Unspoken tricks that work & the power of Deal Dynamics
You spent months preparing your investor proposition, your financial model and your investor pack. You crafted a list of relevant investors, killed your fears, jumped in and went pitching investors. You received the usual “you’re great, a bit too early, come back later, send us updates please” and “oh, uhhh, well, no, but maybe later” and other rejections every founder learns to receive.
You still managed to pull it off through sheer grit and get one or two investors interested – congrats! Closing your funding round is, finally, within sight.
And then all hell breaks loose.
Investors change the tone, and deadlines get dragged out, last minute ‘investor friendly’ terms appear and become deal breakers, you get asked to disclose information you shouldn’t, told to drop X or Y investor, as they make ‘suggestions’ (not really optional) and add their conditions.
Let me tell you: this deal isn’t closing anytime soon. You’ve lost it and will struggle to close it on good terms.
They won the game – a common occurrence, especially today when deals are slower, investors more demanding, and all their dirty tricks considered “fair game” again.
How, why? What did you miss?
We have helped hundreds of founders through their funding rounds, and one of the most stressful times is… right at the end. When you think it’s all sewn up and about to close. Many (realistically, most) untrained founders and CEOs fail right there, at the last hurdle, the last lap when the finish line is in plain view.
This is when you need to understand Deal Dynamics. I’m no psychologist, but I learnt (the hard way, at great cost) that once you understand the psychology behind the power play, control mechanisms and deal-closing triggers, you win.
You close your funding round on your terms, not theirs.
Your calendar, not theirs.
With less stress and blowup risk.
Understand the Human Behind the Money
Guess what, investors are human beings, too – no, really, I mean it, they are!
They have egos (some of them supersized), cash deployment timings and ownership goals, and a partnership to report to (internal politics are rife), with their LPs (investors) asking why they lost that deal and this other one when other fund XYZ closed. Lose too many hot deals, and “maybe entrepreneurs don’t value you that much”.
Tips For Navigating Investor Deal Dynamics
How to engender FOMO
Every investor I know repeatedly tells me other VCs’ deals don’t impact theirs, then lists them alphabetically, with dates and values, within minutes. LOL.
2. FOLS (Fear of Looking Stupid)
Even greater than FOMO, by some margin.
It’s okay for investors to pass on a deal. What it’s not okay for them is to be dropped by the founder in the finals. So you, the founder, can control the final lap of your funding round, who’s investing and who’s not. Deal-closing uncertainty is your friend.
3. Fundraising is a game of Information Asymmetry
VCs always request (sometimes forcefully) way more information than is reasonable without ever giving any indication of interest. Pro poker-faced players. Learn how to counter that.
4. Disclosures matter. A Lot.
Understand how and when to release each set of info.
Exclusivity is luxury. Price it accordingly. Investors need information, which you should disclose, but keeping some information to yourself can trigger their FOLS. Use it appropriately, and they fold.
5. Keeping to your timeline and deadlines at all times
Master it, as they read it, as a strong signal of strength and change their process dates and priorities accordingly. If you don’t do it, they’ll play the clock against you, and when time runs out, you will accept terrible terms you shouldn’t. Options vs. Timings. Read this story here.
6. It’s your business. Your shares. Your timing.
Your cash requirement, your business. You issue the deal terms (use our templates; they are fair to both sides). You decide when you accept offers, and you choose the investors. You drive. It’s remarkably easy once you know how.
Ready to deep-dive into the deal dynamics of fundraising?
Learn how to build FOMO, FOLS, leverage egos, navigate exclusivity periods, disclosures and hidden names, and even have a plan B. This is one of the multiple sessions we cover during our programme, the Fundraising Bootcamp.
We’re not your typical fundraising class. And we can help you close your funding round – from seed to Series C. Check out our next programmes here, and let’s see if we’re a good fit.