“I can’t raise money for my business!” This is the most common remark I get in emails and phone calls from startup entrepreneurs and seasoned business owners who are trying to raise money to turnaround or expand their companies.
By the time they reach out to me for help, they’re exasperated, intimidated, angry, or demoralized. Add in some colorful language and you have a clear picture of the frustration associated with fundraising by first-time entrepreneurs. One new business owner sent me an email recently that said, “I’ve always been a winner. I don’t understand why this is so hard.”
When I ask entrepreneurs why they think they can’t raise money for their companies, I usually hear some version of finger pointing. They blame bankers for being too conservative. They blame venture capitalists for not giving them a “real” opportunity to tell their story. They blame wealthy investors for taking too long to make decisions. They blame the bad economy, India and China, Wall Street, and even their own employees for not selling enough or doing their jobs right.
It’s dangerous for entrepreneurs to play the blame game because the attitude is not compatible with successful entrepreneurship. Leaders of prospering companies accept full accountability for every aspect of their company’s operations. And as a veteran of the venture finance community who has helped entrepreneurs raise millions for their businesses, I know that it will be the actions of company founders, not the actions of others that will dictate their fundraising fate.
One reason why entrepreneurs fail to raise money for their businesses is they simply give up too soon. It doesn’t make sense but it’s true. Entrepreneurs who happily log 80-hour workweeks perfecting their first products, Web sites and patent filings, abandon their fundraising efforts at the first sign of adversity.
Here’s how it happens. An entrepreneur sends off a few emails to several different investors and gets discouraged when his phone calls are not returned the same day or even within the same week. Another entrepreneur reads online how difficult it is to raise capital for a new business. And then after a bank turns down her first and only loan request, she assumes that it must be true – it’s impossible to raise money for a business.
I do firmly believe that how we face resistance fundamentally shapes who we are as human beings and as entrepreneurs. One person’s opinion should not be the final arbitrator of your entrepreneurial dreams. One investor can’t speak for all investors. And one bank officer can’t speak for all commercial lenders. You just can't give that kind of power to any single person at any single funding source...ever!
Just ask Howard Schultz, the Chairman and CEO of Starbucks. In his book Pour Your Heart into It, Schultz describes how difficult it was during Starbuck’s early days to identify investors for his coffee store concept. Schultz says that he was turned down by 217 angel investors (some more graciously than others), but received checks from 25 investors.
What’s important here is not his roughly 10% “yes-to-no” ratio, but his persistence. He kept calling, kept talking, kept networking until the fundraising job was done. I also admire Schulz that he didn’t let disparaging turn downs derail his determination and passion. He adapted, improved and eventually persevered.
I know this sounds sort of Yogi Berra-ish, but you just can’t let little things defeat you or they will. This is what I remind entrepreneurs in my coaching sessions. When startup entrepreneurs ask me when it’s ok to give up their fundraising campaign, I have a ready response. I advise them to contact no less than 242 funding sources -- Howard Schultz’s magic number. If you don’t have the stamina to pitch 242 funding sources, you may not be ready to turn your entrepreneurial dream into reality.
If, in contrast, you are determined to raise funds for your business see if you can “beat Howard” by raising a round of capital in less 242 solicitations. Can you beat Howard? You won’t know unless you try!
Susan Schreter is a 20-year veteran of the venture finance community and a university educator in entrepreneurship. Her work is dedicated to improving startup longevity and operating performance in rural, urban and suburban America. She is the founder of www.takecommand.org, a community service organization that offers the largest centralized database of startup and small business funding sources in the U.S. Follow Susan on Twitter @TakeCommand.