January 17, 2023
I say this because raising is a nerve-racking process but keep this in mind at the end of the day you only need one yes. So use the no's as fuel.
Raising is a bit like dating, you are out there, all confident trying to meet new people and see if you get along. However in the end you're only looking for one "yes".
I remember when we started our raise we had so many questions as to how to structure it and go about it. Moreover, we wanted to make sure that it happened as quickly as possible as raising is a full-time job and can distract you totally from the rest of the business.
It’s a bumpy ride, but let me explain the story of how we raised half a million pounds in eight weeks.
In theory, the steps are simple:
The reality is a bit like this:
Every good execution comes with a good strategy. Here are the top 3 things that made a difference for us.
We took a very pragmatic approach, one that would let us measure how well we were doing at any time and if not, what we needed to do to ensure we were back on track.
The top 3 things that had the most impact:
Before you start your raise, you must choose the date when you are looking to close the round (which means having all the money in your bank account). For this example let's say April 1st (tip: if you're raising in the UK, April is the accounting year-end and it's always a good time to raise).
A minimum ticket is the minimum investment amount that an investor must put in to invest in your business. You want to make sure that the investors that you can put in your minimum ticket. For this example let's use £50,000.
It will help you qualify investors. At the end of the first meeting with an investor, I would always say something like: "our minimum ticket is £50,000, is that something that you could do?"
This is a good way to understand where does the investor stand and if they have enough money to join your round. That way you make sure that you're maximising your time by not talking to people who cannot join your round.
Target close date: April 1st
Minimum ticket: £50,000
Total raise: £500,000
These are the different stages that you will walk investors through and how long each stage takes. Take into consideration that this includes back and forth emails/scheduling etc in the middle:
In total, this comes out to 68 days for a single investor to go through the funnel. This means that we must start our first call with investors on January 23rd to close by our end date.
Now that we've created our "funnel", we can make assumptions as to how interested investors will be and set a "retention", namely the number of investors that say no or stop replying.
This gives us a powerful way to calculate how many Meeting 1's we need. If we multiple the retentions as users go down the funnel: 50% x 50% x 100% x 30% = 7.5%. This means that approximately 7.5% of the investors that we have meeting 1's with will end up signing the term sheet and wiring the money.
Let's now use some high-school maths to find out how many investors we need and how many first meetings we need.
The formula is:
total raised amount / minimum ticket = # of investors500,000 / 50,000 = 10 investors
In the worst-case scenario in which all put in the minimum ticket, we need 10 investors.
The formula is:
number of investors / % retention of investors = # of 1st meetings10 / 0.075 (equivalent to 7.5%) = 133 1st meetings
Congrats! You need to talk to 133 investors . Yes, you really do, and that's just the number you need to have a meeting 1 with. You actually need to outreach many more.
In reality you may not need to 10 investors because some may commit more than the minimum ticket, but preparing for the "worst case" is always better.
We ended up outreaching 248 people and around 92 total meetings.
In the end, the people that we wanted most to invest did invest and we're so thankful for the trust, however, the actual number is not what's important, if it weren't for the plan that we set out, it would've taken much longer
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