FOMO: The only thing that matters in closing a seed round

Steve Schlafman shared a great deck yesterday — a primer on Raising Seed Capital. Slide 53 contains a gem for founders.

Your objective: FOMO (fear of missing out)

Your goal throughout the process should be to create excitement, demand and scarcity for your round. Investors move in packs.

I’ve been on both sides of many seed financing processes, and the ability to generate FOMO is what it takes to get your round closed.

Think of all of the other characteristics of a company prepared to raise seed as pre-requisites:

• great founding team, big market, solving a real problem people actually have, early traction, clear distribution opportunities

Put yourself in the head of an investor. The only thing that will get them to making a decision is planting that thought in the back of their head “do I want to miss this?”

Psychologically, your round must be perceived as an opportunity for the investor.

It’s all about creating a favorable power dynamic:

• If an investor fears he might miss out on this opportunity, you own the power dynamic.

• If an investor knows you need her money, they will always wait for a forcing function to make a decision, they own the power dynamic.

Your company may be ready to raise capital, but until you can create that sense of opportunity and the chance that an investor might miss out, you won’t close. It’s a game but its true.