Do’s and don’ts of fundraising

It’s widely known that development and investment go hand in hand in the digital world. But how does one search for investment? Since this is an issue that we see with lots of entrepreneurs and startups, we decided to interview one of our close friends, an investor in renewable energy, Tomás Ocampo. Check out our latest Amalgama Interview, led by our CBDO, José Tedin.

José: If you had to recommend to someone that’s looking for investment what to do, or what would be good for them to do, what would you tell them?

Tomas: In my opinion, the most important thing is to take fundraising as a process. So basically if you’re the CEO of a startup, you have a thousand things to do, from growing your team, finding clients, iterating your product, interviewing potential clients and trying to sell. So you have many things to do and all of them are important. And then you have another one that’s fundraising. So I think, first, as in anything that you want to do right you need a plan and a process.

The plan and the process are not the guarantee of success but not having them increases the chances of failure. So the first advice I give to entrepreneurs that are trying to raise money it’s to try to establish a process. This is really similar to a sales process in general. You try to generate the top of the funnel, to form connections with investors and you develop a list of, let’s say, 200 investors that you’re gonna reach out to. Also, we need to understand money as a process, in the sense you should try to constrain it in time. So you are going to do a lot of work up front to develop this list of investors and the documents that you’re going to present to investors. You’ll do a background check on those investors so that you can tailor your documents and your conversations according to who you’re meeting. But you want to do a lot of work upfront so that when you launch the process and you start talking to people you do it kind of in a constrained amount of time. This will make your time allocation more efficient and secondly, generate a fear of missing out between the investors, between the people you are reaching out to. You don’t want to raise money indefinitely in time. You want to build long term relationships with them and also make sure of who they are, that they bring value to your company, as they are potential board members that you’ll want around you.

José: Great, it’s really interesting what you say about investigating the investors and also adapting the information you’re gonna present and the pitch to the investor that you’re talking to. I thought of the preparation of the documentation just as a general process and not as something that would be targeted and tailored for each investor. It’s really insightful.

Tomas: Yeah, I think it’s important to do all the work upfront to develop your funnel. To have your list of investors you wanna reach out to, as well as the documents to pitch your company. You’ll want to do research on the investors you’re gonna reach out to because you may have a personal connection with some of them, and you can point that out when you meet them. You can even have something in common with them like you both play golf or you are part of the same organization club or something and you can connect personally. Or maybe there’s a podcast interview where you can talk about your business model. I recently had a company that was raising money, and I introduced them to a fund and that fund was like:

“Hey have you thought of this other investor? He’s tweeting all the time that a company like yours should exist so you should just talk to him because that’s like a match made in heavenThis person is looking for that opportunity and as long as you have an awesome team to take that opportunity, that person will probably invest.”

So I’d say you should start by developing that funnel and then preparing all the documents, doing the research so that you can tailor a little bit your documents for each investor, or your most important investors for when you are going to meet with them.

José: Great, and if you had to say what are some general mistakes or things that maybe startups or entrepreneurs do when they look for investment that you would advise them not to do, what would you say?

Tomas: First, it would be doing the opposite of what I just said, not taking it as a process and letting fundraising drag on forever or not doing it as a one concentrated effort. So then you can start getting interest from some investors but you enter this loop where you cannot narrow it close. You never get to a point where the urgency to sign documents and invest. So I would say not running a process and letting this thing run forever, is an issue. Even though I say it’s a process that should be constrained in time, I think it’s important to develop long term relationships with your investors. The investors you want, that are in your space, and the ones that you would like to have in your company; don’t reach out to them for the first time to ask for money. Reach out to them early when you are thinking about this idea, or you are starting to develop the company, you could get good advice from them and it works both ways. They get to know you and it gives them information in case they want to invest in the future, and you also learn about them if you eventually want to work with them, have them on your board or have them as investors. And sometimes that doesn’t work and you can still pitch them in the future when you are doing a round and that’s fine. But I would say that’s another one. And then there are specific mistakes. Let’s say you have one great investor that you want in your company who is interested in investing. Sometimes you kind of get excited that a person is potentially investing but they are not committed yet and then you want to take advantage of this and you try to generate a fear of missing out with those endorsements that you start having. Be mindful of that, be sure they are committed because it can go both ways. You sort of know when a person is committed or not, and I think the decision to leverage those situations or not is really personal. There are CEOs that are way more pushy, sellers, and then there are others that run the process a little more conservatively, but I’ve seen all of those work and make mistakes. Another mistake, and I think entrepreneurs in general are really resilient, would be to get discouraged. You are gonna hear a LOT of “no’s”. All of the successful companies you hear that at some point they received mostly no’s. Don’t get discouraged by that because most great startups in the beginning sound like a stupid idea. You are not gonna do a super successful startup with an idea that is mainstream. It has to be contrariant. When an idea is contrariant, most people will tell you that it’s stupid what you are trying to build. So don’t get discouraged.

José: Yeah, believe in your company, believe in your startup and what you are building.

Tomas: Once you are committed to this, go 100% forward on building it. Most entrepreneurs are like that. People who are not like that should go and do something else because it’s a pretty rough road.

José: I totally agree, it’s true that you receive a lot of no’s and you might get discouraged so it’s important that you stay attached and continue walking. I liked very much what you said about making sure you are doing this in a constrained amount of time and you are not doing this forever because if not you don’t have that urgency to close. But if you had to give an extra piece of advice to someone that is looking for investment, what would you say?

Tomas: I think that another piece of advice is to be open and discuss with potential investors openly what are the challenges of business because then you get to really know them. This may not work for everybody, but it works for me. Discuss what their real business judgement is so you get to know if you really want them in your cap table, if you really want them potentially in a board, and you get to build a relationship. You also get to give them agency to investors so they know they can add value to their company and give them that permission. So I would say take these conversations as both a potential opportunity to get them to know you but also for you to get to know them. It’s kind of a process that runs both ways and now that there’s so much cap (capital) available in the market it’s actually not that easy to raise money right now. There’s a lot of great entrepreneurs, but there’s a lot of capital and there’s a lot of noise. So you should approach fundraising both as a way of selling your company but also of learning about the investor.

José: It’s true that many times we think that we want the investor to choose us but we are also choosing the investor and we are also choosing who’s gonna be part of our company.

Tomas: Yeah and an investor is like an employee that you cannot fire. So once you take that money, you are gonna have them around for a while. It doesn’t mean you will have to talk to them all the time, but they are gonna be there. So it’s really important who you choose your investors to be. Most of the mistakes that I have made in the past are related to who I took money from. It’s gonna be your long term partner, so I would say an important advice would be to not to be desperate for the money. I think things are better when you take it that way, like people notice that you have confidence in your company, that you are gonna be really careful on every step of the process, even who you take money from and that is gonna reflect on everything else. So I would say that is important.

José: Awesome! Thank you very much for your time and for joining us here. It was a pleasure having you here, at “Amalgama’s Interviews”.

Tomas: Total pleasure, Jose. Go Amalgama!


If you have an idea or are working on a project you could use some help with, feel free to contact us! We’d be happy to help you… or who knows? Maybe be your new partner in crime.

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