10 Minute Pitch

Closing the Round

Closing a Startup Financing • Fund raising is a time-consuming, arduous

and sometimes frustrating exercise. • With no a track record, an entrepreneur

should expect to talk to 6-10 prospects to close one investor.

• Generally, 10 investors are needed for a meaningful early stage round, requiring access to between 60 to 100 people, which can be disheartening (close rate 10%).

Closing Startup Financing • Over the past several weeks, you’ve learned

how to, among other things, identify potentially interested investors.

• Imagine if the 10% close rate discussed on the preceding slide, could be increased to from 25% to 75% – Enabling you speak to fewer potential investors.

• The following slides present six tips on how to improve your startup financing close rate.

Improve Your Close Rate • Pick a closing date for your financing.

– Closing date more critical when the funds being raised are very large.

– Most angels/early stage investors will ignore your closing date, but some won’t.

– Provide flexibility in the wording of closing clause (e.g., The financing will close on MM/DD/YYYY, or such other date mutually agreeable to both parties).

– Investors may ask about ‘who’s closing’.

Improve Your Close Rate (cont.) • Provide investment options.

– Remain flexible, particularly when dealing with non-institutional investors.

– Offer two or three options for the terms of the financing (e.g., different thresholds, time horizons, repayment schedules).

– Enforce a minimum of $25K to enable smaller investors to participate.

Improve Your Close Rate (cont.) • Ask about doubts.

– By the end of the 2nd meeting, ask “what are your remaining doubts or concerns?”.

– Their response usually will indicate whether you can address the concern or not.

– Information also useful when prepping your reference partners for subsequent calls.

Improve Your Close Rate (cont.) • Stop selling.

– Don’t continue to sell, even after the investment decision had been made.

– Once an investor has decided to invest, step back and let the process naturally happen without continually selling.

Improve Your Close Rate (cont.) • Don’t forget to ask for the check!

– The purpose is to get the investor to write a check. Don’t let details overtake the process.

– You might actually get the funding more quickly than anticipated.

– One subtle way to ask for the check is to ask whether the investor plans to wire the funds or write a check.

• Remember – it’s not closed until the money is in the bank!

Getting to the Close - Summary • First and foremost, if you don’t fit the

investor’s “thesis” you won’t close. Create a network of “could-be investors”.

• Treat could-be investors like they’re already invested. Update them on progress and establish a positive track record.

• Ask for the check! Don’t wait for the potential investor to offer it – that won’t happen.