I met just before Christmas with a chap recently who wanted to raise capital to help in franchising his business, which I will decline to name for reasons that become obvious soon. I, however, thought it was a bit early to try to raise capital as his business wasn’t particularly systemised, exciting or potentially lucrative. In fact I wasn’t convinced that his business model actually worked. Therefore, I suggested I would introduce him to a friend who was an Angel Investor, who has had a lot of success in franchising and whose insights on business model innovation I valued. The chap I met disagreed with me about him not being ready for franchising yet and felt that lack of cash was the only thing holding him back.
So despite my vague doubts that he wouldn’t actually listen to any advice that wasn’t inline with his own ideas, I introduced him by email to my friend. A couple of days later, I was cc’d on an email back to my friend that had not much more than a Capital Raising Information Memorandum (I.M.) attached.
Having that sinking feeling that this wasn’t right, I did a quick check and here’s what I discovered.
- No other correspondence had occurred, so the first thing my friend knew after the introduction was he was sent an I.M. by email.
- The I.M. was unasked for, which was slightly irritating to my friend.
- I also got this in the email back from my friend “the franchise offer on his site links you through to a ‘broker’ and then I couldn’t find his listing on their site, amongst the plethora of chicken cooking, lawn mowing and other ‘franchise-offers’ of (not much) note.”
I was really disappointed by this as an outcome, because I think Capital Raising is hard work, but impossible if you don’t treat it like romance. You need to:
- Make sure you have something good to offer, not just mutton dressed as lamb.
- Meet people who are potentially looking for exactly what you have got, not just put the hard word on everyone you meet.
- Put in some groundwork developing the relationship, don’t just cut to the chase and ask “how about it?”
So, where is the love here?
One response to “A quick story about Capital Raising and Romance”
Brendan this is a really good wake-up call for me today. We’ve met several
people like this who ‘put the hard word on everybody’ and it’s really
de-energising and not respectful to those who genuinely have a real business
worth raising money for and growing, and the capital people who want to add
value in addition to $$ to excellent businesses that they admire and enjoy.
Maybe when you have that sinking feeling next time you might decide not to
be as helpful and generous as you were this time. On the other hand, it’s
people like you that genuine entrepreneurs really need and appreciate! A
conundrum I guess. It’s a wake-up call for me because we’re currently
talking to some VC’s and angels about finance for our new venture and a
reminder to me that if the fit is not right, not to progress. That said,
everyone so far has been most encouraging and supportive. I guess there are
enough true romantics out there to keep entrepreneurial/VC relationships
afloat.