They are out there but where to find them?
Impact founders and CEOs often struggle with their lack of connection with the impact investor community.
Founders and CEOs get really involved in placing their offers in all the online platforms they can find such as AngelList for instance. The problem with putting your deck up in these types of platforms is that the ratio of success there is pretty low. There’s such a volume of profiles, it’s almost like a resume on a major job-posting site. And unless you know somebody on the platform that’s going to help propagate you and get you visible, you’re just one of a million. You’re a needle in a haystack. And unless they know you’re there, they’re not going to seek you out necessarily. So even within those platforms, you have to have a more sophisticated strategy.
So what are the other options?
Well, either you have a network of high net worth individuals who are capable of making investments or you need to access a network.
How do you access a network?
Depending on how you register your offering, every state may have different laws around that. In regards to private equity offerings, there are securities laws that govern who can actually shop your deal around. Now, the crowdfunding bill that passed a couple of years ago, actually opened up the ability to market your offering publicly. But, still to do that compliantly is kind of an involved process. So minus crowdfunding, either you hire a finder (somebody who has their own network who can make introductions for you), which is permitted in certain states, or you hire a broker-dealer, who is a professional fundraiser. That’s actually what they do. They package up companies and they take them out to accredited investors or investment groups, whether they are family offices, venture capital groups, or private equity groups.
If you need to go the route of accessing a network of accredited investors, there’s a whole due diligence process you’re going to want to go through. You need to decide who you would want to partner with, because they’re going to get a piece of the action typically, and are likely going to want a retainer. To clarify, even just to get somebody to go out and represent you and your company, you’re going to have to put up some money, because for them to do all that is required on contingency, not knowing whether your business is actually sellable, is a risk for them to open you up to their network of prospects.
Retainers can range from out-of-pocket costs to tens of thousands of dollars, depending on the type and amount of the raise. Fee structures vary amongst finders and broker-dealers although in the professional and licensed broker-dealer space, they will likely utilize what is referred to as the Lehman Scale. This provides 5% for the first $1MM, 4% for the second $1MM down to 1% on everything above $4MM. Double or Modern Lehman Scale calls for 10% on the first $1MM, 8% on the second $1MM down to 2% on the first $10MM and a smaller percentage on remaining amounts of capital raised.
In summary, here are the main channels to find impact investor prospects:
- Your existing network
- Accessing a network
- Finders
- Dealer-Brokers
- AngelList type platforms
Want to get prepared to raise capital successfully?
Download our Free Fundraising Checklist Here: https://thechangeagenthub.net/fundraising-checklist
Once you receive the checklist you’ll be redirected to a video walkthrough so you can use this checklist most effectively. And you’ll also be invited to check out our 9-step fundraising preparation roadmap with detailed information called Impact Incubator Immersion. This program is the exact process all our impact clients have used to raise capital successfully.
