My Fundraising Experience - 9 things I've learned to increase your chances of getting funding
Venture capital has been a vital source of financing for high-growth start-ups. Countless innovative companies such as Amazon, Apple, Facebook, and Google owe their early success in part to the capital and coaching provided by VCs.
We know that VCs fill a crucial market need by connecting entrepreneurs who have good ideas but little to no money with investors who have money but no ideas. This doesn’t mean that their money comes easily. Selling your idea and equity to a VC takes a lot of time, effort, and practice. Most of the time, this expedition leads to nothing but silence, rejection, or a maybe later response. While I have had success in the past, this doesn’t guarantee success in the future either. It just increases my chances. And that is what I aim to do here today. These are some of the things that I have learned on going out to raise funding that I have felt have increased my chances of getting heard and invested in.
1. Keep your pitch deck slides simple and easy to understand.
Focus on the who, the what, the why, and the how (in that order). “The Who” explains who you and your team are and why your team is able to pull this off. Who are the founders and key team members? What relevant domain experience does the team have? What key additions to the team are needed in the short term? Why is the team uniquely capable to execute the company’s business plan? What motivates the founders? These are all vital questions that if you answer will show the value of your management team.
“The What” is your problem statement, the solution you’re providing, and the problem you are solving. This is essentially the idea of the company itself
“The Why” is the big vision. Why are you building this company, where do you want to take it, and why this problem needs fixing so badly?
“The How” are the details, the differentiators of your business, product, and/or service, your competitive advantage, and how you are going to sell this to customers in the product market, execution strategy, metrics, traction, etc. This is where you can now go into the details after painting a clear guideline
2. Always get feedback.
There’s a high chance that investors will not be interested in investing in your company, but what they have to say about your pitch can help you tremendously. If they are going to say no, you might as well make it a productive “no” by asking for feedback on what you could have done better and learning about why they aren’t interested. Listen to the experts who are hearing multiple pitches a day and adjust your deck and pitch accordingly. You would be surprised to hear that it could be a “no” because of the way you are selling the idea as opposed to the idea itself.
3. Don't be afraid to keep updating your deck at all times.
Updating your deck and pitch is part of the game. Some decks are good for sending as a reference but some decks are better for presentation. Create multiple decks and have a purpose for each one for various occasions so that you’re prepared with the appropriate slides. Like your business, your deck can always be improved and you have to be agile and adapt to changes and keep an open mind about making certain changes. Don’t be afraid to test different versions of decks with different VCs.
4. Track all your potential investors.
It’s important to stay organized when reaching out to venture capital investors. Keeping a list of all the investors that you've met with, including their contact details, their reasoning for rejection or acceptance, and perhaps a tidbit about how and where you met them can help you build stronger connections and facilitate conversations for the next time you see them. Additionally, anytime you have an update on your company, product, or service, you can email them and let them know that you’re making progress and adapting to the market. As you improve, showing progress to VCs is key. They may have not invested initially but may have been interested and come back. The key is to keep your company on their minds.
5. Show them (appropriate) numbers.
Venture capitalists look for founders who truly understand the financials and key metrics of their business. You need to show that you have a handle on all of those and are able to articulate them coherently so having a grasp of your financials is crucial. VCs want to know the KPIs you’re tracking. Whether it’s the total adjustable market, customer acquisition costs, or budgeting metrics, adding appropriate finance metrics will always bring credibility to your deck. A founder should be able to articulate their KPIs, talk intellectually about the team executing to improve them, and have a clear sense of where those metrics can be in a year or two.
6. Sell the big vision stuff early on.
VCs look for large scalable markets and opportunities. Give them the big picture of how your company will benefit your market and then go into the details of how you’re going to reach the market. Most investors are looking for businesses that can scale and become meaningful, so make sure you address the issue right up front as to why your business has the potential to become really big. Don’t present any small ideas just yet. Investors will want to know the actual addressable market and what percentage of the market you plan to capture over time.
7. Don't be desperate.
If you seem desperate for money, it doesn’t look good. Build your company in a way that it can sustain itself or find alternative ways you can get money without relying on VCs. As an entrepreneur, you have to make sure your company can grow on its own. Remember, VC money should be an accelerant, not something you depend on. Contrary to some, I believe that an entrepreneur should do whatever you need to do to ensure that the company survives. Sell whatever you can to get clients and income coming in, but don’t lose focus on your Northstar. Remember, even when AirBnB started, the founders sold cereal boxes (the breakfast part of AirBnB) in the early days to get some revenue
8. Don’t neglect your actual business.
If you are going to be totally focused on fundraising, remember to not neglect your actual business operations and the growth of your company. Lots of people get lost fundraising, networking, and meeting investors; that’s time lost from building your actual business. If you’re too focused on that, you won’t have time. You should either learn to delegate responsibilities within your management team or pick and choose investors carefully so you’re not wasting your time. Work smart, not harder. Delegating also means that you have other strong members in the team who can take on the workload which reduces keyman risks and are more investable from a VC perspective
9. Stay positive and don't get disheartened.
When VCs say no, don’t let it get to you. It could be a yes later, you never know. VCs aren’t as risk tolerant as entrepreneurs. The important thing to remember is that as long as customers are interested in your business, product, or service, then you stand a chance in the marketplace. Just because VCs aren’t there yet or haven’t fully grasped the potential of your business, as long as you have potential customer growth and are gaining traction with your customers, you will be successful. If your targeted customers aren’t interested, then you have a problem so listen to what your customers have to say. As Mark Cuban says “Sales cures all”
These are just some of the observations that I’ve made personally going through the journey again in 2022. By no means is this a recipe for a successful pitch. I simply think that it would increase your chances of getting heard. Overall, I would say, prepare yourself for rejection but also keep a positive attitude and it will help you maintain investor relations and could accelerate your business in the future. Go get 'em and best of luck out there!