Securing financing for a startup is a formidable task. Even for a seasoned veteran, obtaining financing can be daunting. Unfortunately, no set method works in every situation, but there are things you can to make it more successful. My recent guests on Negotiations Ninja, Alex Yakubovich and Stan Garber, are something of experts when it comes to securing funding. Together they have launched more than one startup, most recently procurement gamechanger, Scout RFP. Inevitably, there has been rejection on the road to success. They shared some of their wisdom and tips on how to get to yes when it comes to pitching for funding.
How willing are you to invest in your idea? The answer should be 100%. If it is not, it could be more advisable to work out the kinks or start over before asking for large sums of money. In the case of Scout RFP, Alex and Stan needed a simplified, elegant process for carrying out RFPs. It didn’t exist, so they built and launched the prototype with their own money. By truly believing in the idea, it showed investors there were substance and worth.
There is a false sense of bravado that exists in the world of negotiating and startups. It is an obvious fallacy to avoid. Investors know if startups had all the seed money necessary to take the idea to market, there would be no investment meeting. Think about the fact that private investors and corporate firms spend all day deciding what to invest in. They can detect narcissism, inflated numbers, ego, and false promises very quickly. If they catch an embellished figure, prepare to damage the relationship permanently. Keep in mind; they are also investing in character.
“[Professional investors] want to work with genuine people and genuine founders who want to do great things for users,” says Alex. “In the very early stages you’re getting evaluated on: is this a genuine person who really wants to deliver something great to the universe? And if you are, and you’ve done a lot of work up to that point, and you have good a trajectory in your career, they’ll believe in you, and they’ll back you.”
A good investment relationship is comparable to an exceptional dating match. It is all about finding the right fit and not taking things too fast. First conversations when trying to secure funding will go more smoothly if advice is obtained instead. It builds up trust and allows time to make sure it’s a good fit for both parties. Eventually, a pitch may not be needed. After several meetings, there could be enough trust and progress already present to receive an offer.
Don’t skip preparation for a pitch under any circumstance. Nerves are a factor, which makes practice that much more critical. Practice leads to polish, which leads to negotiation confidence, which leads to closing. Always do the day’s first pitches with the most familiar executives. It is easier to recover if a mistake is made. If preparations are made, it shows the other side you are respectful of their time, and the meeting is a top priority.
Keep in mind: preparation leads to polish. Polish makes your pitch stand out. “When you come in, and the presentation is polished, and it’s confident, and it’s clear that you put in a lot of time and effort to make it tailored, whether it’s on the sales side or whether it’s on the buying side, it shows whoever’s on the other side of the table, one, respect, but two, that you put a lot of preparation into this and are treating this very seriously. And so much of negotiations is how much time you spent preparing for them,” says Stan.
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