Enhance ReadabilityBack in 2009 when we were first getting started, I attended a fundraising bootcamp hosted by For Impact. That’s where I met Unreasonable Mentor Tom Suddes, a wisecracking, self-deprecating founder of 19 companies who can do 1,000 push-ups in a day, used to be a pro boxer, and never seems to run out of energy. He’s raised $1 billion himself, coached entrepreneurs to raise a total of $1 billion, and is currently coaching his third billion.
Fundraising takes up at least 50 percent of a CEO’s time. Tweet This Quote
Tom’s got three keys to fundraising, which are relevant to both for-profit and for-impact (what the IRS calls non-profit) fundraising. They may sound simple, but do not be fooled. I used them to raise our most recent round of $1.2 million in a few months. This blog post details the three keys and offers you templates and example emails to implement them.
Key #1: Be with the right person.
This is the most frequently overlooked part of fundraising and perhaps the most important one to get right. Here are the steps to hone in on the right people:
- Come up with an ideal profile. What does your dream funder look like? What are their characteristics? Write them down and ask people in your network if they know anyone who fits your description. For example, if you were running a venture providing employment to people with disabilities in India you might look for someone who:
- Has a loved one with a disability.
- Believes in dignified solutions, like job training or livelihood creation, that allow people with disabilities to move out of poverty, rather than charity.
- Is someone who you would enjoy having a beer with every week.
- Is someone you’d want as a mentor.
- Is of Indian descent or has traveled to India several times.
- Come up with at least 50 prospects who match your ideal profile. Put them in a “prospective funder tracker” like this one. Keep this funder tracker regularly updated with all the conversations you have with potential funders (Note: Thanks to Unreasonable Mentor, Billy Parish, for sharing the first version of this template).
- Prioritize your prospects based on the 3 Cs. The funders who are most likely to give you money are those who meet the three Cs. They care about what you’re doing. They have the capacity to support you (which you can assess by looking at other funding they’ve done, looking up their personal background on Google for a sense of their affluence, or simply having an honest conversation with them). They have a personal connection to you. The funders who meet all 3 Cs are your top targets and the first ones who you should ask. Many funders will care about what you’re doing and have the capacity to support you. Build a personal connection with these funders and ask. Don’t bother with those who don’t care about what you’re doing, and de-prioritize those who don’t have the capacity to fund you (although, it may be worth it to let them know you’re looking for contacts who could help you raise the amount you’re looking for). Your goal is to have 25 prospective funders who care about what you’re doing and have the capacity to support you. You should assume roughly two of them will give you funding (Note: Thanks to former teammate Ian Kim for teaching me the three Cs).
Do your homework and explain why you believe you have a unique connection with the funder. Tweet This Quote
Key #2: Predispose prospects in your favor.
If someone cares about your mission, has the capacity to fund you, and is positively inclined in your direction before you ask them for money, odds are in your favor that they’ll agree to fund you. Predisposition, or the process of getting someone to feel like they want to support you before you even ask, is an incredibly important part of fundraising. Here are the most powerful ways to predispose someone.
- Get introduced by someone they trust. If you don’t know this prospect, but someone they trust can connect you, ask for that introduction! Ideally, you want the connector to say, “Sarah, you have to meet [insert your name here]! What she’s doing with [insert your company here] is beyond inspiring and amazing and I think it’s one of the most impactful organizations I’ve seen. No pressure, but I’d love for you to sit down and learn about their model. If it’s the right fit, it might make a great addition to your portfolio.”
- Write a thoughtful email explaining your intentions upfront. Funders know why startups/early-stage organizations approach them. Yet, so many of these organizations mask their intentions by saying, “I just want to chat and get to know you.” That sort of line annoys funders. It makes them feel like they can’t trust entrepreneurs who approach them, who carry a secret agenda (that’s actually obvious to everyone). Be upfront with them and start off on the right foot. Here are a few email examples of how to do that. Seek permission to have a conversation with them about funding, rather than tricking them into having the conversation with you.
In your initial conversations with a prospective funder, get to know what you could do to help them. Tweet This Quote
- Tell them why you chose them (source: Adam Grant in this blog post on how to get important people to email you back). Sure, funders have money. That’s why everyone wants to talk to them. But why do you want to talk to this particular funder? Make them feel special. Show them you’ve done your homework and explain why you believe there’s a unique connection here. Tell them you’re aware of their funding criteria and patterns (if they have any) and that you fall in those criteria.
- Show, don’t tell. The single best way to predispose a funder to saying yes to you is to let them experience your work first hand. For example, we just received a large grant from a foundation. The reason they were willing to give us this grant is that they came to the Unreasonable Institute, participated in our Investor Days and Unreasonable Climax events, got to meet our entrepreneurs, connected with mentors in our network, began working with our lawyer to help make deals, visited the work of several of our ventures, funded four of them, and got to know our entire team on a 2-day retreat in the mountains. By the time we asked them for funding, they were already huge fans of Unreasonable Institute. If you can’t get a prospective investor to come see your work, get them as close as you can with videos, testimonials, and traction.
The single best way to predispose a funder to saying yes to you is to let them experience your work first-hand. Tweet This Quote
- Be of service to your prospect. Funders are always looking for connections to people they can co-invest/co-fund with, well-aligned deals, lawyers to help them disperse cash well, chances to learn about new funding models, etc. In your initial conversations with a prospect, get to know what you could do to help them. Then make sure that you do it.
