Maria Foxhall is the Chief Revenue Officer at Pivot Global Partners, a global professional services firm that designs and implements the pivots organizations need to innovate, scale and grow. Maria was interviewed by Michael Fiedel, a Managing Director at InsurTech Ohio and Partner at PolicyFly, Inc.
Maria, how does the process for raising money generally start?
“That process generally begins when the business starts. There’s a point when a startup will need a level of funding that family and friends will not be able to provide. All startups should have a plan built into their overall strategy for raising the next level of funding needed to expand business operations. For example, when my partner and I began our brokerage agency, we developed a plan to expand operations, add staff and raise additional funds for that expansion. Based on our business plan, we needed two staff members and $100,000 in system upgrades by the end of the first year. Our next level of funding began with our local bank and moved to our contacts in the insurance and investment industry to help us secure additional funds.
Most insurtechs we've worked with have built something new and exciting to enhance an existing insurance company's platform performance, but at a certain point, they needed additional funds to ensure their new idea/system worked. Thus, including funding for continued product/service development and running proof of concepts (POC) should be built into the business plan. If it's not, it will become apparent, and the firm will eventually move to address the need to continue growing its business.
It's essential to develop a plan to secure funding to grow your business early. Once a business' funding surpasses $500,000, it should shift its focus from friends and family to working with an investment consultant who can find venture capital or equity partners to invest.”
Should startups have an expectation that they need support in order to identify and schedule meetings with VCs?
"Absolutely! Going to a venture capitalist (VC) or private equity firm (PE) requires a different skill set. I would encourage anyone looking for money to hire a qualified investment consultant who understands their market, business and how to raise funds with specific VC or PE firms. Otherwise, they could wind up wasting a lot of time, effort and money and not get the funds needed to grow the business. I've done it both ways. I've raised funds with family and friends, but I also have some experience in banking and finance. With my background and access, I was able to use friends to find a VC for the second round of funding for a client.”
How do venture capitalists react to hearing about a new company from a consulting partner that they have spoken to before versus an unknown CEO reaching out cold?
“Before reaching out cold, you really need to understand who you're working with by doing research. I would say from a venture capitalist perspective, they're more open to someone they know because they've been working with that person before being brought various opportunities. Most of the due diligence is done upfront by that consultant, so it has been developed and they're comfortable. It's not that venture capitalists mind talking to CEOs because they want to hear the story firsthand. The CEO should be prepared to tell their story in a very compelling way. Having a consultant helps a lot because you get a faster response, and you won't have to go through a thousand cold calls to get to one meeting.”
Once a startup has one or many meetings on the books, what are the critical expectations that you set with that client about presenting to any given VC?
"We start off by helping clients understand who they're meeting. Then, we encourage our clients to do their due diligence on the VC or PE firms before developing their presentations to ensure they partner with the right firm. We also ask the client to know ‘their story’ and are prepared to tell it to the VC or PE effectively in 25 minutes. That's the complete story from start to finish, including financials, team, customers and target markets. Preparation is key to making sure that you can tell that story effectively in twenty minutes or less.
When you're doing your due diligence and preparation, we recommend you put together a deck with no more than ten slides that will take 25 minutes to deliver and answer questions. Doing an investor presentation during COVID has to be virtual, so it's hard to get a feel for the person in the room or who's no longer in it. The team delivering must be cognizant of what's happening on the screen, know whether they're engaged, and be prepared at any point to answer questions.
If you've done your homework, you can answer any question and know who's in the room. Typically, a VC will send in their junior executives and maybe one senior executive for your meeting. Please know who's on that call so that you can play to that audience. Adjusting your story to your audience will get you one step closer to getting the funds.
Don't focus on the bad; focus on the positive and any risks you've heard from your customers or previous investors. Be ready to ask questions as well. Usually, a VC will send you a list of questions to answer ahead of time. And if you have questions, send them to the VC in advance of the meeting.
A VC wants the complete picture of your operation, so make sure you include your key team members in the room when presenting. Even if they're independent consultants, they can help you drive home a management team and process. Finally, when the presentation is complete, identify a point person other than the CEO to answer any questions from the VC or PE. ”
If you have a VC on the hook, what does a startup need to be prepared to do in order to get the money?
“There's a next level of due diligence and process that VCs will send you through. Once you get the money, be prepared to implement the strategy you presented. For example, if you need four people, prepare to bring those four people on within a 30, 60 or 90 day period. If you’re not ready to hire them, at least have a plan and timeline to hire them. Be ready to implement the people, processes and systems that you said you would without hesitation.”
If you have a VC interested, what are the general things you want to be prepared for to help close the money itself?
“Legal requirements; there are term sheets and contracts to be reviewed and signed. Have a team of professionals who can help you understand the perimeters of the deal and all of the requirements before signing. Last but not least, be ready to execute your plan once you have the funds.”
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