The trend is obvious: U.S. firms, crushed by a credit crisis and fear in the private equity and capital markets, need to look elsewhere for money. Many are looking overseas for Chinese, Japanese and European investment.
Hat in hand, our executives travel to these far-off capital markets in search of money to survive and grow. Many come back empty-handed.
How can a U.S. firm position itself to get foreign investors?
• Follow the first rule of sales: Make it easy to buy — Put your literature, marketing materials and website in localized forms for overseas audiences. When using English, simplify it. When selling a piece of your firm to Germans, have the courtesy to remember that English isn’t their first language.
• Commit or forget — Partnerships are harder than marriages. If you take someone else’s money, you take on their demands, curiosity and compliance requirements. You will need to cater to them, not the other way around. You may have business and social demands placed upon you.
• Be flexible — People from various cultures handle money differently. They may have meetings at times of the day or week that are unusual for outsiders. They may spend much more time getting to know you than you’re accustomed to. If you can’t bend, you will break.
• Forget the rush — When I hear things such as, “We need Chinese money and we need it now,” then we know we have a recipe for disaster. Most countries move more slowly than we do. And our emergency isn’t their problem.
There’s nothing more ridiculous than an American CEO telling a Chinese venture fund that they need the money in 30 days. Save the plane fare if that’s your approach.
• Make a safe haven for them — Investors need to know that they (and not just their money) are welcome. Make sure you have an appropriate place for them to stay when they visit, with the proper meals and activities. Bring them translators and culturally sensitive people from this side of the ocean.
• Ditch your nondisclosure agreement and noncircumvent agreement — That’s like starting a meeting and saying, “Hello. I don’t trust you, but need your money.” And you won’t enforce them anyway, because you can’t.
• No power point — No canned presentations. You’ll be better off asking your investors about themselves, their goals, fears and frustrations in foreign investing. If you need to present something, use creative words and communicate to a partner, not an audience. Remember, business isn’t business. Business is personal.
• Plan your investment meetings as you would sales calls — Have a schedule of meetings, a follow-up program, a customer contact program, information sessions and frequent get-togethers. It’s hard to sell Wall Street with a one-call close. How can you sell Hong Kong with that approach?
• Listen, listen and listen — Too many presentations (money-raising or any others, for that matter) are presentation-focused. It’s better to ask than tell, and better to show you’re listening than to be the best pitchman in history. Many cultures are indirect. Hence, you may require listening lessons.
• Offer a menu of options for amount of funds needed — It’s best to offer more than one way to participate. Successful money-raising deals utilize a menu of options. “If we get X, we can do Y and you, the investor, get Z. If we get X+2, we can do Y+3, and you get Z+4.”
• Offer an array of options for the investment vehicle — Loans, equity, warrants, stock options and combinations of them all should be utilized to increase the investor’s comfort.
• Don’t meet without “deal authority” — Nothing will be more infuriating to an overseas investor than someone who’s representing the opportunity, but doesn’t have the authority to change or close a deal.
• Be prepared to do favors — These can range from helping the investor’s other business interests (for example, carrying their products, structuring their export departments or training their staff) to helping the investor’s personal interests (helping their children find housing in the United States, for example).
• Consider opening a bank account in the investor’s country — Why should someone who’s helping you have to deal with currency conversion, exchange rates and wire transfers? Remember that first rule of sales?
• Consider opening a subsidiary of your firm in the investor’s country — This allows the investor a chance to recoup losses, have local presence, and add or subtract funding as needed, while learning more about your business. It also shows a major commitment by you to the country and the culture.
These methods should be used in combination with each other. None of them guarantee you’ll get your funding. Omitting most of them probably will guarantee that you won’t.
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