- De-risk the idea of funding your venture by showing “social proof.” Funders are often herd animals. They have to make high-stakes bets (worth thousands or millions of dollars) on stuff they know very little about, surrounded by uncertainty (startups/early-stage organizations). So they rely heavily on the opinions of other people who have investigated your venture. When you share what you’re doing with a funder, give them some insight into who else is supporting you. For instance, we just got a $256,000 grant from Rockefeller Foundation. You better believe we are sharing this with prospects! We also share a few examples of our mentors, press we’ve received, and results to date.
Key #3: Just ask.
If you have connected with the right person and effectively predisposed them toward you, all you have to do is ask. This is where a lot of people struggle. But, if you’ve predisposed properly and declared your intentions form the start, all you have to do now is be direct. Here’s how to do it:
- Show them the levels they can come in at. You may not know what capacity a funder has. So present various levels they could come in to fund you (e.g. $50,000, $100,000, $500,000).
- Show them what they get for their money: return or impact. Explain to a funder exactly what she’s going to get for giving you her capital. If that’s financial return, walk her through your projects and your strategy for how you’ll provide liquidity for investors. If that’s impact, show a funder what their dollars will do. For example, 2013 Unreasonable Venture MANA Nutrition showed prospective funders that every $60 invested in MANA could forever cure a child of severe acute malnutrition. A $60,000 investment, therefore, would cure 1,000 kids!
Funding is not a one-way relationship; they want benefit from the funding they provide. Tweet This Quote
- Give them a 2-pager. For our raise, I started by sending funders a 27-page document to read. Guess how many read it? Zero. Funders get tons of requests for money, so respect their time and start by sending them a two-pager. They’ll ask for more detail if they want it. We have raised the bulk of our funds to date nothing more than having funders visit Unreasonable, a 2-pager, a budget, and a few phone calls and in-person meetings.
Here’s our two-pager as an example. It should include the following elements:
- Your mission and company description in 1-3 sentences.
- Amount of funding you’re raising and deadline for raising it.
- A visual of what you do.
- Your traction to date.
- The strategy you need to funding to make happen (ideally visually).
- Use of funds and high level budget (ideally visually).
- Timeline for implementation.
- Follow up with them regularly. They are going to take time to get back to you—they get a lot of requests, and it takes time to do diligence. Make sure that you stay in touch regularly. Typically, funders move more quickly if you impose a deadline and create a sense of urgency. Even as a non-profit, you can establish a final date for raising your “round.” See the follow up email that I sent to a funder as an example (third email in the doc).
- Know your budget cold. Be able to justify your amounts. One of the first questions that funders asked me is, “Why do you need this much? How do you know it costs this much?” I was once discussing a grant of several hundred thousand dollars with a prospective funder, and as we were going through the funds needed, I couldn’t account for $40,000. She still gave me the money, but she subtracted $40,000 from the amount I requested. I learned the hard way to make sure I do my homework. Now, we include examples of past initiatives we’ve run that have similar costs as evidence, or we cite how much other organizations spend to do something analogous.
If you have to choose between building your company and fundraising, prioritize building your company. Tweet This Quote
- Give them an easy out so you can get clarity. My good friend Ross Baird, Executive Director of Village Capital, uses the line, “No is my second favorite answer” to show prospective funders they should be honest about their interest. You want clarity so you can focus your time on the prospects most likely to fund you. See an example of an email I sent to a funder after about 3 months of chatting with her about it (fourth email in the google doc).
- Make sure you commit to getting them what they want out of the relationship. Funding is not a one-way relationship. Funders want benefit from the funding they provide. It’s imperative you ask them why they’d consider funding you and what they want out of the relationship, whether that’s return, recognition, learning, a chance to be on your board, or a chance to be associated with your inspiring work. Discuss this early with the funder and devise a plan to fulfill their expectations.
A few other considerations:
- Fundraising is really, really hard. To an entrepreneur, funders are erratic, random, and slow to move. It’s important for entrepreneurs to understand that their job is to predict the success of ventures without evidence. They are frequently wrong, and when they’re gambling their hard-earned personal funds or hard-raised funds from others, they have a tough job. So expect that funders will be erratic, random, and slow to move.
- Fundraising is at least 50 percent of a CEO’s time. That’s 2.5 days out of every week focused on only fundraising. If you have to choose between building your company and fundraising, prioritize building your company (because a better company is more likely to attract funding). But, ideally, entrust building your company to your team and make fundraising your focus (source: Paul Graham).
It’s important for entrepreneurs to understand that a funder’s job is to predict the success of a venture without evidence. Tweet This Quote
- You can’t do it alone. Fundraising is emotionally grinding. It takes a long time, you don’t usually know where you stand, you put in a lot of effort for a delayed payoff, and it’s harder than you expect—much harder. Therefore, you are unlikely to progress without support from a “fundraising committee” or a “fundraising mentor” checking in with you once every week. The role of this fundraising committee/mentor is to go through your list of targets with you and ask you where each relationship stands, what progress you’ve made since last week, and ask you what next steps you’re going to take. Their job is really to serve as a mirror of your progress and hold you accountable. If you leave it to yourself to fundraise, you’ll put off making asks, drop key next steps, and focus on smaller urgent tasks that pop up. (Many thanks to Unreasonable Mentor Scott Leonard for being my fundraising committee and believing in me through our raise!)
In summary, as you prepare set forth and raise the capital you require, remember:
- Be with the right person.
- Predispose them in your favor.
- Just ask.
You just may surprise yourself…
A version of this article originally published in May 2014. It’s been updated and reposted to inspire further conversation.
