Chapter 6 - Negotiating the Deal
IN THIS LESSON
Closing an Investor
It may not be the most comfortable thing for you; it may not be your first choice; it may not what you prefer, but at some point, in the negotiation, you need to push the investor to close. Then again, this is the desired outcome of your fundraising efforts.
Your start-up does not have unlimited cash for eternity. You have a set runway underpinning the existence of your business, team, and future. The clock is ticking, and you must have a sense of urgency as you approach the end of your round.
You may think that the investor needs months to think about it, but let’s face reality: after all the conversations and the extensive process of due diligence, there is not much else you can say that will change the outcome. If the investor spent the time to meet with you and discuss potential investment, it means they are interested. Don’t lose sight of this fact. If the prospective investor hadn’t considered you as a viable investment opportunity, they wouldn’t have gone out of their way to even propose such a possibility. After 45 days or so, the reality is that the decision has probably been made. You just need them to close on the deal!
Remember your ABC: “Always be closing.”
What can distract you from closing are vulture-like investors who will drag out the process to drain you and then ask for better terms. You need to be very aware of this possibility unfolding right under your nose.
Your best weapon is to have enough runway – enough cash on hand to keep your company’s operations going forward. The following are three things to keep in mind while you are trying to close on new investments in your business:
Never assume that you are done raising money with an investor until the money is in the bank.
Keep talking to investors.
Put them in a box and have them race if you must.
You might be limited in your ability to put all investors into the final stage of the process, but you can pick, for example, 6 out of 10 who decide to close, but always have warm leads and conversations going. If you can’t get them into this round, don’t sweat it; you may still be able to get them in the next round. You can even put them in the backburner as a back-up investor for later. All things considered; you must focus on closing. You will thank yourself once you do.