November 30, 2023
written by Derek Distenfield
Hey there, fearless founders and startup enthusiasts! Today, we’re diving into the exhilarating world of FOMO – Fear Of Missing Out – and why it’s the secret sauce your startup needs to spice up that funding game. Buckle up, because in the ever-cautious landscape of post-pandemic investments, FOMO is your golden ticket to grab investors’ attention.
1. Terms, Terms, Terms – Accelerate Those Decisions!
You know what makes venture capitalists break into a sprint? Getting a peek at your terms, even if it’s just a high-level email draft. It’s like dangling a carrot in front of them – they can’t resist taking a bite. Speed up those decision timelines and watch them move.
2. Raise Before the Big Splash
Timing is everything. Secure that cash before a game-changing milestone hits. Whether it’s a pilot going full-throttle or a government test paving the way for a massive contract, investors love being part of the success narrative. Move fast, move bold, but tread carefully – missing the milestone could throw a wrench in your fundraising gears.
3. Hit Pause, Focus On Sales
Mark Cuban’s golden rule: “Sales cures all.” Temporarily shift gears from fundraising to spotlighting those operational wins. Saying “no” for a while might just be the nudge that gets investors scrambling to be part of your success story.
4. Raise When You Don’t Need It
Strike when the iron is cold. Raising money when you’re not desperate gives you the upper hand. Leverage is your best friend. Remember, entrepreneurs are always raising money, even when they don’t need it.
5. Oversubscribe – The Power Play
If you’ve got commitments pouring in, flaunt it (without overpromising). The magic word? “Oversubscribe.” Investors want in on a deal that’s hotter than hot. Make them feel like they’re part of an exclusive club.
6. Triangulate Investors With Your Network
Call in reinforcements! Your existing investors can be your secret agents, reaching out to others. The more buzz, the better. Your personal network? Pure gold. “I keep hearing about this deal” is music to an investor’s ears.
7. Diligence The Investors
Turn the tables. It’s not just about them vetting you; you can vet them too. Ask for references, check out their portfolio, and chat with other founders. Let them know they’re under scrutiny just like you are.
8. Time-Driven Processes
Set the stage. Declare a time frame for your fundraising dance. Ask for those term sheets by a specific date. A bit of pressure can work wonders. Just remember, rule #1 comes into play if things get too intense.
9. Incentivize With A Deadline
Walk the fine line. Offer incentives tied to a commitment date without looking desperate. Change that convertible note discount rate or terms based on positive business activity. Show them the urgency without waving a red flag.
Remember, founders, there’s a fine line between being confident and pushy, and nobody likes a jerk. It’s crucial to have the self-awareness to determine this delicate balance. As a fun side note, check out the Uber movie to witness how well TK did it there – the master of confidence without the jerkiness.
10. Firm Closing Date – Lock It Down
You’ve got a lead investor, and it’s time to seal the deal. Set a closing date, but keep it realistic. No one likes a slammed door, but a confidently closed and somewhat timed one? That’s a power move.
FOMO is no fairy tale; it’s your startup’s reality check. Sure, you want investors to see your value proposition, but a sprinkle of FOMO adds that extra magic. The dream scenario? Mutual FOMO – where you’re just as afraid to miss out on them as they are of missing out on you.
Spice up that fundraising journey, folks! Until next time, stay bold, stay FOMO-worthy. 🚀
Derek Distenfield, a seasoned professional with over 15 years of leadership experience in the US Army, nonprofit organizations, and diverse corporate environments, currently holds key roles as the Managing Director at FG Ventures and the President of Digital Ignition.
