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Hey, everyone! Today I want to tell you how to win your first investor!
If you go to an investor and tell them you need $10M but you haven’t raised any yet, they probably won’t be interested.
However, if you have $9M raised already, then it’ll be easy to get that last investor.
Why? Because the investors will have the fear of missing out on an investment that other people already believe in.
On the other hand, having raised zero dollars doesn’t give you any leverage.
Founder’s share
Go to your investor and say, “The minimum is $250K. However, if you invest $1M, then we won’t charge you a management fee.”
Give discounts to early investors. You could also give them liquidity preference, transparency rights, or another benefit.
This will incentivize investors to invest more or just get them on board.
Note: Just make sure you present it like a bonus; let them know they’re getting a good deal!
Standard share
This approach is more standard, hence the strategy name.
Go to your investor and say, “The first $2M allocated to this fund will get [preferential treatment].”
This is a quick way to appeal to multiple investors.
Because hedge funds usually aren’t heavily regulated, some investors might say…
“I’ll invest, but even though I signed a non-disclosure agreement, I want to know what trades you’re making and what positions you’re taking.”
Yes, it’s one more investor, but will this add to your workload?
Negotiation is essential in capital raising.
Lincoln said in my video that…
“It’s okay to deal with these preferential investors early on, but the bigger/better you get, the more demanding you need to be.”
This is someone who writes a good-sized check, which is good. But they may demand 20% of your GP and take some management positions.
This can be a kickstart to your capital raising and can attract more investors.
“When it comes to launching and scaling funds, almost everything is negotiable.”
Lincoln Archibald
So, be flexible. If something doesn’t go right, don’t throw it all away.
Learn how to use these different strategies on how to win your first investor!
That’s it for today!
If you want to learn more strategies like leveraging your partners, click here!
Thanks,
Want to get direct guidance for your fund? Schedule a time with my Fund Advisors!
DISCLAIMER: This content is for educational and informational purposes only. It is not to be taken as tax, financial, or legal advice. You should always consult a legal professional before taking action. Furthermore, this is not a recommendation to buy or sell any security. The content is solely just the opinion of the author.
