Today I’m going to show you how to close more investor commitments faster - and make it much easier to bag a lead investor - by creating deal heat.
It’s crucial to create your own momentum, because everyone wants in on a hot round - but no one wants to touch a cold deal with a 10-foot pole.
Unfortunately, most founders have no idea how to create deal heat, and start drowning the moment they start having to go beyond their immediate circle and approach investors cold.
Here’s the truth:
Your round will be a disaster unless you’re extremely intentional about who you pitch & when.
Founders think: oh he’s not talking to me...
Yes. I mean YOU.
Because if you’ve ever had this happen to you…
- Potential lead investors tell you: “come back later”
- People you thought would be a slam dunk just aren’t really that interested
- You feel like you talked to EVERYONE, and still stalled out at ~15% of your raise target
…then you should listen up.
Because most capital raising rounds are a haphazard disaster.
Deal heat doesn’t magically come to you.
No second chances. Don’t screw this up. Here’s what you do:
Step 1: Accept that Herd Mentality is real.
Accept that you are the only person responsible for creating your own deal heat.
And to get that started, first you need to seed the tip jar.
Once you’ve built your investor list, you better not be putting an investor at the top of it.
Instead, start with the bank and other non-dilutive capital sources.
Before you speak to a single investor, it’s your job to first run down any easy / free / low-cost financing that’s available to you.
Because why in G*d’s name would anyone write you a check if you hadn’t first picked the low-hanging fruit?
Even if an SBA loan isn’t going to be a fit right now, you need to know the broad strokes (e.g. rough idea of rates, amount, timeframe etc) that would be available in the unlikely event you decided to take it.
You just need to know what’s out there - BEFORE you start holding your hand out to equity investors.
Next, it’s time to…
Step 2: Rank your list.
This is where deal heat starts.
Building momentum is about booking early wins, even if they’re smaller check sizes.
Organize your investor list, by order of approach, starting with the most likely to write a check* and going down to least likely to commit (of these groups):
- Friends & Family
- Existing investors with pro rata rights
- Friendlies, such as alumni angel groups
When you’re pitching them, you're gonna use these words:
Assuming we have a lead you’re really going to like, all the DD stacks up and the terms are all good… what might you be in for? Not gonna hold you to it & can't guarantee we'll be able to give you the entire amount since we already have roughly $X.XM-Y.YM in soft commitments, but what's the max you'd ideally want to invest?
Don’t forget to mention the potential options you have from Step 1 - even if they’re not a great fit, they still add up toward your total raise amount (if push came to shove!)
More jiujitsu like this in soft-circle strategy.
With every soft commitment, your deal heat will build.
Next…
Step 3: Add everyone else to the list.
Not every group will apply, but the rest of the list goes in this order:
- Angels / angel groups
- Strategics & CVCs
- Warm past conversations
- Inbound investor leads (use urgency pressure you’ll create)
- Customers
- Other institutions, e.g. Family Offices
- Potential non-lead VCs
- Potential leads VCs
By the time you get to approaching potential leads, you already have a lot of capital raise traction.
DEAL HEAT.
With every single soft commitment you get, your headroom (how much equity you have remaining starts to disappear).
Now get cracking.
Once you have your list, time to start executing.
Make sure you have a well-written, forwardable investor email ready at all times.
*If you’re unsure about pitching, add a few training wheels pitches to angel groups at the top so you can work out all the kinks in a low-stress environment.
When done well, your $5,000,000 round will be overcommitted by the time you get to pitching lead VCs.
And it’s a hell of a discussion when you walk in the room saying:
“Hey - we don’t really need the money, but I want you on our cap table. Here’s why…”
🔥
There are 4 ways I can help you:
02. Deep-dive Digital Courses for Founders — Self-paced courses teaching you to overhaul your pitch, find investors & get funded faster.
03. 1-on-1 Capital Raise Coaching (Series A min) — See if it’s a fit to work directly with me on your capital raise strategy.
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