Fundraising is a critical component of any startup’s journey (and survival). Raising that next round of capital is no easy feat, but ultimately securing additional capital can translate to bringing your MVP to life, executing your go-to-market strategy, ramping up business development, hiring new talent or building out new technical capabilities on your roadmap.
Is a capital raise on your radar? Here are five tips to keep in mind as you prepare for your next round.
Tip 1: Reflect on the last year
This advice goes for any year, but especially of late where we see companies of all sizes seeking to navigate a global pandemic. It has been an absolute rollercoaster, but we've seen founders and teams with resilience, emotional intelligence, strategic thinking and the ability to make good business decisions shine.
As investors, we aren’t expecting your reflection to be a perfect picture, but we are curious to hear your perspectives and recent learnings.
Be prepared to speak to your overall journey as a company and team, as we will be interested in learning about how you navigated (and continue to navigate) uncertainty and the dynamics of the new normal. We will also want to dig deeper to understand how you go about making strategic decisions (sometimes tough ones), evaluating trade-offs or balancing short-term needs with long-term growth. Other questions to think about:
- What were your initial goals for the last year and how close were you to achieving them?
- What were your biggest accomplishments?
- What were your lessons learned?
- What was the toughest decision(s) you had to make?
- How have you had to pivot or course correct?
- What are your top strengths – as a company and individually? Where do you have blind spots or want additional guidance?
- What advice or guidance did you receive from your board and advisors? Did you decide to enact that or not? Why or why not?
- What are your plans for the next 12-18 months and beyond?
Reflecting on last year and thinking ahead for plans in the years ahead and beyond will enable you to put your best foot forward when speaking with investors and sharing your company’s story.
Speaking of your story…
Tip 2: Perfect your pitch (and deck)
At a high level, the most successful pitches are ones that are compelling stories. When you’re meeting with investors, embrace a storytelling approach to better engage them in conversation and leave them inspired to follow up or take action. Take time to articulate the problem you identified, the opportunity or unmet need and how your company (and team) is best positioned to address that opportunity. By focusing more on storytelling and less on presenting slide after slide, you can:
- Create an emotional connection — make them care about you and your company
- Establish context and create a sense of meaning — investors want context to your solution
- Communicate complex or abstract concepts simply — making it easy to understand is key to getting engagement
- Inspire imagination and motivate action — get investors to believe in what you believe and motivate them to invest
As a storyteller, your job is to take your audience on a journey. That journey can mean different things depending on the situation. It could be to persuade the audience to fund a project, buy a product or service, better understand an opportunity or set of risks…but in this case, the journey is to persuade investors to make the decision to invest in your company.
With that storytelling approach in mind, you need a powerful pitch deck to bring that story to life. You may be excited to start meeting with investors and want to be prepared for anything they may ask you, but don’t let that tempt you to include 60 slides. (Hint: they likely won’t get read in that case.)
As a rule of thumb, aim to keep your pitch deck to 15 slides or less. And focus on what’s most important. If you leave investors wanting more information and interested in setting up more time, great! That’s what you want anyway!
Tip 3: Do your homework
Time is a startup’s most precious commodity, and every meeting or engagement you have takes time. Doing your homework may sound like a no brainer, yet surprisingly many don’t do this enough. Before you meet with investors about your capital raise, be sure to prepare effectively for each conversation.
Research the VC or CVC you are presenting to: Look at their websites, LinkedIn pages, recent news and thought leadership. More importantly, review their investment thesis and portfolio companies to ensure there’s a fit in terms of stage, check size, sector, etc. For each firm you plan to meet with, try to understand their main goals as investors. Do they invest primarily for ROI? Strategic learning? Near-term commercialization?
Research each individual person you are pitching to: Get a clear understanding of what they do, key focus areas, their background, articles they have written, posts they’ve shared or topics/panels they’ve spoken on. Do you have any mutual connections or common experiences? Look for ways to find common ground from the start and build the relationship.
Update and organize your data room: Once you make your pitch, if an investor is interested in potentially investing in your company, they will want access to your data room fairly quickly to begin their due diligence. Making sure your data room is well organized and up to date is critical. This establishes your credibility as a founder and reflects your leadership of your business, which builds confidence in potential investors evaluating whether or not you and the company are a good fit.
Have key metrics handy: While every investor will bring their own unique questions to the conversation, it’s helpful to have key metrics on hand that will almost definitely come up throughout the process.
- Total addressable market (TAM) and the percentage of TAM you plan to achieve over what period of time
- Annual recurring revenue (ARR) and/or monthly recurring revenue (MRR)
- One-time revenue (i.e. from pilots/POCs)
- Customer acquisition cost (CAC), lifetime value (LTV) and CAC/LTV ratio
- Customer churn rate
- Conversion rate from pilots/POCs to contracts
- Burn rate
- Gross profit and projections
- Growth rate and projections
Tap into your network: Connect with fellow founders who have raised capital before. What went over well? What are pitfalls to avoid? What are questions that stumped them? Can they offer any warm introductions to investors who may be a fit for you?
Tip 4: Tell us…why you?
We invest in fintech companies, but we also are equally investing in the people and teams leading those companies. The leadership team can make all the difference when deciding whether or not to invest. So in addition to telling us about the problem, opportunity, what you do and more…make us believe in you and your team. Why are you the right team to deliver this product or service to the market? Why are you the right person to lead the charge and grow the business? As strategic investors, we expect to work closely with our portfolio companies for many years to come beyond investing, so there needs to be a fit and a belief in the team just as much as the business or tangible product.
Tip 5: Make the ask
Of all the tips I shared here, this has to be the top one (and it goes for any meeting – not just investor meetings). Always be confident and make your ask. Always go into any investor meetings with a goal in mind, and work to guide the dialogue toward achieving that goal. Ask the key question you need an answer to in order to move your company to the next step. Here are a few examples to consider when making the ask with investors:
- Does this interest you enough to schedule a follow-up to learn more and dig deeper?
- Based on what you’ve learned so far, are we the type of company that you would consider investing in?
- What would be the next stage in your investment due diligence process?
- For a corporate VC – Are there any subject matter experts within the organization who may also be interested in learning about our offering?
- For a corporate VC – Do you feel you have enough interest and understanding to consider pursuing a proof-of-concept or commercial opportunity alongside an investment discussion?