Lucky Enough to Have Investors Banging Down Your Door? Here's How to Manage an Inbound-Driven Investment Round.
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Raising money for your startup is stressful and, for the most part, everyone’s story is different. This makes figuring out the best approach for your organization confusing, because there isn’t a uniform path to follow. Whether you’re raising capital for the first time, raising a second or inside round, or seeking a strategic investment, there’s a plethora of content available geared toward making it less daunting to navigate the tricky waters of venture capital.
But, as I mentioned, no two fundraising stories are the same, and I recently found myself in a unique position where I learned a lot. Here at Guideline, we recently announced a $15 million Series B financing round, led by by Felicis Ventures. Unlike a traditional financing round, ours was opportunistic -- we weren’t planning on raising additional capital, but received enough inbound interest from investors that it seemed irresponsible to ignore.
Having raised capital before, it was enlightening to learn how different the exercise can be when investors are knocking on your door instead of you on theirs. I learned first-hand that there are some things you can do to navigate the process to best leverage this existing interest. Today, I’m sharing some of them in hope of helping other entrepreneurs who find themselves in this somewhat unique position.
But first, to be clear, financing can be a complicated and quite challenging experience. I fully realize how fortunate I am to have been in a position where investors came to me. I realize that these tips are in no way universally applicable to the financing process, but for those who experience what I did, I hope they are helpful.
Define the process.
Traditionally, the process of raising capital can take an immense amount of time, but managing it based on inbound interest puts you in the driver’s seat. When your inbox has reached a point where it feels irresponsible to not take advantage of investor interest, immediately push pause to define your next several steps. The first thing you should do is determine how much time you’re willing to spend on the exercise and put guard rails in place to make sure you stick to it. Set a maximum amount of time and then divide that based on the investors you’re potentially interested in working with. Block the time on your calendar so there’s no question of when you’ll get to it.
Related: 5 Business-Funding 'Rules' to Break
Create a Kanban board.
Having a visualization of your workflow is incredibly helpful in optimizing for efficiency in every aspect of your business, so why not approach investment in the same way? I gathered all of the inbound interest in investing in Guideline, and made a chart that categorized investors in the ways most helpful to me (e.g. did they come via an intro, a cold outreach, etc.). As you move through the process and choose which investors are a fit and why, you update the board to reflect that new information. Rank the investors who best fit your organization’s needs and move forward accordingly. This empowers you with an at-a-glance view of the entire process, which helps you move quickly between steps.
Think beyond capital.
If you’re handling an investment round opportunistically, you’re in a unique position.This gives you the freedom to consider more than just capital when evaluating potential investors and will shine light upon what truly makes a VC firm competitive. You should never shy away from asking potential investors hard questions, but it’s especially important in cases where there’s a lot of inbound interest. Beyond money, what will this new partner provide? What’s the structure of their in-house team in terms of resources? How does the traditional focus area of the firm compare to your organization’s stage? There are so many important things to consider before taking money from an investor, so take advantage of the flexibility this unique position provides.
Have on-call character references.
Raising a round of capital based on interest moves about three times faster than the traditional process. So, it’s important to save time where you can. When I decided to pursue an opportunistic round, one of the first things I did was contact my mentors and advisors to let them know. Potential investors love to hear from people who can vouch for your business, work ethic, etc., so having these folks on standby expedites the process in a meaningful way.