The Kejora Series: Steps to Approach Your Investor of Choice Pt. 2

Last week, we published the first part of our article about the steps to approach your potential investor. In this part of the article, we will talk about steps a founder can take to approach your investor of choice in Indonesia. Although we stated that the materials and documents are the main source in determining whether you will get funded or not, you still have to approach your investor of choice in a certain manner in order to put your foot-on-the-door to get their attention.

Our Funding Guideline to approach Investors

There are many ways you can get the attention of an investors. However to help you in your funding journey, we decided to give you our standardized 5-step guideline in attracting your potential investors. The 5-step guideline is: To communicate with your investors, setting a meeting, pitching, following-up and doing your negotiations. In this section, we will break down our 5-step guideline and suggest possible things you can do within these steps. Keep in mind that sometimes there will be a long period in between the steps. And there is a chance that you might not reach the fifth step with most investors. But always keep your hopes up, as long as you still have passion in your startup, you can still continue in your startup journey.

Ways to Communicate with your Potential Investors

There are many ways to communicate with your potential investors. You can start by connecting with them in professional social media platforms like LinkedIn or MeetUp. You can also try to cold call or email them and see whether they are available to meet or interested in your investing for your startup. You can go to their office and attempt to schedule a meeting with the director or partner of the venture capitals, if you can't you can always meet the associates and impress them so that you can get the director or the partner of the venture capital to meet up with you. Why should you meet up with the director or partner of a venture capital? The answer is that they are the only one with the power to decide whether or not they should invest in your company. Next, another thing you can go is go to networking or other types of events in the startup community, chances are is that there will be some representative from a venture capital or some angel investors attending in order to scout some potential startups. Lastly, the best way to communicate with investors is through a mutual connection. Networking is very vital in doing business in Indonesia, due to the lack to method to get trustworthy information, investors tend to rely on trustworthy friends and individuals to get information. If you are connected through a trustworthy connection and your synergy with your potential investor is great, then there will be a higher chance that your startup will get funded.

Setting up the Meeting 

Once you've manage to be in communication with a potential investor, set up a meeting that is suitable for all parties. Now the hardest part of the funding process. The big question is: How do you attract a potential investor to give you time to meet up. When you approach big venture capitals or popular angel investors, remember that there are millions of other startups trying to get their attention to fund their business. Therefore you have to find a way to gain their interest. You can do the following by making an amazing elevator pitch that makes them intrigue to find out more about your startup, you can set up a booth in convention events like Echelon or Tech in Asia in order for them to know about the existence of your company. You can try to increase your presence in social media through your content. You can try to be featured in an authorized media article by companies like e27, Tech in Asia or IDN Times. Lastly, try to go to events that the venture capital or angel investor is hosting. Most venture capitals like Kejora Ventures and MKV often host mini-events for the public to join in. During these types of events you should put yourself out there and charm the potential investors to giving you time for a meeting to pitch about your startup.

Pitching 

In our previous section of this chapter of the Kejora Series, we talked about the information material you need to put in your pitch deck. If you've read it and check the other resources we provided for you, you should have the foundation for an amazing pitch deck in the making. Even if you followed it step-by-step, please go to others to proofread or edit your pitch deck, just like writing literature or an essay, you need others to edit your work to ensure that you are clear, direct and persuasive. After you're confident with you final copy for the pitch deck, start practicing your pitch presentation. Try it out in front of a mirror, once you've gain some confidence, pitch to your family and friends to get more criticism and tips for your presentation. Once you've gain their approval, try to pitch to strangers in order to get out of your comfort zone and to see whether your presentation is truly well.

When getting ready for the meeting, make sure that you clear out your schedule for a few hours in case of situations where you end up leaving a bit later than you anticipated and the inevitable Indonesian traffic. First impressions matter the most in almost all relationships, you will be judged by your potential investor within the first 15 seconds that they meet you. If you are late, dressed sloppily or even looking tired and irritated, then you might be deemed as unreliable by your potential investors. Just as we stressed out in the previous article, always do your research. Before meeting with the venture capital or angel investor, do a little research about the person that will be meeting you. Do the research about the venture capital. Prepare questions that you intend to ask the person you're meeting about the venture capitals and its portfolio. Make sure you have all documents and materials ready for the meeting. And lastly, be confident and anticipate the questions they would ask you about yourself, your founder team and your business. If you can't answer their question, they will find your company to be a red flag.

