How to leverage relationships to raise capital
Founders tips for start-ups and scale-ups
Beyond the hype of flashy presentations and elevator pitches lies a fundamental truth—who you know (and who knows you!) can make or break your start-up. While groundbreaking ideas and innovative technologies should be at the core of your operation, authentic relationships are pivotal to your ultimate business goals.
Patona's founders, Simon Lee and Simon Jones, are well seasoned in the trials and triumphs of the start-up world. With successful track records of starting several fintech ventures, they’re sharing a collection of insights on scaling businesses and forging meaningful connections and partnerships that can secure capital and help obtain the right talent and resources. Let’s take a look.
Network quality over quantity
While it may be tempting to attend every networking event and conference in the hope of meeting potential investors, focus on quality over quantity. Networking events can be overwhelming, and collecting a bunch of business cards doesn't guarantee meaningful connections. Instead, focus on events that are relevant to your industry and target audience, allowing you to engage in deeper conversations and build more authentic relationships.
Start-up investors are not just looking for promising ideas; they're also looking for founders who are passionate, committed, and have a solid support system. By developing meaningful relationships, you demonstrate that you have a network of people who believe in you and your business. This can be a compelling factor for investors who want to ensure they are backing a well-rounded team.
When it comes to securing banks as investors or customers, Simon Lee offers this advice, “If you’re talking to a bank and only talking to one person, you aren't going to get anywhere - you need to talk to multiple people and you need the support of senior leadership.”.
Engage with multiple stakeholders within the bank, including senior leadership. Building relationships across the organisation increases the chances of gaining support and strategic partnerships.
Simon adds that founders should not shy away from sending messages or emails, even if they are uncertain about the response; “I had sent at least 1,000 messages to the top 4 banks with little response. I almost didn't send a message to Brian Hartzer, the CEO of Westpac, as I didn't think he would respond. He did, and because I took that extra 5 minutes to send a message, a strategic investment and partnership happened.”
Harnessing the power of word-of-mouth referrals
One of the first steps to leveraging word-of-mouth referrals for raising capital is to assess your existing network. Founders often underestimate the potential of their current connections and focus solely on reaching out to new contacts. However, value lies in tapping into the strength of established relationships. Friends, family members, former colleagues, mentors, and even customers can become powerful advocates and help spread the word about your venture.
Trusted recommendations ease the concerns of potential investors and provide valuable social proof. When someone vouches for your business or endorses your vision, it instils confidence in others and validates the potential for success.
Beyond securing capital, word-of-mouth referrals have been instrumental in Patona's success. Satisfied clients and partners who have experienced the value of Patona's services, have gone on to recommend the company to others within their networks.
The numbers are clear when it comes to the power of referrals. Studies have shown that 88% of global consumers trust recommendations from people they know more than any other channel, and 65% of new business opportunities come from referrals and recommendations.
Resist ‘growing at all costs’
For many start-ups, the temptation to grow at all costs can lead to a focus on increasing revenue without considering the long-term implications on culture and customer satisfaction. For Patona, resisting the urge to grow too fast has meant focusing instead on long-term strengths; exceptional culture, people, and customers.
Start-ups in Australia, especially in the technology sector, are faced with competition from well-funded incumbents and global players, making growth a necessary tool to stand apart from the crowd. Establishing global teams (and in essence, global trust) becomes a vital strategy as you strive to sustainably scale up and raise capital.
The success of such remote teams often hinges on trust and effective communication, which are more readily fostered within authentic relationships. The ability to meaningfully connect with investors, mentors, industry peers and skilled talent around the world can lead to a wealth of opportunities and resources for funding and growth.
Simon Lee emphasises this by adding, “Our asset is our people, so growing with great people is key to our success even if it means having to say no to revenue opportunities”. The benefits of maintaining a strong culture and committed team far outweigh the short-term gains of quick growth. By prioritising relationships, Patona ensures that its growth is built on a solid foundation of trust, collaboration, and shared values.
Be transparent and open
Be genuine with your interactions as a founder, and avoid the temptation to inflate or withhold information to make your venture appear more appealing. Investors appreciate honesty and authenticity, and it showcases your integrity and commitment to building a successful business.
Being forthright about the challenges you face and the steps you are taking to overcome them builds trust and credibility in you and your brand. Authenticity becomes even more essential beyond the fundraising process as investors become long-term partners who are committed to the success of the venture.
Patona’s founders stress the importance of seeking feedback from potential investors. By asking them, "what's wrong with our business?" and "why won't you invest?", start-ups gain valuable insights that enable them to address concerns and present solutions. Eventually, persistence can lead to successful investments.
Seek mentorship and guidance
Establishing and maintaining mentor-mentee relationships can offer invaluable guidance and support, providing deeper insights into the fundraising process, constructive feedback, and even help founders avoid common pitfalls.
Mentors can also introduce founders to their personal networks, expanding the pool of potential investors and partners. Find the right mentor by seeking out individuals who have relevant experience in your industry and are genuinely invested in your success.
As the start-up ecosystem continues to evolve, the value of authentic relationships will only grow. So, whether you are just beginning your entrepreneurial journey or looking to scale up, remember that your network of relationships can prove to be your most significant asset in raising capital and achieving your business goals.
Good luck!
