Why You Should Never Use a Finder

Bold statement coming from a guy with a LinkedIn title of "I help startups to get funded and investors to build a stronger pipeline"...

So why am I writing an article about a topic that encourage people to not use finders? The answer is very simple. I am not a finder...

Why Investors Hate Finders

Before I explain what I mean by the above statement, let's try to understand how is it that finders have such a bad reputation. Finder's reputation has gotten so bad around the Valley, to a point where investors will disqualify companies just for using them.

But why is that?

There are actually multiple reasons for that. Some are the finders fault, and some are pure stigmas generated by investors.

Finders are usually people with a strong network, looking to monetize their connections. That by itself is not such a bad thing, but do you really need to get 5% of a funding round just because you know a guy and made a quick phone call or an email?

Greediness is one of the earliest sins...

But things have actually even worse. Some finders today only claim they know a guy, where in reality they do a quick search and shoot investors a cold email glorifying the company they are representing.

And I'm not even talking about a targeted, well written, well explained, fully researched email to a relevant investor. These finders are using the old spray and pray approach, wasting so many good peoples' time, energy and inbox space.

Here's the thing, spray and pray is something even you as a founder can do (Which I don't recommend doing, but more on that later). The problem with spray and pray tactics is that the finder is actually deceiving the founders that pay them and are causing damage to the funding efforts.

Now that's a well deserved bad reputation...

What Using a Finder Mean For Your Company

Remember I said earlier that some of the bad reputation is caused by investors generated prejudices. Here are a few...

Some investors view your efforts of getting to them as a qualification test for your entrepreneurial skills. They believe that if you have the ability to create connections and penetrate their network, not to mention convince someone they trust to put in a good word for you, it says something about your chances of succeeding in this entrepreneurial game.

To their point, if you can't get to them, how will you get to your customers...

Using the above logic, when you use someone else's network (assuming they even have a network) by paying to get the introduction you are basically cheating. Shame on you :-)

Another nice one is about the quality of your company. We all know that raising money is hard, but good companies seem to never have problems raising money. It seems like investors are just begging to invest in these companies.

But the real question is what makes these companies so great?

Is it because their founder are repeat players? Is it having a great product? Or maybe they just have the right network? Or maybe it's their marketing? or simply the hype they were able to generate around the company and product?

It might very well be all of the above.

Again, to the investors' point, strong teams, sorry, great companies, are able to create all of the above.

Wait, what did I just write?

Great companies are the ones who can build a good product, nurture a strong network and have great marketing. I'm sure there's more than that, but the point I'm trying to make here is that any company can be great.

And this is where I come in (boy, I love how I just plugged in that piece of humility...)

Who Should Be Leading Your Funding Round (Hint: It's not me...)

I started this article explaining why I am NOT a finder. A finder is someone who puts their face in front of yours and help (or at least claim to) you open doors to investors.

Some finders will help in preparing materials, some will do the reach out, but the common ground here is that they will put their brand along with yours when doing the above. Some finders might accompany you to meetings, they might even pitch for you (at least at first), but do you really want this?

How having all of this reflect on you as the leader of your company?

Just go back to the previous section and add another prejudice to the list...

Investors want to see great leadership in a company, and nothing shows that better than a founder that takes control over his destiny and lead the funding round.

You should be the one leading all the discussions, doing all the talking, mastering all the numbers (ok, maybe not all of them, you're allowed some slack here) and controlling the entire process.

But that doesn't mean you should do it by yourself...

I Got My Part, But What Do You Do?

That's a fair question. But before I dive into what I do, I just want to remind you that investors would want to get to know your team. After all, they are investing in them as well.

Enough about you. Jesus, there is a limit to how much we can only talk about you...

Before I tell you what I do, let me start by describing what I don't do (don't you just hate it when someone says that? but bear with me, it will all make sense).

• I don't lead your round.
• I don't put my logo, name or brand anywhere on your materials
• I never participate in any conversations with the investors (I only break this rule when I am connecting you to someone I know, but that will only happen if I really like you and have a great friend who can help you).

To make a long story short, I work in the background, doing all the dirty work and all the heavy lifting so you can focus on taking the lead, build a great company and get those investors chasing you.

How Should You Really Be Fundraising

I hope that by now you understand the difference between a finder and me. I wanted to give you a sneak peek at what my process looks like. After all you've read so far. It would only be fair to give you some real value and not waste your time...

Who knows, if you like what you read, value your time, and your team's time you'll might see the value in what I do and offer to hire me (hey, no pressure there...). But in the meantime, here is what someone (me, me , me) should be doing to support your funding round.

