How To Work with Finders to Raise Startup Capital

One type of persona startup founders encounter many times through their fundraising journey is the “finder.”  “Finders” are individuals or entities that help connect startups with potential investors, usually in exchange for a success fee such as a percentage of the money raised.
We delved into this subject on our recent podcast with Jonathan Gan, an experienced entrepreneur and startup advisor. Jonathan, with his firsthand experience from founding, leading, and selling his startup Whichit, shared valuable strategies for effectively utilizing finders in the capital-raising process. Here are a few of the main points he made about working with finders to raise startup capital: 

1. Preparation is Key

Before engaging finders or investors, ensure your startup is thoroughly prepared. This goes beyond having a compelling pitch deck. Prepare for due diligence by having detailed documentation and robust financial forecasts. Remember, first impressions count, and unpreparedness can lead to missed opportunities.

2. Fundraising is a Full-time Job

Recognize that fundraising requires an immense effort. It's not just a side task but a full-time commitment. Balancing this with the day-to-day running of your startup is challenging but crucial. This commitment signifies to finders and investors that you're serious and dedicated.

5. Expand Your Network Through Finders

Your immediate network will eventually tap out. Finders can open doors to new investor networks. They act as bridges to potential funding sources that you might not have access to otherwise. However, relying solely on them isn’t advisable; use them to complement your networking efforts.

6. Criteria for Choosing Finders

Selecting the right finder is critical. Look for those with a strong reputation and network relevant to your startup's stage and sector. They should align with your startup's values and goals, ensuring they can represent you effectively to potential investors.

7. Manage Finder Relationships

Treat relationships with finders as strategic partnerships. They are temporary but valuable assets in your fundraising journey. Make the most of their introductions, but don’t become reliant on them. The goal is to use their services as a springboard, not a crutch.

8. Maintain a Detailed Investor CRM

Implement a detailed Customer Relationship Management (CRM) system for tracking interactions with investors and finders. This system should log every interaction and follow-up, providing a clear picture of your fundraising activities and progress. It's a powerful tool for managing ongoing relationships and ensuring no opportunity is missed.

9. Approach Investment as a Continuous Process

Fundraising isn’t just about specific rounds. Treat it as a continuous process that’s integral to your startup’s journey. Even when not actively seeking funds, maintain relationships with potential investors and finders. This ongoing engagement can pay dividends when you next seek funding.

10. Professionalism in Communication

Always maintain professionalism in your communications. Whether it’s an email or a meeting, presenting yourself and your startup professionally is crucial. This professionalism extends to how you interact with finders and investors, reflecting on your startup's ethos and credibility.

11. Entrepreneur's Responsibility

Ultimately, the success of the fundraising effort lies with you, the entrepreneur. While finders can provide valuable introductions, it’s up to you to close the deal. Be proactive in managing the entire investment process and take ownership of the outcomes.

12. Consistency and Persistence

Regularly update all contacts, including those who initially declined to invest, with new developments and achievements. Consistency in communication and persistence in following up can turn a no into a yes. It’s about building long-term relationships that may bear fruit over time.

In summary, while finders can be invaluable in the capital-raising journey, they are just one part of a larger strategy. Successful fundraising is underpinned by thorough preparation, relentless commitment, strategic networking, and consistent engagement. As a founder, your proactive approach to managing these elements can significantly increase your chances of securing the necessary capital for your startup’s growth.