(Editor’s note: Jon Olafsson is chairman and co-founder of Icelandic Water Holdings. He submitted this story to VentureBeat.)
With fear running amok on Wall Street and the future economic picture so uncertain, it can be hard to raise venture capital these days. Over the last 12 months, though, we’ve managed to secure $23 million from both institutions and friends and family.
Part of the trick, we found, was having a well-researched and clearly articulated business proposition that clearly demonstrated a very substantial upside for investors. We cast our net wide, using our own personal networks as well as those of professional fundraisers. And while we were prepared to be flexible on terms, we refused to entertain low-ball offers.
Ultimately, though, our fundraising success came down to a few factors. Here are our secrets:
Keep it simple – The market for bottled water is well established. We had the advantage of an existing product, but that was hardly a guarantee.
We condensed the investment proposition to four essential “pillars” – the market, the source, the product and the distribution – and demonstrated how we had competitive advantages in each area.
Go with what works – A core strength of our product is the spring we draw from, located in Ölfus. Investors , we quickly learned, liked the idea of owning a part of this highly valued resource.
Emphasize the positive – Communicating success signals the potential value in your company. We were fortunate to boast a strong sales performance during the fundraising period – something we regularly communicated to potential investors. Along the way, we also highlighted our growing U.S. sales and international distribution.
Eliminate the negatives – It’s easy for VCs to say no. And it’s incumbent upon you, as the business owner, to remove the reasons for them to give that answer.
During the process, we addressed three concerns that, admittedly, were specific to our industry, but showcase what any prospective fund seeker should think of in advance:
- No track record – We ensured we had a company history, proving to investors that the product had legs.
- No distribution – We obtained distribution in US, Canada and China, showing we weren’t a product that would be landlocked in Iceland.
- No control of source – We bought the land that houses our spring, giving us the rights to the source in perpetuity.
Follow-up on all leads – We used all of our personal networks as well as those of two international investment banks to look for potential investors. We were prepared to incentivise people to find investors, offering placing commissions of up to 4 percent. We followed up assiduously on all leads giving further information, access to the data room, samples of the product and offering site visits to Iceland. A successful first meeting was always a result of a personal engagement with the project on the part of the potential investor.
In the end, roughly half of the funding has come from investors who are my personal friends, with the rest coming from South African institutional investor Bidvest.
Believe in the business – There are always dark days in a business and fundraising can be especially frustrating in the current environment. We continually reminded one another about the quality of the product and the latent demand for it in international markets.
Some potential investors offered us terms that were much poorer than the ones we finally achieved. It was our confidence in our business that gave us the strength to say no. Our existing shareholders helped support the business and the pricing by continuing to invest in the business during the process.
About the author: Icelandic Water Holdings, ehf, Chairman & Founder, Jon Olafsson has spent the last 30 years building successful companies from the ground up and transforming them into industry leaders. Best known as the chair of Northern Lights Communications — Iceland’s premier integrated media, communications and entertainment company — Olafsson has served as a critical player on the executive boards of more than 15 companies across multiple sectors including investment banking, entertainment, media, construction and land development.