We are reguarly helping startups in their fundraising as well as analyzing a lot of pitch decks. From our long experience, we would like to present you 5 key fundraising tips:
Time is always your most valuable asset, so don’t waste it. Find out everything you can about the fund: their investment strategy and focus, current portfolio, track record, the type of investor they are. Make sure to ask questions that build on the information that is already there. Nothing is more annoying than asking the obsolete – it simply conveys you didn’t care or engage enough.
Your story needs to be sound – what problem in the market am I solving, how am I solving it and how will I grow and survive doing it: your raison d’être. But whilst you want a sexy pitch, you also need to be able to go into the nitty gritty details to back it up: monthly revenue growth and forecasts, your customer acquisition and operating costs and of course, your margins; make sure you understand what drives your cash flow! Be prepared to answer the uncomfortable questions and make sure not to exaggerate your financial projections – due diligence will do the relationship test for you.
This seems like an obvious one but you’ll be surprised how many startups fail to get past the first meeting due to this issue. In the eyes of the investor, if I am going to spend a lot of time with you but I don’t like you as a person, it’s just not going to happen: why would I choose to spend time with you if you make me feel uneasy? You need to convince the investor that the money is well invested because YOU are worth his time and able to lead a company and sell its product: lying, boasting, refusing to listen, being unable to accept criticism, those are not the sought after characteristics to start a business relationship.
There is much disagreement on this one. Some experts will tell you to raise money when you need it least because it gives you more leverage, while others say there is no need to give a piece of the cake too early. Be certain when and how much you need and how and when you want to ask for it – be clear on your funding objectives. Remember, just like in any personal relationship, it takes two to tango. The reason you strike a deal is because there is a purpose for both parties, so you should neither be too cocky nor too desperate: but know your worth!
After the first successful contact, be sure you keep up with what you promised: Show the investor how you will, and have achieved agreed targets, it will make him more likely to trust and invest his time and effort into you. Be cooperative and confident: you need to uphold your end of the bargain, and if it is a fit, that relationship will thrive.