10 Things to Know About Fundraising
The moment you start fundraising, you begin running two product lines.
1. The flagship product that you sell directly to customers (what most people know you for).
2. Your company.
Investors are not clients of your product, they are looking at your whole company as a separate product that they may want to purchase part of. This means they look for nice “features” in the business like; founding team, traction, business model, revenue, etc.
Here are 10 more things you should know about fundraising:
- Build a sales funnel of investors just like you would for your product. Expect to talk to at least 150 QUALIFIED investors.
- 100 pitches to get 3-5 commitments is not unusual. This means you’ll get rejected ~95% of the time– even with a highly qualified and pre-vetted investor list. Prepare for this.
- Find investors on Crunchbase, PRHub, InsideVenture, VenturePulse, Quora, Techcrunch, Medium, Pitchbook (paid), CB Insights (paid), Foundersuite, or LinkedIn.
- Asking someone for “investor intros” is too broad of an ask. If you don’t know what you want, they won’t either. Do your homework in advance and ask for intros to specific people who you think would be a good fit to increase the likelihood of an intro.
- Avoid investors who have: invested in competitor startups, are low on funds, have done no recent deals, invest in a different sector/stage/location than you’re in, have a bad reputation. Diligently cut down your list at the research stage for a better investor conversion rate.
- Create a tracking system or CRM to keep track of relationships as they move from “new lead” to “money committed” or “declined”. Remember, you’re selling a part of your company. This is a sales process.
- Do intros in parallel – you want to talk to as many qualified investors as possible at once. Build momentum!
- Send regular progress updates to all investors who haven’t explicitly told you “no”. This creates FOMO in your favor. Investors have a tendency to want to be the last ones to join. They won’t know they’re last if you don’t tell them others are jumping on board.
- Use a tool like Foundersuite or Docusend to see who’s viewing your deck (and plug emails into re-targeting so you can infiltrate their attention).
- When you see momentum building, go for the close! Ask for interest level and next steps. It can take 3-6 meetings before you get a term sheet, so expect to follow up frequently and move the relationship along. This is your responsibility. Don’t let up until they say “no” or you have money in the bank.
Every pitch is different and every Angel, VC, lone wolf and PE firm are different, and they all weigh your pitch through different methods. Always know who you’re talking to and play to their strengths. If you find a great investor but they don’t invest in your field, then don’t waste yours and their time. However if it really seems like a good personality fit, then invest in building the relationship and seeing it through.
Now that you’re ready to keep pitching, here are some tools to help source investors in your area: