VC Minute – quick advice to help startup founders fundraise better.
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When you know how much capital is potentially around the table then you can tell this to investors.
Do you remember earlier when I gave you a hypothetical example of that $2 million round with a $1 million committed in another $1 million of interest? Did you catch that $1 million of interest? That $1 million of interest is the aggregate of all of those investors that you’re in communication with that you have a reasonable chance of closing.
You get to let investors know that there are other investors around the pool. The implication is that if they want in, they’re going to have to move. This is how you use your system to move through investors systems.
In the Techstars playbook, this is called Soft Circle and there is magic to Soft Circled money.
Where do you draw the line on the capital that you should be talking about as Interested or Soft Circled? These should be investors that are far enough along in their process that you think you can reasonably bring them to a close when the round comes together. Maybe you can bring half of them to a close.
This is not the “First Call” folks. This is also different than Committed capital and that’s okay. In fact, that’s the point.
The only way that investors will know that there are other people at the pool party is by you telling them.
And this is how you tell them: you have $2 million committed and another million of interest.
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