A capital raise is like preparing for the Olympics.
You have to train for it every single day, says Samira Salman, founder and CEO of Salman Solutions, a New York-based business growth firm that advises executives, builds companies and raises capital.
A former corporate tax lawyer, she’s sat on both sides of the investment table and worn almost every hat that comes with working on a deal.
During a keynote address at TiEcon Florida, Salman outlined five steps to a successful capital raise, complete with hands-on exercises for each of the steps.
Here’s her advice:
Mindset. Fundraising is hard and takes a lot of time, so the most important task is to get the right mindset. “If you think you are going to raise funding you will,” Salman said. “Your mindset needs to be that I’m going to win. I’m going to raise x amount of capital.”
To accomplish this step, draft a declaratory statement, and write it down in a journal.
“Write, ‘I will raise $10 million’ five times. If you do that every day for a year you will raise $10 million,” Salman said.
Preparation. Fundraising is a skill set. “You want to get as good at that skill as possible,” she said. “Nothing will give you the confidence necessary to raise funds as being overly prepared. Check every fact and figure, spelling, spacing and format. If you are ultra-prepared, you are going to win.”
Make a list of all the things needed to raise capital — a business plan, a financial model, a team to execute, a strategy to find investors. Then, schedule one or two hours every day to work on those items consistently.
Market understanding, or learning the rules of the game. “Right now, the reality of the situation is the dollars are controlled by a select group of people,” Salman said. While conceding that there’s an imbalance when it comes to funding women-owned and minority-owned startups, she also said there’s no point in arguing about it with potential investors.
“The people with the money have a certain way they like information. They have a certain way they like to deploy capital, and that is the rules of the game. You can either learn the rules and win, or you can get out of the game,” Salman said.
Several exercises go with this step. Understand the different types of capital that are available, including venture capital, funding from private family offices, debt funding and grants, and figure out which one is best for your business. Draft the perfect investor profile, with the qualities you want in an investor; for instance, do you want an investor who is hands-on and in the office every day, or one who prefers a once-a-month meeting. Make a list of people who can write you a check, a separate list of people who know people who can write you a check, and a third list of people who can help support you, such as CPAs and CFOs.
Numbers. Numbers are the only thing that really matter, Salman said. “If your numbers don’t make sense, I’m not giving you money.”
She urged founders to make a spreadsheet, showing revenue and costs in detail, as well as the assumptions used to get to those numbers. Update the document quarterly, and if you miss projections, explain why.
If a founder doesn’t know how to put that together, get advice from a financial professional, she said.
“If you don’t have a financial model, you don’t have a business. You have a hobby. Your financial model will make or break your business,” Salman said.
Hustle & close. The best way to close a deal is to build a relationship. Don’t ask for money as soon as you meet the investor, Salman said. “They are human beings and they like to be treated as people,” she said. “Build a relationship of trust.”
She said founders should ask investors if they want to see a pitch deck or prefer a conversation, for instance. Be responsive to phone calls and emails, show up to meetings on time and come properly groomed.
“When you are in business, you know something is going to go wrong,” Salman said. “All I care about is when the thing is going wrong, can you and I work together? Are you going to be responsive and open and honest with me? That’s why you have to build relationships.”