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In the last segment on this topic, I led with some examples of my ghosts of fund-raising past. In the rear-view mirror, the advice is sage and to most equity providers who have read the blog and talked to me about it, they seem to agree.
That said, it wasn’t lost on me that as someone who wants to “teach”, the article wasn’t particularly instructive or uplifting to those of you thinking about raising capital. In the words of a friend of mine after reading it “It was like getting a golf lesson from your club pro and after you hit the first ball, he says “You should have started when you were 6.” Helpful.
In this segment, I promise to be more useful and identify some ways you can bridge the gap from not knowing the one person to call and what it takes to connect with that person. Amazingly, you probably already have and use the tool I’m going to recommend: LinkedIn.
I’ll admit this may seem like a significant pivot from suggesting that if you can’t make that one call, you shouldn’t even bother. Here is a tool available for all, for free, and most of you already use it. As much as I have historically disliked the social apps such as Facebook (which I was forced to join in 2008 and quickly quit) and Twitter (which was suggested I join and one month in, I’m getting close to quitting), LinkedIn for me has stood the test of time and provides some great utility. Why? Three key reasons.
First, many of us have been on it for a long time and therefore it has effectively recorded your history of work interactions with a convenient “Connect To” button. Second, it keeps track of your colleagues’ career changes and you never discover “Damn, I don’t have their correct email address any more.” Third, it is a networking tool, rather than a communication tool- I think that’s an important distinction.
This said, I can see some of you wanting to close out of this blog and connect with every private equity or technical person you can find. That would be a bad idea. To me, the power of the tool is that it has documented the relationships you already have and it is those relationships that hold the key to fund raising and successfully starting a company.
Here is an assignment. I’ll reference the story of the Ligers; the first step in launching a company is to have the right team. Write down the names of your team members in the left column and assign them one of following labels: “the money”, “the commercial” and “operations”. (see a previous post from the SPE panel for more details on this topic https://davidramsdenwood.com/spe-qa/)
Now look at the list and evaluate your needs? If your list has team members that cover each of these topics and you haven’t been funded yet- I’m going to suggest you don’t have that area covered. To elaborate, I’ll draw from an example in my past and focus on the role I call “the commercial”. When we started Synchronicity Energy in 2012, we thought what the market wanted was a “MLP” vehicle that paid distributions from a low risk asset. Linn Energy was wildly successful and buying every asset it could get its hands on and we wanted to replicate it. We built a plan, targeted some assets and met with would be investors. The commercial person – if we had one – would have been saying the following:
- How can we compete with Linn Energy? They are public and already have a lower cost of capital than we could ever have.
- Why do we believe we are the best suited to buy someone else’s asset in a “grow or die” industry?
- If we have to go public as the exit strategy with the existing team, why aren’t we just working for the company that owns the asset already?
We lacked a fundable acquisition thesis for the type of capital we were seeking. Private equity, in particular, is looking for you to buy a dollar for 50 cents (or 25!) and have line of sight to being able to exit the investment. Who is the buyer and why do they want it? That’s “the commercial”.
If you have gaps on your list, these gaps should form the basis of your first LinkedIn search through your EXISTING contacts. You cannot begin a fundraising journey without a full team. Who on that list do you feel is compatible with the skill sets you need? What would the business model look like that leverages the key skill sets of the group? Who do they know in their network that multiplies access to the things you need.
It is true, that in four companies, the only one that truly failed was the one where we called 80 people. And, it is true that through calling the 80 people, I met the recruiters, the investors and the key partners in the team that we built. What I’m saying is that making the call to the 80 people won’t result in money for your venture in 3 months- which is likely the timeline you need it. It will set you on the path to be able to raise money in the future. And just because you individually don’t bring the skillset of “the guy that understands the money” doesn’t mean you can’t find him or her. But, the key is that you need to find that person before you expect to raise capital.
Back to the assignment. Let’s assume that you have the correct team- the money, the commercial and the operations. Who in that collective network do you know at a private equity or family office or pension fund that you can talk to? Again, for LinkedIn purposes, this should be the people you already know. Rebuild a relationship with them. Call them, have lunch with them, stay in touch with them and do it not because you want money today but because at some point in the future, the relationship will be mutually beneficial.
This is the core of what I mean by “you should have to make only one call.” If your network is strong, your relationships are active and you are constantly being helpful and connected to those in your professional network, you will know when the time is right for you to partner.
I describe this behavior as “Do the right thing”. If you have treated people fairly, respectfully and been a genuine help to them in their journey- whether they are a salesman, technical person or money person, they are more likely to think of you highly, speak of you highly and be willing to help you. You should have a positive ethos and in staying in touch with your network when you don’t need anything from them, and being helpful when they need your help, you increase your chances.
So open LinkedIn. Identify the people you have lost touch with; that you have a true relationship with and whom you respect because they have always treated you positively. Re-engage, re-connect and let your network grow. It may not get you funded today, but it will certainly help you, no matter what happens, in the future.