Over the last two weeks I’ve been writing posts to help you get better at doing investor meetings. Today I’m going to talk about how to close investors for your seed round using “test closes”.

If you’ll recall in my first post I went over the 7-step process that we teach inside Fulcrum. This is the process that helped me 10x my results with investors and it has helped many of our founders get to be truly expert level closers. Here are the steps to run in an investor meeting:

Step 1: Engage
Step 2: Build Rapport
Step 3: Qualify
Step 4: Enroll
Step 5: Handle Objections
Step 6: Test Close
Step 7: Close

As I said, today I’m going to talk about closing, and specifically a technique called “test closing” that will make you 10 or 100 times more effective at getting investors to yes. When I learned this technique it was like someone had given me a treasure map for navigating the end of investor meetings.

And this is important because the thing I see over and over again with first time founders is that they don’t know how to close the deal with investors. In sales this is sometimes called “Asking for the sale”, and it’s crucial because some investors will simply not invest unless you ask them to.

So I see founders struggling and after I teach them this they say something “Wow, I never knew I could just ask them to invest?”. So let’s talk about asking for the sale…

Asking For The Sale

In the context of an investor meeting the simplest and most straightforward way to ask for the sale is to say “So, would you like to invest?”. This isn’t the most elegant way to close, but it is definitely better than not asking at all.

When you ask this the investor you are meeting with will say some form of “yes”, or they will say something else that indicates they aren’t ready.

However there is a problem with “Would you like to invest”. The problem is that if the investor responds with something like “No, I just don’t think the market is big enough.” they have now committed themselves verbally to not investing. They have verbalized a decision and a reason for that decision.

For you as the entrepreneur this is difficult to overcome, simply by virtue of the fact that people don’t like to change their minds.

So what I’m going to show you today is a better way. Enter the Test Close.

The Test Close

The test close is a simple technique that gives you a better option than just simply asking for the sale. The test close is similar to asking for the sale, but it is conditional, and so it gives you the same information you need as the founder, but doesn’t force the investor to commit to anything like in the example above.

For this reason a test close in my humble opinion is way more useful and powerful than simply asking for the sale, because it allows you to gather the information you need and seamlessly transition to a smooth close. As the founder test closing gives you valuable information to understand what convincing might still be left before you are ready to close the deal.

Said another way, a test close is a conditional question that helps you as the founder understand where the investor is in his or her buying process. Is she ready to commit to an investment? Or does she still have reservations and questions that she needs answered before she’ll commit. And if so what are those reservations?

Example Test Closes

Here are some example test closes that I like using in investor meetings:

• “If you were going to invest, how much would you want to invest”
• “Based on what I’ve shown you today, how excited do you feel about what we’re building?”
• “Is this resonating? Would you have any hesitations before committing to this round?”
• “Hypothetically, Is there anything that standing in the way of you joining this round?”

As you can see all these test closes are questions that are conditional and therefore don’t commit the investor to anything, while simultaneously showing you as the founder how far along the investor is in her buying (ie. investing) decision.

My absolute favorite test close that I teach to all our Fundraising Mastery CEO’s is the first one: “If you were going to invest, how much would you want to invest.” These are magic words.

This is a test close that I recommend every founder use at the end of a meeting after all objections have been handled.

Here’s how this goes: You are nearing the end of your investor meeting. The energy feels good. You can tell the investor (let’s call her Sally) is enrolled and you have handled a bunch of objections. So now you ask the magic question and the conversation unfolds as follows:

You: “Great Sally, this has been awesome. I’m curious: if you were going to invest in this round how much would you want to invest” (TEST CLOSE)
Sally: “Hmm I think I’d do fifty thousand.”
You: “Great, do you need anything else from me before committing?”
Sally: “No I don’t think so”
You: “Great, well should I put you down for $50k then?” (ASSUMED CLOSE)
Sally: “Yep.”
You: “Ok great, welcome aboard! I’m looking forward to working with you.”
Sally: “Awesome me too!”
You: “Ok great, so I’ll shoot you the docs and wire instructions as soon as we hang up. Do you think you can sign everything and wire by Friday?”
Sally: “Yep sounds good”
You: “Great thanks. Question do you have any friends you typically invest with who might be interested….” etc. etc.

Let’s break this down. Sally was ready to invest. However you as the founder didn’t know this yet. If you had asked her straight up “Do you want to invest” you risked her saying no and giving a reason like in the example above.

So you used a test close to find out where she was in her buying/investing decision. It turns out she was ready to invest, so you as the founder were able to move smoothly into an assumed close “Great, well should I put you down for $50k then” and then smoothly handle the logistics and move the deal forward towards a close.

It might seem silly to break it down to this level of detail, but we work with a lot of founders who haven’t done this before and either get super awkward at this stage of the meeting, or NEVER ask for the sale at all and then wonder why they can’t close any of the investors they speak with.

Ok so let’s look at the case where Sally the investor is NOT ready to invest yet. You as the founder learn this from the test close:

You: “Great Sally, this has been awesome. I’m curious: if you were going to invest in this round how much would you want to invest” (TEST CLOSE)
Sally: “Hmm I think I’d do fifty thousand.”
You: “Great, do you need anything else from me before committing?”
Sally: “Hmm. Yes I’m concerned about your team. I’ve never invested in a solo founder before. I’m concerned there’s too much to do here for one person.” (OBJECTION)

So in this example, your test close has unearthed another objection. Which needs to be handled before you are going to close Sally. If you had said “So do you want to invest?” she might have replied “No. I don’t invest in solo founders.” and then you’d be in a hole and need to dig yourself out.

Using the test close you unearth her objection without the “No”, so now you have given yourself an opportunity to handle it. In this case you’d go back to the objection handling process (Step 5) and handle this objection, then once the objection has been handled, you can return to test closing.

And that’s how this works. The test close is a low-pressure way for you to determine if the investor you are pitching still has objections (in which case it is too early to close), OR if  all their objections have been handled and they are ready to move forward with making the investment.

Instead of trying to close an investor who may still have objections, test closing allows you to test the waters so you know which direction to go at every step of the closing process.

Once you have test closed and discovered no more objections, you are ready for the final step of the process: Closing. Which I’ll cover in a separate post.

And that is a little manifesto on the power of the test close. Please use it and let me know how it works for you – Happy test closing!

(Note: If you want to master this over 3 months in order to 10x your results with investors, we are currently accepting applications for our next Fundraising Mastery cohort)