"10 Powerful Body Language Tips" by Deca Inc

During your presentation, follow the 10/20/30 rule of Powerpoint. Although in the previous article, we said that as long as the powerpoint is less than 15 slides, it should be okay. According to Guy Kawasaki, an entrepreneur influencer, the most optimized way to make is presentation is to reduce your presentation into 10 slides that you put into the duration length of 20 minutes, which contains text no smaller than 30 points. But of course, there will still the caution that you might not speak coherently, might speak quietly or might speak too fast due to nerves. If this is you, we would recommend that you make your pitch presentation stand for itself. Another words, you presentation can be easily understood without you explaining it to your investors. In addition, most Indonesian investors prefer reading rather than hearing, therefore it might be a safer choice to make a pitch presentation that can stand on itself. The reasoning for the 10/20/30 rule of Powerpoint is that you should make the presentation short so that the investors will be more interested to ask you questions about your presentation. It was suggested so, also because if the presentation is too short, there will be a high chance that the investors will lose their interest in your presentation and start checking their phones or email. Therefore our recommendation is to try to make both types of presentation, focus in the presentation that stands by itself first. You will use it to pitch to Indonesian investors, the simple 10/20/30 rule presentation can be used for foreign investors.

Approach pitching like online dating. When you go out on a date, you would dress up to look your best to attract your potential date. This should be the same as pitching, when you go out to pitch to a potential investor, try to dress up to attract your potential investor. Of course, you wouldn't dress yourself to meet a potential investor like you would dress up meeting your date. What we mean is that just as much effort you put in to look good for a romantic interest, you should put as much effort or maybe more in order to look good for your potential financial partner. Have you ever stalked your potential date in social media to find out more about his or her interest and background? Pitching for an investor is similar, before going on the 'pitching date' you have to find out more about the person you're going to pitch to. Find out his or her interest and tailor your presentation to their interest.

When you do your presentation, make sure you don't delay your presentation with boring facts as appetizers. Directly "wow" your investors with the main course, the big picture of your presentation. Use that perfected elevator pitch and entice your investors with the sexy numbers and your logical and plausible plan for your company. Remember every minute matters in your pitch presentation, the average duration length for pitching is usually only 20-30 minutes. And most important tip is to stick to your allocated time. Manage your time allocation for your presentation and always provide time for your potential investors to ask questions about your presentation and your company. Keep in mind that you should expect interruptions in your presentations, so try to give time in between slides for investors to ask question so that they wouldn't interrupt you and interrupt your flow of presentation.

Your presentation can only tell so much about your business. If you happen to have a demo product or a demo video, it would be best to put it at the end of your presentation. This would mean that you have to plan it into your presentation schedule. Why do we recommend you to provide a demo in your presentation pitch? First, your demo will give the investor a full picture of your company and product. Second, your demo will provide you with a smooth transition to your conclusion. Lastly, videos and hands-on experience is the best way to engage your audience to your presentation.

Have only one person from your founder team to do all the taking in the pitch presentation. The only time where the other founder team member to talk should be for answering questions that is relevant to their direct role in the company. Too many voices can make the presentation be too confusing your the investors as they would not know who they should spend time focusing to. In addition, it is easier to keep the flow of the presentation if there are less voices in the presentation.

During the end of your presentation after the Q&A session, remember to thank your potential investors for their time. If you want to take the extra measure to keep your company fresh in their mind, you can send them a personalized Thank You card a few days after your pitch meeting.

How to pitch with Angel Investors

Following-Up with your Potential Investors

After you did your pitch presentation, wait for a couple days for the venture capital or angel investor to contact you back about their decision. Don't rush them to give you an offer. Wait out for a few weeks before attempting to contact the investors. You can do the following by giving them a call or giving them an email. Keep in mind that if they have not contacted you months after your pitch presentation, there is a high chance that they weren't interested. If you were rejected already, try to find out the reason why you weren't able to attract them to fund you. Don't be offended by the rejection. By asking the venture capital or angel investor the reason they didn't fund you can help you grow your company and fixing whatever it is that didn't attract your investor.

Negotiating your Deal

However, if you are given an offer by the venture capital or angel investor for funding into your company, then go ahead and set a time to negotiate your deal. Make sure you give enough time you analyze the offer by the investor and if you can afford the get professional service to consult or advise you on the deal, then go for it. Read through the offer given by the investor and make sure you understand the whole contract. Find out what you can do to negotiate the deal to better your situation, but don't push too hard or you might lose the deal.

"Negotiating with Investors" by Business Plan Thrive

So what are the best strategies a founder must try when negotiating a deal with your investors? And what should to talk to your investor about? Before you start negotiating your term sheet with  your investors, ask them these 5 questions to understand their expectation in your company.

1. Ask what are the things they can do for your startup other than funding. Although you have done your research about the investor or venture capital, by directly asking your investor about the things they can do to help your startup, you are guaranteeing that they can provide you with those following services and benefits for your startup. In addition, there will be some unique benefits that an investor can do for your startup that they haven't did for other companies in their profile. When discussing your term sheet with your investors make sure that these discussed benefits and services are later included in the contract.

2. What is their preferred exit? By asking this question, you can understand your investors' expectation for your startup. You would be able to know the time-frame at which they wish to exit and whether they would be interested to fund in the subsequent round as well.

