Every startup founder knows that fundraising is a complex process with many traps that may handicap landing an investment. However, there are certain things to keep in mind during fundraising that will bring you closer to potential investors and make you prepare to answer their most common questions. Below, you will find some useful tips on successful startup fundraising from VC funds: TMT Investments, Next Road Ventures, Iron Wolf Capital, PROfounders Capital, SpeedUp Group and Lighthouse Ventures.
Fundraise, fundraise, fundraise…
'As a CEO, you should ALWAYS be fundraising' - recommends Joe Bond, Principal at PROfounders Capital. According to Joe, 'it’s crucial to start talking to investors early and continue the conversation even then you don’t need funds, as your approach to the conversation is very different when you’re desperate to land investment versus when you want to build a solid business relationship. Start speaking to investors early and continue an informal conversation even when you don't need money (which is actually the best time to build up interest!). The best entrepreneurs are able to do this without it being a huge distraction' - adds Joe.
Don’t forget about your business
Fundraising is a time- and effort-consuming process that captures a lot of attention and energy from startup teams. 'Don’t focus too much on raising funds and attending as many startup events as possible which turns out to be a permanent road show and a huge distraction from your day-to-day business and development' underlines Ewa Chronowska, Partner at Next Road Ventures. In her opinion startups should be more picky with events and focus mostly on developing business. 'Keeping investors updated with dynamically growing business metrics (even by email) is much better than winning pitching competition in 5 different countries in a raw in 3 weeks! It makes no sense, no mistake, we are happy for you but this is a red flag for most investors. When do you find time for running the business itself?' adds Ewa Chronowska.
Get your startup noticed
While being careful with selecting the right events will help to keep your business on the right trajectory, you still need to draw interest to your startup. 'If you're about to start the fundraising process and you're looking for a way to reach out to investors, the best way for that is actually to make the VCs notice you and approach you first. That puts you in a better position, so make sure your startup is well-visible in media space or at the conferences. Investors are actively looking for the best investment opportunities, so do everything to let them find you.' - adds Jagoda Żychlewicz from SpeedUp Group.
Create A-level team and know your business in and out
Having an A-level team is a must-have and will prove your startup’s expertise and prospectiveness. 'The best composition in tech startups is a hacker, a hustler and a designer. Such team enables a startup to create a great product from the tech side, to offer the best UX by analysing clients’ needs and, last but not least, sell the product' points out Tomas Martunas, Founding Partner at Iron Wolf Capital.
Having a Unique Selling Proposition is also a must if you want to be taken seriously by a potential investor. Constant, detailed evaluation of the market and competition is another necessity that will raise your chance of success. 'Have an answer on your USP and competition in detail cause the devil is in the detail. Provide clear execution & growth plan: be ready to explain in 5 minutes what will you do with the money if VC invests today. Be also ready to explain your vision in 5 years, your long term differentiator and why are you passionate about what you do' outlines Tomas Martunas. So ensure investor that you have a plan: both short and long term.
Craft your pitch deck
Once you catch the first interest from investors, the pitch deck will be an element that will decide whether they want to engage in further negotiations or drop the idea. Alexander Pak, Investment Director from TMT Investments highlights: 'The presentation has to be short, concise and interesting to prevent the investor from getting bored. Always be prepared to demonstrate some exciting traction - whether it is revenue growth or new advanced technology, customer growth'. Joao Duarte, Venture Partner from Lighthouse Ventures underlines that you need to keep in mind that 'early-stage investors care about few points: team, product, market and traction.' More valuable tips on crafting startup pitch deck can be found in'How To Create A Pitch Deck That Will Get Your Startup Funded' by Ewa Chronowska from Next Road Ventures.
Finding the right match
Don’t put all eggs into one basket. 'Make sure you speak to a lot of funds as you will always get some NOs! TOP TIP - if you feel you need to hone your pitch then maybe you could actually start with a few of the funds lower down your list so that the pitch is perfect when you approach your favourite fund!' - highlights Joe Bond. The investor will be your partner in business for the next few years, so you have to make sure that it’s a good match as well. 'Don't just rely on the quality of the portfolio and recognition of the brand when picking your VC. Getting the perfect match is all about the people and the relationships you build. Make the effort to speak to some of the VC's (ideally exited) portfolio CEOs (pick some failures as well as successes!) to get some real opinions on what they are like to work with.' adds the Principal of PROfounder Capital.
Successful closing of the round is no less of a challenge than attracting the investors. The aim of the funding round is to gather enough funds to bring your project to another level. 'Don't try to raise as much capital as possible in one round as this will dilute the existing shareholders to the extent that this would be uncomfortable for the next investors as small ownership of key people (founders) is not a good situation for early startup. Better way is to split the required amount into 2-3 parts and propose higher valuations at every next stage.' advises Alexander Pak.
Last but not least: 'Don't waste your time and ask for further introductions unless the investor joined the round. Would you recommend an apple to your friend if you didn't like it?' - sums up the Investment Director at TMT Investments.
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Related Posts:
Types Of Startup Funding Rounds (by Marcin Laczynski, Partner, Next Road Ventures)
How To Write Elevator Pitch For Investors (by Ewa Chronowska, Partner, Next Road Ventures)
How To Create A Pitch Deck That Will Get Your Startup Funded (by Ewa Chronowska, Partner, Next Road Ventures)
