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| Dealing with Soft Commitments
Read time 1.9 minutes | One of the worst things about fundraising is getting a soft commitment. How often have you heard, “I’ll invest if you find a lead investor” or “I’ll invest if you can get another $250,000 committed”?
These horrible soft commitments are NOT legally binding and often are an investor's way of dragging you along with actually committing funds, which is what you need to start creating FOMO around the round.
So let’s chat about what often happens when you have soft commitments and how to deal with it to turn the situation to your advantage. | | Find your customers on Roku this Black Friday | | As with any digital ad campaign, the important thing is to reach streaming audiences who will convert. To that end, Roku’s self-service Ads Manager stands ready with powerful segmentation and targeting options. After all, you know your customers, and we know our streaming audience. | Worried it’s too late to spin up new Black Friday creative? With Roku Ads Manager, you can easily import and augment existing creative assets from your social channels. We also have AI-assisted upscaling, so every ad is primed for CTV. | Once you’ve done this, then you can easily set up A/B tests to flight different creative variants and Black Friday offers. If you’re a Shopify brand, you can even run shoppable ads directly on-screen so viewers can purchase with just a click of their Roku remote. | Bonus: we’re gifting you $5K in ad credits when you spend your first $5K on Roku Ads Manager. Just sign up and use code GET5K. Terms apply. | Use code GET5K now | |
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| Promoting Soft Commitments | Some founders don’t realize that you can’t promote soft commitments to other investors. Because they aren’t solid, you have two issues: (i) investors know that they aren’t guaranteed, (ii) your only proof is a conversation or email. Investors just can’t rely on soft commitments, so getting one won’t help you raise money from other investors. | The Reality | Most first-time founders don’t realize just how much BS there is behind a soft commitment. In my experience, 99% of them fall through when you don’t reach the condition set on the investment, and 80% fall through even when you do reach the condition. | Often, when you reach the condition and then go collect your money, you’ll hear some excuses like: | The market has changed, and we are no longer interested. We don’t have the money to make this investment anyone. We would need better terms to consider moving forward. We invested in someone else that is competitive with your business. We are already in Due Diligence with a few companies and don’t have the capacity for another deal.
| I’ve had clients deal with each of those exact scenarios. | Turning the Tables | Here are the best strategies I’d recommend for dealing with people who give you soft commitments: | Codify the agreement - Try to get them to put the agreement in writing. If you do X, they will invest Y. Most won’t do this, but it’s worth trying. If you get this, then it will be more persuasive when talking to other investors. Find a lead - Once you find a lead, if you have some soft commitments, you can truly put pressure on them and create some FOMO. Tell them the round is closing, and they must say yes or no now. If they had any real interest, it would prompt an investment. Collect enough to fill 1.5x the round - If you can collect enough soft commitments to fill 1.5x the amount you want to raise, then you can also use this to create FOMO. Send a message saying that you have an overcommitment of hard and soft commitments, so all soft commitments will need to become hard commitments, or they are out. This pressure will cost you 1/3rd of those soft commitments but can turn that other 2/3rds into enough hard money to fill your round.
| TLDR
Soft commitments suck but they are part of fundraising. Knowing how to leverage them is key to long-term fundraising success. | | Have you had to deal with soft commitments? | | | 74% of Companies Are Seeing ROI from AI. | | Incomplete data wastes time and stalls ROI. Bright Data connects your AI to real-time public web data so you launch faster, make confident decisions, and achieve real business growth. | Get Access | | Are you looking to grow your business? Here is how I can help: | |
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