jumping on a private jet to head to Aspen or Deer Valley or to their family vacation destination of choice.
So if you don’t have a termsheet yet, it is going to be very difficult to get a meeting scheduled with investors between now and the New Year.
But there is good news. You can use this time to your ADVANTAGE. While the investors are busy doing year-end stuff, you can prepare to be the first deal to close in January. This is a window of OPPORTUNITY to go address the REAL reasons that you haven’t gotten a termsheet yet:
- Finish 2016 strong with NEW CUSTOMER TRACTION.
- Prepare a kick-ass fundraising campaign to launch on January 2.
How many investors have told you that you’re “too early” or that you need more “customer traction”? The month of December is a PERFECT time to go solve that problem head-on.
How many months have you been trying to raise money for your startup? Are you getting the results that you want and NEED? How many more months can you continue doing the same thing and expecting a different result? December is the PERFECT time to go solve that problem head-on also.
The solution to the customer traction / you’re too early problem is simple. You need a one-page sales pipeline report to show to investors. Even if you are pre-revenue, you can simply make a list of the customers that you have been talking with (or you will be soon) and how much revenue you think you can earn from them.
The solution to the fundraising problem is that you probably don’t have a campaign plan. Raising money for a startup is not that different from any other marketing campaign. In this case, the “product” that you’re selling is 20-30% of your company’s stock. Any good sales and marketing professional can tell you that the only logical way to run a campaign is to a) build a list of target customers (investors), b) QUALIFY those targets BEFORE you spend hours of time with them, and c) then work that list relentlessly. Instead of blindly asking for warm introductions, you will find that it is much better and much easier to have a target list of the VERY BEST investors for your company – SmartMoney Investors that you KNOW have already had successful exits in your industry.
If you want to be the first deal to close in January, how you spend your time in December will determine who gets a deal done and who doesn’t.
Jeff (J.D.) Davids has served on the management teams of 8 venture capital backed startups and 3 of those companies completed successful IPOs and 3 of them were acquired by large corporations. He has completed well over $1 Billion in financial transactions including raising money from Angel Investors, Tier 1 Venture Capital Firms, Strategic Corporate Investors as well as completing IPOs and Mergers & Acquisitions from both the buy side and the sell side of those deals. To learn more, visit www.SmartMoneyStartup.com.