This is no way to raise money, people

raising capital funding medical devicesI can’t believe how often I get a message like this one.

Below, I’ll translate it into my native New York tongue so you hear it the way I heard it.

Hey Joe, How’s it goin’? Listen, me and the guys are gettin’ together and makin’ this thing. It’s gonna be big.

So if you know any big shots from one of your schools or businesses or anybody with a lot of money, tell them about us, okay? I’m tellin’ you, you can get in on the ground floor of this thing and it’s gonna be big.

Call me, all right? We’ll get a slice.

This is no way to raise money, people.

The message came from someone I hardly know who asked to connect with me here on LinkedIn. I did; he’s in the industry, and we have 200 connections in common.

I won’t be sending him any leads.

In fact, I’d delete it out of hand if it weren’t so outrageous that it compelled me to stop what I was doing to write this piece.

Giving him the benefit of the doubt, here’s what he’s saying.

Joe, you’re a person of influence so I thought I’d write you.

Please learn about my company, our strategy, our management, our intellectual property, our capitalization, and our likelihood of ever launching a product that will convince our target markets to switch their behaviors in favor of the behaviors that would enrich us.

I suppose the next logical step would be:

I assume you know a lot of people with money. Please use your reputation and influence with them for my benefit?

You might say, “Hello. It’s been a while since we last spoke. Since you trust me, I’d like to tell you about someone I met. I did a deep dive into his company and while I’ve never spoken with him directly nor am I personally taking an equity stake, I think you should invest your money with him, or at least hear what he has to say.

I wouldn’t waste your time if I didn’t believe in this.

Good luck! And let me know what you end up doing!

Sadly, that was the good scenario. The less generous interpretation is:

I’m looking for money and it would be great if you forwarded this message to anyone who might possibly invest in us.

In that last one, my cash-poor friend didn’t even stop long enough to consider how fast-and-loose he was playing with my reputation.

Moral of the story

Don’t do that.

Instead, consider what Mark Kraus, a member of the world’s largest angel investor network, advised members of the Medical Devices Group back in 2015. He says:

“When I am approached about a company, I generally ask for two pieces of information:
• A one or two page summary of their business; and,
• A short slide deck that the company uses in a 7- to 10-minute pitch for fundraising.

The 1-2 page summary should include the following, each with a concise, single paragraph and/or bullet points. It’s important to be concise – it’s not a full business plan!

Company Contact Info – name, address, url, key management, board, advisors, contact info for CEO

Company Overview – elevator pitch summary of the company

Market Problem – what problem / opportunity is the company trying to address?

Solution – What product / service is the company developing to address that market problem?

Market – Short description of overall market segment (overall size, revenue, segmentation and competition)

Regulatory – What is the regulatory status or plans for the company’s product / service?

Intellectual Property – Describe any patents granted, patents applied for, licenses, university/other commercialization agreements

Business Model – How will your company make money? How will investors make money (exit, IPO, partnership, etc.)?

Deal Terms – Prior funding summary, pre-money valuation, deal terms for current raise

The slide deck needs to address the above points as well, albeit in a presentation format. Graphs, pictures, timelines, prototype examples, simple tables are often used. Generally a little more detail on financial than the above one pager allows, but important to keep it high level and not a detailed, complex spreadsheet. Overall, the presentation needs to tell a story that captures the essence of the company and why this is a great investment opportunity.”

Mark said if company executives can’t provide the above, they probably aren’t ready for his money.

For further reading, all these Medical Devices Group discussions:

• Creative Funding in a Difficult Medical Device Environment http://medgroup.biz/creative-funding
• How much money do you need to raise? http://bit.ly/how-much-raise
• Why can’t I get my start-up funded? http://bit.ly/why-not-funded
• What 3 things must a startup do to get funding? http://bit.ly/get-medtech-funding
• Is a prototype enough? http://bit.ly/ptotype
• Medical Device Funding’s Dead Zone http://medgroup.biz/dead-zone
• Got a $10-million idea? Who cares! http://bit.ly/10-mil-who-cares

About the author: Joe Hage leads the world’s largest Medical Devices Group (350,000+ members), the industry’s only spam-free, curated forum for intelligent conversations with medical device thought leaders. Mr. Hage’s medical device marketing services help companies engage qualified prospects and his 10x Medical Device Conference (with MDTX) unites Medical Devices Group members in an fun and educational forum each year.

10x Medical Device Conference at MDTX

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