DETROIT – In
my admittedly limited experience on this earth, I’ve observed that the most
productive and fulfilling relationships are those that have been cultivated
over time and built upon a foundation of honesty, clear communication, and
reciprocity. This applies to professional, investment, and even romantic
relationships alike. While I will stick to professional and financial
relationships in this Funding Findings blog, I’m pretty sure there could be a
blog solely dedicated to explaining the uncanny similarities between securing
investment and romantic relationships. But I’ll save that for another day.
Similarities
aside, energy/transportation technology companies interested in securing
funding must think strategically about how to position themselves for success.
In most cases, this positioning requires deliberate thought about how to grow
relationships with potential funders and funding influencers. Here are 6
tips for how to court the funder that’s right for you and build a connection –
hopefully to the point of consummation into a financial relationship:
Know your
goals
Before you
begin actively developing relationships with potential investors or other
funders, your company needs to know its goals as they relate to securing
funding. Ask the key questions: What types of funding are you pursuing? To what
activities within your company will the funding be allocated? When do you need
funding? You should think critically about your company’s development goals
over the next one, three, five, and ten years. If you neglect these goals, you
will have much less direction, and thus much less success in building
relationships with potential funders. Once you understand what your funding
goals are, you can then reverse engineer and build a timeline with milestones.
Your strategic goals should provide the overlying context for any potential
funding opportunities.
Identify the
right people
Once you
understand your goals, the next step is to understand with whom you will be
developing a relationship. If a key part of your funding strategy is to pursue
federal R&D programs, identify which federal agencies and technology
sub-offices are particularly relevant to your technology, based on their
strategic plans and past grant programs. Then, identify the individual program
managers that influence decision-making for your technology area. This
information can be easily accessed on the agency
websites. If your capital requirements point to pursuing seed or venture
capital funding, do some research on which angel or venture capital groups are
making investments in your space similar to the investment you are seeking.
There are a handful of VC firms that specialize in energy technologies. If it
turns out that you identified a target contact that may not be an influencer or
may not be relevant to the funding you’re seeking, ask them to refer you to any
of their contacts who may be relevant and pursue those.
Start the
conversation early
Let me
repeat what, at this point, is becoming the unofficial mantra of the Funding
Findings blog: START EARLY. Being proactive is particularly relevant to
building relationships with potential funders, because building a fruitful
funder-fundee relationship takes time. Once you know your key goals and the
timeline along which they are placed, start cultivating relationships as soon
as possible. Allow the relationship enough time to mature for when you actually
might be pitching or applying for funding. Starting early also enables you to
learn (read: fail) early and often. You may learn unanticipated major barriers
or challenges your company must overcome to secure funding earlier, rather than
later when it may be too late.
Be humble
and ask questions
You’ve made
it this far by knowing your strategic goals, zeroing in on the appropriate
contacts, and reaching out early to set up the initial phone call. Think of the
initial conversation as informational or research-oriented, rather than pitch-
or sales-oriented. Starting off by selling or pitching your technology
immediately often changes the conversation’s tone, prompting the investor or
federal program manager to listen with a more skeptical and perhaps defensive
mindset. Begin the conversation by introducing why you’re there: to learn more
about their goals, needs, and priorities, to humbly socialize your technology,
and to ask for honest advice about how your company should be approaching
technology and business development. Ask a lot of follow up questions that
begin with “why.” Ask what technology or business milestones they think your
company needs to achieve in order to be successful. If executed in a
supplicating, yet confident manner, the conversation can introduce your company
to challenges and opportunities that you may not have realized. I think many
would be surprised at how honest and helpful potential funders can be if
approached the right way. Investors are humans too!
Reciprocate
support and feedback
Reciprocity
is a basic
human instinct that, often subconsciously, guides our interactions with
other people. Thus, relationships with funders ought to be a two-way street.
Ask your contact if there is any way you can support their efforts or lend some
information you have. Mutual support is particularly relevant for relationships
with federal grant program managers. When a grant program releases a Request
for Information (RFI) or is open for public comment, the managers appreciate
input from the experts in the field, especially experts from companies that may
be submitting proposals to the program in the future. For both federal grant
program managers and private investment professionals, you can provide valuable
information about the environment in which your technology lies – the state of
the art, key challenges and opportunities, and other organizations that are
innovating. This information is important for the funders to stay on top of the
markets in which they invest or sponsor research.
Keep in
touch
As your
company and technology progress over the course of your work leading up to your
pursuit of additional funding, periodically keep in touch with the funder
contacts with whom you’ve developed relationships over time. One of the most
productive ways of maintaining contact is to provide updates on how you’ve
tangibly and continuously hit key milestones on a regular basis. The milestones
could be on the business side, such as securing channel partners or purchase
orders, or on the technology side, such as developing a bench scale prototype
or hitting certain performance targets. These may be the same milestones that
the venture capital partner or federal program manager suggested were prerequisites
for their group to consider funding your company. If you can demonstrate that
your company routinely sets ambitious, yet achievable goals and routinely
achieves those goals, your relationships will further strengthen and be more
likely translate into financial relationships. It’s also important to keep in
touch to understand the potential funder’s needs, challenges, and opportunities
and how those evolve over time.
Hopefully,
if you heed the aforementioned advice and create a productive working relationships
with potential funders, you’ll be able to make the “ask” when the time comes.
Not only do these tips serve to make it easier to secure funding when you need
it, but they also serve to inform how to most effectively build your company
and innovate on your technology.
Go out there
and respectfully court potential suitors! Potential funders, that is.
Danny Allen is NextEnergy Manager of
Venture Services
