“If you had to sell ice to Eskimos, how would you do it?” The idea being, of course, that if you can sell ice to Eskimos then you’ll be an effective salesperson.
I hate this question.
Why? Because it totally ignores one of the fundamental principles of effective sales: qualify your prospects. You want to direct your efforts at people who might reasonably want to buy your product, not people who don’t need it. That’s why one of the parts of an effective sales funnel is qualification.
I don’t want salespeople who make unlikely, difficult sales . . . I want salespeople who make lots of money! If I had a salesperson who was trying to sell ice to Eskimos, I’d fire them on the spot for wasting my time.
What does this have to do with investors? Don’t worry, we’re getting there.
Not Every Investor Is The Right Investor
Finding investors is essentially a sales process. You put together a pitch, and then you present it to people who might be interested in your idea. You’re not selling the product, exactly, but you are selling a financial interest in that product. Investors are your potential customers.
If you had infinite time and energy, you could pitch to every investor on the planet—but you don’t. You need to focus your efforts on the investors who might actually be interested in your business . . . in other words, you need to qualify your prospects just like you would with potential customers.
Too many people forget this step, and just throw themselves at any investor who crosses their path. This isn’t a smart use of time or energy, and will annoy a bunch of people.
One other point, and then we’re going to get to an example.
I get pitched to a lot. There’s no greater turn-off for me than being shown a product that I’m obviously not interested in, excited about, or qualified to understand. It’s pretty obvious what I’m in to—I’m a sucker for kitchenware and fitness products—and if you can’t even do the most basic research on what I like, then how can I trust you to understand your customers?
In short, if you’re not going to qualify me, how do I know you’re an effective salesperson?
Tim Linnet And RutaSleep
This week I want to take a look at Tim Linnet, founder of Linnett Corp, manufactuer of a sleep-aid product called RutaSleep. Tim and his father are both pharmacists, and for years they saw people come in asking for sleeping aids. “We’d recommend a product, but when we told them that it would be ineffective unless they stopped consuming caffeine they’d give us this blank stare. ‘I can’t do that,’ they’d say,” explains Tim.
Clearly there was a business opportunity here, if they could find the right product.
“After a bunch of research, trial and error, we found Rutaecarpine. It decreases caffeine levels and helps people sleep without giving up coffee, soda or tea. With that in hand, we started looking for investors.”
Before long, fund raising was taking up 80% of Tim’s time. They started with friends and family before moving up to some smaller angel investors. It took three years, but they eventually raised $750,000. It was enough to get the product out and selling in stores . . . and now that they have that social proof under their belts, they were just able to secure a $1.1 million financing deal with a private equity firm.
None of that would’ve been possible if they weren’t carefully qualifying their investors and targeting exactly the people who might be interested in their project.
“Weirdly enough, we found that it was much, much easier to land a big investment ($100k+) from someone who’s an expert in our field than it was to get a smaller investment from someone who didn’t understand what we were doing,” says Tim. “We’re both pharmacists, and there’s a fair amount of scientific know-how that you have to have if you want to understand our product. Fortunately that made qualifying investors easy—but we made a lot of mistakes and wasted a lot of time in the beginning.”
They did extensive research into the people who had already invested in similar products, finding investors who specialized in sleep aids and other over-the-counter medications. Then, instead of laying everything on them all at once, they’d present a short one-page pitch. The ones who were interested received more information, “dripped” bit-by-bit to hook them even further.
(That’s another pet peeve of mine—give me just enough info to make me interested, and then I’ll ask for more. Too much all at once? No thanks.)
Not only did that strategy keep investors from suffering from information overload, but it pulled them into the project emotionally and allowed Tim to reach a much larger number of potential investors in the same amount of time (smart!). You could do a lot worse then emulating his campaign.
So remember—keep qualifying your investors! And with a little luck, you’ll find exactly who you’re looking for.