Some investors want to be the last one to commit and few want to be the first. It’s mostly a safety and survival technique. Think about it from their perspective. The first investors to write you a check run the risk that you only get half-way to your fundraising target, which means your business is suddenly an even riskier investment than what they originally predicted. Savvy investors that write checks early in the round will intuitively take this into account, which might explain why they are being extra cautious and demanding in their due diligence. These dynamics are behind my related analogy on fundraising (see post here titled “The Domino Effect of Fundraising“).
As it turns out, I’m a big proponent of letting the investors control the pace of the “dance”. But when you’ve got investors on the fence for excessive periods of time and need to close your round, you need to apply some genuine sales closing techniques. In fact, during your initial conversations with each prospective investor, ask what sort of things are important to them when making their investment decisions. Focus on those things during your conversation but also write this information down when you’re done so that later when you find yourself needing to nudge them to a decision you remember which aspects of your opportunity and business plan to accentuate and highlight recent progress or new information.
The main thing you want to know during the “dance” is if the investor is just being polite by taking your repeated follow-on meetings or is this their preferred method of due diligence. So ask them, in effect, to find out. At the end of one of your meetings or via email (in person is better), and after you feel like you’ve truly provided all relevant information, ask them something like “Is there any additional information you need in order to make an investment decision?” If they answer “no”, then follow with “Can we count on your commitment for this round?” Now the issues will almost certainly be put on the table for you to address.
Here are some other questions that will help assess the true position of an interested investor:
- What sort of things would you be looking for to make this a clearly viable investment opportunity?
- Is there anything specific that concerns you about committing to this investment opportunity?
- Are you leaning towards investing or not investing?