As a member of the Baby Boom generation who’s helped businesses raise capital for more than thirty years, I was delighted to read about the next wave of entrepreneurs from the “Generation Z” group (born from 1996 to 2010). According to a 2016 Monster Multi-Generational Survey, around 49 percent of Gen Z-ers plan to start their own business—far more than the Millennials, Gen X-ers, and Baby Boomers who went before them.
The good news for this new wave of entrepreneurs is that today it’s easier and cheaper than ever to start a business: all you need is a product, a phone, and a social media account or two, and you can build a customer base and sell your stuff all around the world. The bad news is that when you want that business to grow beyond your ability to self-fund (or borrow from friends and family), you’ll need outside money. And TV shows like Shark Tank and constant news reports of this or that startup raising gazillions in venture capital to the contrary, raising capital is usually one of the toughest things for any entrepreneur.
Luckily, it is easier today to reach the people who have access to capital. Even the most reclusive funders have a website, LinkedIn account, or some way you can get to them (or their assistants) directly. However, sending a cold email or LinkedIn request usually gets you nowhere. That’s why entrepreneurs need to be just as smart about building connections as they are about building their businesses.
To build strong, profitable connections, there are three critical questions entrepreneurs should ask.
- Who do I know that can help me gain access to funding?
- Who do I need to know but don’t know yet, and how can I access them effectively through my current network?
- What value can I add to these people before I ask them for anything?
Start by making a list of everyone you know, and everyone those people know as well, recognizing that any of them might provide you with funding at some stage. When you’re first starting out you may not need a lot of capital, for example, but you may find yourself needing a small “bridge loan” to cover payroll or to pay suppliers. That emergency money could come from your college roommate’s parents, or a businessperson you know from church. (According to a 2017-18 Global Entrepreneurship Monitor report, 12 percent of established business owners in the U.S. invested in other entrepreneurs, with a median investment of $10,000.)
But the connections that the people on your list can provide are even more important than their capital. Who do the people on your list know, and will they give you an introduction? Let’s say you want to reach “big money” funders like venture capitalists, angel investors, family offices, and so on. A warm introduction from someone they know usually will make the difference between your email being opened or call being returned and you ending up in a spam folder or voicemail hell.
The third and most important secret in building the connections that lead to funding is to find a way to add value before you ask for anything in return. You may be thinking, “What kind of value can I add to the people I’m asking for money?” Well, there are many types of value that you and your business represent. Your customer base, for example; or an opportunity to understand a new market, business model, or sales process; or your connections to people the funders may wish to know. It’s your job to figure out what is valuable to the investors you wish to reach, and then offer them what they are looking for long before you ask for money.
Gen Z entrepreneur Tiffany Zhong is a great example of this. In a recent Forbes article she described how she reached out to Silicon Valley venture capitalists on Twitter when she was only 16, because she wanted to learn more about funding the business she knew she wanted to start eventually. What could a 16-year-old yet-to-be entrepreneur offer VC millionaires? A unique perspective on her demographic. Zhong quickly became known as the “Gen Z whisperer,” and by the time she was 20, she founded Zebra Intelligence, which uses a research board of Gen Z people to help people better target their investments and products to that demographic.
Zhong says that most successful people are looking for the answer to one question: “What can you teach them that they don’t already know?” I suggest that entrepreneurs of any age keep this question in mind when looking for funding. Your knowledge, perspective, connections, or resources may be exactly what potential investors need. And once you build relationships based on value, you’re more likely to get value—i.e., investment cash—in return, no matter what your demographic.