"Hi James,

Were you able to review the pitch deck and docs for our current round? Are there any other investors you could introduce us to to help fill it out? We have about 1 month of runway left.

Thanks!

Your friend the entrepreneur raising money"

What's wrong with this email? There's a clear action time. There's certainly a sense of urgency. What's lacking is any clear motivation on the part of the investor to want to move faster.

Raising money is a much about understanding the psychology of the process as it is about building a compelling business to invest in. I dislike that element just as much you probably do but it's the reality of how fundraising works.

Unfortunately for entrepreneurs fundraising usually results in 1 of 2 extreme outcomes. Scenario 1 is the good one: there is so much excitement to invest that you have multiple offers to lead, investors fighting to get in, you can "oversubscribe" your round, and you can close it fairly quickly. Scenario 2 is 90%+ of circumstances where it's an uphill battle and you have to fight and claw to build momentum to fill your round.

In scenario 2 investors tend to have the upper hand. You need money, they have it, and there isn't a line of other people waiting to give it to you. It's a very typical high demand - low supply situation. This means you have little leverage to negotiate the terms and are usually stuck operating on the investor's timeline.

Scenario 2 can take 10 times as long to fill the round. As I've written about before, investors are incentivized to wait as long as possible before pulling out their checkbook. Every day that passes is just more information for the investor to consider their decision, one more day they weren't exposed to the risk, one more chance to see if you signed that partner you said you would or acquired as many customers as you set out to or closed those other investors you said were interested in participating. Until there is some kind of external pressure, there's no reason for the investor to move faster.

That doesn't mean you can't still fill your round in scenario 2. It just means you didn't hit the viral loop of investment circumstances in scenario 1 and will have to make up for that with persistence, perseverance, leadership, and strategy. After a conversation with an interested investor you should, as you suspect, follow-up to provide any deliverables you said you would. The only time you ever reconnect after that however is when you can share news that momentum is building: signed a big new partner, brought on that key VP sales you needed, closed a key or high-profile investor, dramatically increased your sales growth rate, etc.

As the leader of your business it is your job to give the impression that there is a growing army behind you and generate FOMO among interested investors. Persistence is not just about the number of follow-ups you make. It's about leveraging every significant victory you achieve as an opportunity to advance the fundraising process.

 

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