No matter what field you work in, there is one fundamental need that is transversal to every startup: proper funding. Without investment, your company will not be able to operate, leading to an untimely shutdown. To avoid such a fate, you need to attract investors and sell them on your project.
Building a Process
Approach Fundraising along the same terms as you would when establishing a strong sales funnel:
You are effectively selling a product to your investors, with the product being your company’s stocks. To that effect, any learning or insights you may have from working in the B2B field will carry over rather well to the practice of fundraising, as it more or less operates in a similar fashion.
Honesty and Transparency
Since everyone knows that startups face an uphill battle, there is nothing to be gained from lying. You should show your potential investors everything. That means all the positive aspects and successes, as well as the flaws and shortcomings. You should do this on a regular, proactive basis, such as through a Monthly Report.
Also, you should not ask for NDAs or anything of the sort. Generally, these are not worth the paper they are printed on and are red flags to any potential investors. If you have something worth protecting, then you need a patent, not an NDA. If you do not have something that warrants one, then you should focus on execution. Instead of wasting time, money, and effort writing NDAs, you should focus on how to best implement your ideas and executing your vision.
Realize that Ideas are Worthless, and Execution is Key. This is a fundamental message to deliver to potential investors, as it will make your company much more attractive in comparison to those who do not share this mindset.
The Pitch Deck
It is often said that time is money. This is even more true when you are in the world of investment. As such, you should share your pitch deck with potential investors before you set up a meeting. People want to know what they are going to be dealing with before they commit to talking to you. Thus, you need to create a great Pitch Deck and send it out to your potential investors before you push to schedule a meeting.
By doing this, you save your time as well as theirs, as you filter through the list of potential investors, leaving only those who are truly interested in working with your company.
You may feel that this puts you at risk of having your ideas stolen, but as was stated before, you should not worry about this. All that matters in the end is the execution. If you can do things better than the competition, then you will come out on top.
Know your Market
It is vital, both for your Pitch Deck, as well as when meeting with investors, that you ensure that you know your product and market code. It is paramount that your knowledge and understanding of your slice of the market is deeper and more comprehensive than that of your investor. If that is not the case, then it is something you need to change ASAP. Make sure that you know what you are talking about and understand the market before you reach out to investors for funding.
Another crucial factor is that you build trust with your investors. Be transparent and follow-up in a timely fashion. Keep in mind that the most successful startups do this through monthly updates, which are shared with potential investors detailing what went right and what did not go as planned. Updates are also a good medium for sharing what you have learned in the process. If you show that you are quick to learn from your mistakes, you improve the chances of securing a lasting relationship with an investor.
Additionally, make sure that you are the driver in the whole fundraising process by being proactive. Routinely following-up with your potential investors, leading to the next steps, and setting a clear timeline all help to manage your investors expectations. It is your job to keep track of, and organize, all of this – not the investors.
Back to Basics
Always remember these directives.
Regardless of how precise your calculations are, you will always find that you will need more money than that which you have raised, and that things will inevitably take longer than you expected them to.
While reaching your fundraising milestones is important, you also need to stay afloat financially. If you do not, and end up running out of money, then you leave the fate of your company in the investor’s hands, and they can simply decide to pull the plug and shut the whole thing down.
Ideally, you should raise enough money to accommodate for 2 years of runway. This will give you enough capital to deal with any complications that come up, and they will, so best be prepared.
Ultimately, the key to success lies in building a great business and achieving your investment milestones. Fundraising takes a lot of time, so be prepared. It will take at least 6 months to close a deal with an investor. Make sure to do your do diligence. Ask investors for feedback, and talk to other startups they have invested in. That way you can ensure that they are a good fit for your company, and vice versa.