As a founder, how can your startup create that all-important sense of urgency needed to fill up your next fundraising round? In other words, how to create a sense of urgency when fundraising?
Without a sense of urgency, nothing is going to happen even if you have nailed it on your business model. You are going to burn a lot of time, money, energy, and labor on preparing and running a fundraising campaign. All for a few results. Why do you need to master this? What are some practical ways you can compel investors to step up?
The Ultimate Guide To Pitch Decks
Here is the content that we will cover in this post. Let’s get started.
The Importance Of Urgency
There is probably nothing more important than being able to create and transfer a sense of urgency during fundraising.
It is the same with any type of sales. In fact, if you can’t learn to create this urgency in pre-seed and seed rounds, the chances are you won’t be able to do that with your customers or when trying to bring in great talent either.
People simply don’t act without a sense of urgency. It’s motivation. In startup fundraising, this mostly comes down to the fear of missing out. Investors don’t want to be kicking themselves and look foolish for missing out on investing in the next Facebook or Uber.
Unfortunately, no matter how perfect your pitch, your pitch deck or your fundamentals, or the value of the offering, without urgency, it is just nice to have, and there is nothing to compel them to act or cut you a check.
If you can nail this, then you will enjoy raising faster, be able to raise more money, and demand better terms. You’ll also be able to carry this over to all of your other efforts, for a wide variety of benefits throughout your organization.
Keep in mind that in fundraising, storytelling is everything. In this regard for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
Start With A Smaller Raise
One of the easy ways to close this gap is to start with a smaller ask than you are really hoping for, or think you can justify. For example, if you would really like to bring in $5M in a Seed round, you might start with a $3M ask. Fill that up quickly, and then open it up for the laggards who are banging on your door and blowing up your phone to get in.
Being oversubscribed will make you look like a hero with a hot startup, versus a failed fundraising who couldn’t hit their target. It will give you a lot of confidence for moving forward too. This is why you should know how to create a sense of urgency when fundraising.
Keep Up The Momentum
This is especially essential if you are running a public crowdfunding campaign online. Everyone can see what you’ve raised, and how much money you are picking up daily, or not. Many will sit on the sidelines to see who else invests, and watch your daily progress. If the needle isn’t moving, they are going to get bored, lose interest, and definitely lose any sense of urgency.
The opposite is also true. If you are running one of these types of campaigns, you must know how to keep pushing traction every week. Or at least hire an expert to run it.
Doing well here also means you are demonstrating your ability to stay intensely focused and achieve whatever milestones you set for yourself. Investors need that confidence in you.
Gre Pre-Funding Commitments
Before you announce that you are actively raising a round you want to already have 30% to 60% of that round already committed by investors. This is going to be vital in an online crowdfunding campaign. Just like any other social likes, people only want to follow the herd. If it is popular with others they will want in. They’ll see the opportunity closing fast. The opposite is also true. If you are sitting at 10% funded, no one else wants to look foolish for putting money into a failed round.
If you can’t get early verbal commitments for at least 25% to 30% of your raise, don’t expect them to show up once you go live.
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Make Lots Of Noise
Very few seem to succeed or benefit from attempting ‘stealth mode’. What you really need is all the visibility and credibility you can get by putting your business plan in front of the right people.
Leading up to and during your fundraising round you should be making a lot of noise. Done well you can effectively be everywhere for your targeted investors. You can show you are trending, can control the media, others are interested, and so on. Do this with press releases, news coverage, leveraging bloggers, social media, events, introductions, and targeted online ads.
The most critical facet of any successful fundraising campaign is knowing how to find investors for your startup. If you would like more information on how to do that, check out this video I have created.
Send Frequent Investor Updates
Make sure you are sending regular updates throughout the round. Let them know who else is investing now, how much is left, and how you are still making traction in the business and raising interest and value during the process. Those who have already invested may raise their stake or refer others. Those on the sideline will feel the window of opportunity shrinking with every update.
One of the best tactics which work in any negotiations and sales is to set a hard and short deadline. You are in or out, right now. Take it or leave it. We’ll have others who want it if you don’t. That’s how to create a sense of urgency when fundraising.
You should always be fundraising. For early rounds, you should be subtly raising 6 to 12 months in advance. Be planting the seed in their minds. Be answering the questions and be building credibility and interest in advance. Then once you are going live with a round, they already want to invest, it is just whether they are going to lead or take the whole round that is the question.
Show The Timing Is Right
One of the most important things for many early-stage startups is showing the timing is right. If you can demonstrate that you are at the forefront of the party and shift, but not too early, you’ll create more urgency too.
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