1. Understand how much you want to raise - The right approach here is to look at the milestones you need to hit in order to fund your NEXT round and plan backwards to see how much you will need. Remember, more is not always better here. The earlier you are the more expensive that money is...
2. Establish your terms - Define what terms and conditions are important for you and what terms you can be more flexible on. The key to any good negotiation is knowing your bottom lines and understanding where you can compromise.
3. Identify and close gaps - Investors want a solid, self sufficient team that can get the job done. Identify what skills you need and if missing fill those ahead of time or have a very good plan on how to close those gaps quickly.
4. Get your legal/finance Sh*t in order - The time to set up your data room and all its content is not when the investors are asking for it, but even before you start the fundraising process.
5. Start building thought leadership and hype around your product and team - Investors will search who you are and what you've done. The more info they'll find the better (as long as it is good...). Also, hype will help bring more investors to the table and help shift the odds to your favor.
6. Prepare a fresh market and competitive analysis - You need to know everything there is to know about your industry, opportunity, competition, and market. If an investor knows more than you, they will not invest. It's as simple as that.
7. Research Investors - I already told you I don't recommend spray and pray tactics. You should only approach relevant investors (stage, industry, competition, ability to lead etc.) and start with finding a lead. You should also be looking for potential warm intros.
8. Get your story straight - Align all your messaging beforehand. Sharpen your story, highlight your strengths and create all the relevant materials beforehand (at least the first draft). Yes, this include your deck, exec summary, marketing materials and demos (and anything else you think is necessary).
9. Create a game plan for the round - Schedule a tight roadshow where you condense as many meetings as you can in the shortest time possible. This will help create FOMO, restrict the time you invest in the funding efforts and will help to keep you on track.
10. Continually optimize - You should always be listening and gathering feedback. Use your team to analyze what is going on, learn, adapt and show progress even within the round.
11. Have your attorneys ready - You should always keep your attorneys close by when fundraising. They will help negotiate the terms, draft all the paperwork and council you on the right path.

Remember that fund raising is a process. Unlike building a company, this is not a marathon. This is a sprint. But like any pro athlete you need to get your shit together and be ready for the big day.

The Byproducts of a Funding Round

Surprisingly, the ultimate goal of a funding round is not to get your company funded. It's to fuel your company with the right fuel to get to the next gas station.

There's a difference.

It's called funding because the dominant resource you are after is money. But money is never enough. You should look for what's called smart money. If your new investor is only good for money, he is actually no good at all.

You need connections, strategic skills, and the right kind of guidance and support. You want people (yes, investors are people, despite what you think...) that can be with you in good and bad time. And there will be bad times.

But investors and money is not the only things you get from a funding round.

The obvious thing you are getting is tons of feedback from a group of smart, non-biased (somewhat) expert in the field (those are all the investors who told you no, and hopefully explained why) about everything you are doing wrong or why your company will not succeed.

This information can be invaluable and can help you build a long term strategy for how to grow your company.

Another byproduct is all the research you have done and the new people you had to bring on board. Hopefully this information and resources will help boost your company to new heights and establish a strong foundation for things to come.

At the end of the day, you should finish the funding sprint with new companions to your journey, more resources and a clearer direction for your company. Or as I call it, a better company.

One Last Thing

I hope you find this article interesting, fun to read and valuable. I've laid out the process I use to help companies get funded in the hopes that you get an understanding of what it takes.

Getting funded is hard work, but it's work worth doing.

You are not alone in this process and if you want, I can be there to help you (email me at: [email protected], or simply send me a message here on LinkedIn).

Like I explained during the article. I do all the heavy lifting behind the curtains so you can shine in the spotlight. I help speed the process and make sure you get a better company on the other side of the process.

All that's left is to wish you good luck on your funding sprint and beware of shady finders.

Cheers,

Avinoam Kaminski

P.S.

Everywhere I look, read or listen I get this feedback that you should never pay a retainer for someone to help you in this process. In fact, some investors even go out of their way to say that you should never pay cash, and if you do pay, have it been in equity out of the round.

I understand that notion of aligning the interests of the outside help to the final result. I also understand that startups raise money because they need it. And, I also understand the investors wanting that their money goes to growing the business, not paying some outside help.

But please keep in mind this:

Yes, interests have to be aligned. Whoever helps you need to be compensated in such a way that will align his interest with achieving the desired goal, closing the round. But, equity will make this person an investor in your company, and that doesn't always work for everyone...

Also, when you go to school to gain education and skills, do you ask them to get paid only if you achieve success in life? Of course not. You pay for the knowledge and service you get. By hiring outside help to get your company funded you are doing the exact same thing.

So don't let the empty words of investors influence you too much. They have an agenda to put each and every cent toward growing your company. But isn't securing the next round an essential part of that?

Also, hiring someone to help accelerate that process will ultimately save you both time and money...

What I'm trying to say is, do your homework. Research each and every individual you are hiring to help you and don't be bothered with how they are getting compensated as long as you get the desired outcome you want, and that includes the budget for that goal.

Jesus, that's a long P.S. I'm sorry :-)

Cheers

Avinoam Kaminski