As we mentioned a few weeks ago, we’ve been speaking to a number of potential investors for Shoes of Prey.
Something we’ve learnt through this process – if you’re planning to raise money it’s best to speak to a large number of investors at the same time rather than one at a time.
This is a mistake we made early on while speaking to potential investors. We initially spent a month negotiating with an angel investor. It was looking like we would get to a deal that would work for us and the investor, so for that month we stopped speaking to other potential investors.
In the end we couldn’t quite agree on terms that worked for both us and the investor so the deal didn’t go ahead. We then had to start from scratch with other potential investors. Our next stop was some friends who had been keen to invest in our business.
Once again we spent a month speaking to them and it looked like we’d go ahead with the deal. In the end that deal fell through as well, so it was back to step one. By this time we’d learnt our lesson so we decided to explore a whole range of options at the same time in case any of them fell through.
We had an angel investor who we thought there was a good chance we’d go ahead with, then we had multiple meetings with two Australian venture capital firms in case the deal with the angel investor didn’t work out. At the same time we had discussions with some overseas venture capital firms and angel investors.
While we’ve not gone ahead with a deal yet, speaking to lots of potential investors at the same time got us to the closest point we came to taking on additional capital, a term sheet from one of the venture capital firms which we decided not to proceed with.
The lesson for us was if you’re going to raise money, don’t speak to just one investor assuming that deal will work out. Create some competition for your business and hedge your bets by speaking to a number of investors at the same time.
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