Wait. Approach With Leverage. Retain Control.
This, folks, is my pet formula for gaining institutional investment as a consumer brand. And it’s the opposite of what they teach folks in Silicon Valley. It’s the least common story you will read about in the business media as well.
Why? Because, as Americans, we are attracted to the illusion of the entrepreneur with the brilliant idea who seduced investors upfront and then rode a unicorn. We aspire incorrectly to this path, the path in which no learning happens, only success. Wouldn’t that be nice?
If you enjoy being a CPG operator after a few years (and not all founders do), then you need to read further.
- Wait – While the Death Funnel tempts many to raise money sloppily from the wrong people out of financial duress, never do this. You need to use seed, personal, and one-off angel checks to supplement gross profits in a healthy Skate Ramp business. Get into Phase 2 before you think about approaching any institutional firm. You need the scale and the data, and the operational maturity. You need to be calm and feeling, well, kinda cocky. Not desperate.
- Approach – Never approach first with a pitch. Ever. Like never ever. First, you need to promote yourself to them. Let them play their ‘I’m interested card with zero pressure.’ The best way to accomplish this is to ask if they’d be interested in being on an email update list. With monthly or quarterly updates, you can keep in touch and prove that you’re not a desperate, cringy founder. You’ll be able to establish with data that you’re worth investing in. Build a relationship first by sharing a peek into the ‘data room’ over months, even years. And then wait some more. Imagine the money could make you pregnant if that helps you slow down.
- Retain Control – This is NOT my area of expertise, so no brilliant tips here. Just a reminder that you waited and waited until you could approach with goodwill and leverage. Don’t enter the actual negotiation without a world-class venture attorney (i.e., this is ALL they do) and pull back or walk away early, if necessary. Act like you can and will walk away, and you’ll be surprised how quickly you discover if they’re really, really interested. The latter will negotiate more favorable terms than the jerks trying to dump ‘end-of-fund’ that must be invested somewhere, anywhere.