How to Create FOMO to Close a Funding Round
Every investor wants to be the one to bet on the next massively successful company, but none of them are 100% sure which startup will pull it off. As a founder, you can use investors' uncertainty to your advantage in the fundraising process.
Investors are already highly susceptible to FOMO (fear of missing out). By creating hype around your startup, you can leverage that existing fear into a powerful fundraising asset to help you secure a seed investment. The key to generating FOMO among investors is to present both a reason to invest and a reason to believe the opportunity will not last for long. This is a common tactic for selling almost anything. Just think about how many sales you've seen advertised as “limited time offers.”
Here are a few tips to help you create FOMO to raise venture capital.
How to create FOMO
1. Leverage Existing Interest from Potential Investors
Few things make a startup look more attractive to venture capitalists than interest from other investors. To take full advantage of this, you should plan to meet with as many investors as possible in a short period of time rather than spacing the meetings out. Most investors talk to each other more than you might think. By stacking meetings, you can make sure your startup is what they're all talking about at once.
Even if you haven't closed an investment agreement yet, stacking meetings still allows you to leverage existing interest to put pressure on other investors. Ask hesitant investors how much they would hypothetically be willing to invest if they decided to do so. This lets you tell investors that you have interest from another investor for a specific amount. If you're not sure how to get in front of investors in the first place, don't give up—sometimes all it takes is one meeting to start generating exponential investor interest in your startup.
You can also schedule meetings with more investors than you actually have space for in the round. This can tip the basic principle of supply and demand in your favor—if there is a large amount of interest in your startup and limited space in the round, the value of the opportunity goes up.
2. Set a Deadline to Raise Money (and stick to it)
FOMO can't be accomplished without establishing a clear risk of missing out—like by missing a deadline. Without a deadline, potential investors have the power to remain “maybes” as long as they'd like. If they know the window of opportunity closes on a particular date, they now have a reason to make a decision quickly while they still can. That's an ideal situation for FOMO to thrive.
Once you have started receiving some interest from your first cohort of potential investors, choose a finite date after which you will be closing the funding rounds and moving on to the next cohort (even if the round doesn't fill). The deadline you choose doesn't actually need to be a hard deadline—but it needs to be perceived as one by the investors. This communicates to them with certainty that you will not wait around for them forever because you have plenty of other options, forcing them to make their decisions quickly or risk losing the opportunity altogether. When venture capitalists must race against an approaching deadline to make their decision, they are more likely to allow FOMO to influence their thinking.
3. Present a Unique Opportunity to Venture Capitalists
If there are a thousand other early stage companies with a business idea similar to yours, investors likely won't feel much urgency to invest in your startup in particular. If you find yourself in this situation, you're going to have a tough time convincing a potential investor that your version of the idea is the one worth investing in.
However, if you present venture capitalists with an opportunity to invest in a totally unique product or service, the idea itself will do half the work for you. An idea that reminds them of a dozen others they've heard that week isn't going to instill any fear of missing out, but as soon as you mention your plan to make 110 proof beer bottled in taxidermied roadkill, every investor in the room immediately knows it's probably the only chance to consider it they'll ever get.
4. FOMO in Action
There are plenty of startup founders who have successfully used FOMO to secure funds for their startups. One example is Rebecca Kersch, who founded a fintech app called Tang. While raising capital for her startup, she found that FOMO was one of her most valuable tools. As she puts it:
“...if you visit [a house for sale] as a potential buyer and the realtor tells you it's been on the market for three months and has had zero offers, your perception of the house changes…you wonder, ‘Something must be off, why has no one else put in a bid yet?' If you were to walk into that same house but the realtor tells you it's been for sale for two days and already has five offers, [it's] likely to make you want the house badly.”
The house metaphor serves as a perfect illustration of FOMO's value to founders. Whether it's a house or a startup, the fear of missing out is a powerful motivator. When interested investors simultaneously see an attractive investment opportunity and a risk of losing that opportunity in the immediate future, you'll likely find closing an investment round with them suddenly becomes much easier.