Preparing to raise funds is not only a crucial moment for any startup on their entrepreneurial journey, but it is also one of the most important challenges they face.
The landscape of venture capital is constantly evolving; Therefore, new businesses need to know how to successfully approach the right investors to secure financing for the growth and development of their business.
Finding the right match
The first stop on the road to securing financing is finding the right investor. While this may feel like a daunting task, several available online platforms, such as Crunchbase, will help with the research and narrow the pool of potential venture capitalists or angel investors.
Whether an investor is suitable or not will largely depend on the space in which they operate, their knowledge of that space, and how invested they are in it. Ultimately, any new business will have someone who will be able to look beyond the monetary gains and rather be a catalyst for the company’s growth and future opportunities.
Without the shared passion, investors will not spend the time required to help start customer relationships, hiring in different geographies or fundraising in the future. Therefore, finding the right one is crucial for the growth of the business.
In a way, a startup practically marries its investors, so founders should perform their due diligence before committing to a long-term relationship. Investors will act as partners, advisors, mentors and board members; therefore, reference checks must be performed to help make an informed decision. It is also best to ask the investor directly if they would like to introduce any of the founders they have worked with in the past; Transparency will help get the relationship on track.
Also read: SEA tech founders playbook: A to Z to become a fundraising legend (part 1)
To tell a story
Different types of funding rounds require slightly different approaches. However, there is one common and very important element for them all – storytelling. Startups need to focus on telling a compelling story that will ‘sell’ their idea. The first eight to ten minutes of any pitch are the most critical, as this is how long it usually takes an investor to decide if they want to finance the business.
It may not seem like a long time, but start-ups can catch the attention of investors and get them excited about the project idea with the right preparation. Hiring a pitch-deck-making agency as well as involving a content expert are two ideas that are worth exploring. Together, they will help the startup lay the best slides and ensure the best storytelling and story flow.
Crushes the numbers
In addition to good storytelling, numbers mean a lot as they have the power to support the claims and ideas. For example, during a Series B fundraising round, investors will expect to see signs of business growth. Therefore, the pitch deck should include measurements such as revenue, customer numbers and acquisition costs, lifetime value, the cost of goods sold, to name a few.
The map should also set realistic goals and projections as well as include the size of the financial investment sought. The latter numbers will differ in each round, but it should, as a rule of thumb, help the company for the next 18 months.
Knowing the numbers and presenting the most relevant metrics will not only support the pitching narrative, but also force investors to believe in the company, resulting in them financing it.
The truth is that if a start-up does not set a pitching deadline for potential investors, they will always be in a fundraising mode. This can be detrimental to the business as less time will be spent actually building the business. In addition, if no deadline has been set, investors may not take the company seriously.
Setting the deadline is an individual matter, and there is no perfect answer to defining one; different timelines work for different companies. However, start-ups should remember to give investors enough time to carry out their work and outline their terms in a term sheet.
Also read: SEA tech founders playbook: A to Z to become a fundraising legend (Part 2)
Clear, clear, collection
Founders and CEOs should consider fundraising as a commitment to their business. Raising capital is the most important and time consuming job for any CEO, requiring a lot of preparation and research. While pitching rounds offer the obvious advantage of money; they are also an opportunity to expand market knowledge and receive guidance in the future.
Therefore, startups should turn to fundraising pitches for the purpose of learning first and foremost. Pitch starts conversations. Making them fruitful and engaging and showing passion will increase new companies’ chances of fundraising success.
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