If you need to raise capital to grow and develop your company, there are two primary pipelines through which to attract investment dollars:
a) The professional investment COMMUNITY
b) Marketing DIRECT to the investor.
The ‘professional’ investment community consists of investment banks, stock brokers, venture capital firms and the like. The community has access to funds through their existing relationships with investors.
Large sums of money can be raised quickly through the community. However, there are disadvantages to chasing this money:
- Fees. Often reasonable, but may not be affordable.
- Might demand an undue measure of influence or control.
- An early-stage development company without traction may not find favor with the community, making the entire process discouraging and unfruitful.
- If favor was previously found, it may dry up if the development of the company does not advance as quickly as hoped.
- Depending on the structure of the financing, if they put their people into your deal, they may be able to pull their people out of your deal. This can spell disaster.
- It is not repeatable at the push of a button. At least not ‘your’ push. You are always dependent on them to agree to go after more money. This dependency puts them in the driver’s seat regarding how fast and far you go.
With all those disadvantages, why go to the community at all? Well, if you can find one or two ‘sugar daddy’ firms to back your deal, it makes it easy on you. They do all of the marketing and the efforts of a well-established firm usually bear fruit. Results come quickly. This means you can stay focused on developing your company. This is good, and in many cases preferable. I like working with the community for all of those reasons. But if/when the disadvantages kick in, it may be time to at least compliment your fund raising efforts with your own, direct-to-investor marketing program.
Marketing direct to the investor is harder. You have to do the grunt work of selling. But if you can create well-oiled ‘systems’, you will have the power and control over if, when and how much money you raise.
The key to a successful direct-to-investor marketing program is to develop repeatable marketing systems which are predictable, profitable and scalable. If your systems have all four of those characteristics, you will have put investment dollars on push-button control.
Shortly after the Second World War, the United States took charge of rebuilding Japan’s industrial infrastructure. Dr. W. Edwards Deming was sent over to aid in the rebirth of Japanese manufacturing. Prior to this, you may recall, Asia had a bad reputation for producing poor-quality products. But by the time Deming got through with Japan, its quality output had become famous, then infamous as it delivered to the world high-quality brands such as Honda, Nintendo, Sony, Toyota, and Lexus.
Deming is often referred to as the father of the modern quality movement. Deming pointed out that “94% of all failure is not because of the people, it is because the system is not working optimally. Unless we change the system we will continue to get poor results” and “Best efforts accomplish very little; you must change the system.” The familiar quote “you can’t manage what you don’t measure” also came from Deming.
In the world of investor-marketing, making good progress means putting systems in place, one after the other, and then disciplining ourselves to optimize those systems. This takes time. Exactly how much time will be a reflection of specialized experience the marketing manager has, and the resources available to him.
The undisciplined approach is to dump a marketing tactic at the first sign of trouble, then run after the next big idea. This is usually motivated by a marketer’s lack of awareness of how to optimize something that is not working. Once optimization skills are learned, many broken systems can be fixed and made profitable.
In any case, it is ‘systems’ we need. Not ‘ideas’.
If we stay focused on this concept of building systems and optimizing them, the process of growing our investor pipeline becomes much more methodical. If long term success is inevitable, it will not be without marketing systems which are predictable, profitable, repeatable and scalable.
Creating these systems requires highly specialized skills. To be sure, the skills can be learned. But creating the systems fast requires experience. If resources allow, the need-for-speed creates a good business case for hiring someone with experience to put the systems in place. Once setup, in-house people can often monitor and maintain with minimal training.
Once you have systems which are Predictable, Profitable, Repeatable and Scalable, you will have found your golden funnel. Investment dollars will always be available when you need them.
One of the weakest areas in most direct-to-investor marketing programs, is the website’s ability to convert site visitors into interested prospects who reach out to you.