3. What is their required level of involvement? This question tells you more about the investor, whether they are the type of investor to be hands-on with their investment or whether they prefer to observe from the side. This is an important question because if the investor require a high level involvement to the company, then your daily day-to-day operation will be effected as well. Hands-on investors often ask for some decision-making power for your business.

4. Ask for some references from the founders in their company profile. By asking this, you are showing your investors that you are a thorough person. In addition, if they are unwilling to provide with a list of founders to contact for reference, then there might be something wrong with the investor or the venture capital. Often good investors or venture capital will be willing to connect you with their other portfolio if they are interest in funding you.

5. Ask what term clauses is important for them. By asking this question, you would be able to understand their perspective better so that you can strategize on which battles you can win when negotiating the deal.

The first two strategies to get better terms in negotiating is already clearly stated in the info-graphic above. However there are 7 addition strategies that you can consider when negotiating with your investor.

• Picking Your Battles. When you negotiate on your term sheet, make sure you know which clauses are the most important for you. By prioritizing your clauses, you would be able to know which terms to fight on and which one to let go. If you know which clauses are important for your investor, you would be able to negotiate better terms for yourself using a simple game of theory strategy. Try to optimize the term sheet to your benefit, and keep in mind that there will be some clause negotiations that you wouldn't win.

• Sacrifice Valuation for Clean Security. Most founders make the mistake of focusing in getting better valuation whereas security is much more important in the long-run. By losing cases on valuation and focusing in winning your cases for company and founder security, your startup will have the better-hand to survive in the long-run. Some examples of these security terms would be: situation of the liquidation of shares, power in decision-making power of investors and many more.

• You should Pay Up for good quality investors. What does this mean? It means that when you have a good quality venture capital or investor willing to invest in you, you might have to "pay up" (have a lower valuation or security position) in your negotiations. There is a reason why you should do the following. Good venture capitals and investors often have alot to do with how successful you become in your industry. Good investors will be able to bring you more exposure, more resources and more insights to help your company become successful. Bad investors on the other hand might not be of any help, if you're unlucky bad investors might destroy your company reputation instead.

• Don't let an investor get away negotiating a clause by saying "we have always done it this way." When negotiating a deal there are two parties involved, therefore both party must agree on it before moving on. If they insist on keeping the clause that you didn't agree, then analyze the importance of the clause. If the clause is not so important, you can get away by suggesting more clause changes that are more important to you. If the clause is quite important, then either agree on middle-grounds or reject the deal.

• If you have multiple of investors in a Syndicate, suggest on a single investor counsel to lead the negotiation. By doing this, you are saving yourself alot of work and trouble from involving yourself with too many parties. And also saving money from minimizing the legal fees you would have to pay.

• Try to deal on advance with follow-on financing. Just as investors often ask for "pre-emptive rights" (the right to invest in future financing if they are interested to do so), you should also have some protection in the event that one of your investor decided to abandon you when you are raising for more capital.

• Handle the negotiation of your term sheet carefully. Whether it's the initiation or following-on negotiations, your tone in which you set the negotiation will effect the relationship with your investors after the negotiations. You will want to have a good relationship with your investor in order to make your business successful and optimize the benefit that your investor can give for your business. If you have a great relationship with your investor, they will spend more of their time and resources for your startup.

• After you are finished will all negotiations and have sealed the deal, don't forget to write a handwritten "thank you" note for your new investor. This will bring your relationship with your investor to a good start. People often appreciate handwritten notes because not many people still take the effort to make one. Therefore, there is a higher chance that they may keep it or display it in the table or near their surrounding. If they do keep the note or display it near their surrounding, then they will be reminded of you everytime they see your handwritten note.

Negotiating with Angel Investors

What are Venture Capitals looking for these days?

Now that you have your checklists and guidelines to approach your potential investors, you can start making and collecting your resources you need. Keep in mind that this guideline we provided you to approach your future investors is not the ultimate path into getting funded. There are still other ways to get funded, and whether or not you get funded is all in your hands. Make sure the materials you collected based on our checklist is in its best quality and that all information are factual and clear. Remember that the materials you provide your investors is only partial to winning your investors. You still need to build a relationship with them and be proactive in getting their attention. As we stated in the previous article, you have to be open to rejection. If you do get rejected, keep your head up and work harder. Entrepreneurship is a journey full of challenges, if it's easy then there will be no reward in doing it.

However you also have to keep in mind of the different trends of the startup world. Sometimes working hard is just not enough, you have to do your research and figure out whether your company is something investors are looking for currently. In our next article, we will talk about the current trends in the startup industry and what today's investors are looking to invest in. Find out whether your startup is trending today!

Other Resources

More Information about Pitching

Warning Signs to Notice when Dealing with These Investors

Looking for Angel Investor

Tips in Negotiating For Startups