How to get funded
Entrepreneurs often face the challenge how, why and what drives investment decisions of Venture Capital funds. Obviously, every business model, industry and team is unique and there is no one size fits all investment decision framework. The following article aims to pin-point some insights of the Kompass Digital investment decision framework and highlights important hints that will hopefully support your fundraising process.
Establish your team
First, you have to define the needed core skills. A lot of startups fail because the team lacks certain skills. If you want to build a rocket, you need at least one who knows how to build a rocket. A team of business managers won’t be enough for this project.
“We invest in people”- A VC is doing exactly this. I invest in passion, persistence and experience.
Nevertheless, no perfect team exists. Know your weaknesses of your team and try to compensate the missing skills by hiring workers. Define roles and responsibilities! A lack of leadership is considered as the biggest flaw. Roles and responsibilities allow the team to focus better on the main issues. Further decide on the equity split. Put aside equity portions for employees and you will avoid conflicts in the future.
Target your ideal investor
Know what you want and why you approach an investor.
A) Micro seed
If you search for initial capital, first hands-on, feedback and strategic support, you should meet up with a business angel. Family and friends are also common for the initial capital.
Go to incubators and accelerators for funding and mentoring. Besides, they provide you a working space during the time as a participant of the program.
You will need venture capital, when you start to extent your business and hire new employees.
Strategic partners will boost your business. They can easier open up new markets for you. However, first consider the use of a partnership. The other company should fit with your branding. Last but not least, keep in mind what the partner wants in return from you.
Know your audience
Adjust the requirements of the investors with the content of your presentation. This will affect the discussion and the upcoming questions. Take care of these three points about your investor:
- Investor focus- Is she/he focussed on digital health? Does she/he invest in early or late stage?
- Investment history- How many deals has the investor already closed?
- Related investments- Did they already invest in similar startups or are you the first one for them?
Upcoming questions could be “What is your product differentiation from the investment we made?” Are there cannibalization problems with another portfolio company?
Create a pitch deck (10+1)
A pitch deck should include following bullets:
- The problem
- The solution
- Market size
- Your business model
- Your USP
- Your Go2Market Strategy
- Your vision
- The team
- funding need and spending
+1 elevator pitch
If you like to learn more about the 10+1 pitch deck, read my article on Medium!
I hope you found the article supportive for your next fundraising. Whenever you have a great idea or an already existing and well working company, feel free to reach out to me for investments and/or partnering opportunities.
Christian is the founder of Kompass Digital and in charge of the operative fund management and deal flow management in particular for deal closings and potential follow-up investments. Moreover, he links startups and their entrepreneurs to relevant strategic partners.
Christian, himself a Founder, Angel Investor and former Management Consultant was active in various Venture Capital arms of German blue chip corporations in Germany and the US. Christian holds a Management and Business Informatics degree and frequently shares insights at renowned Business Schools as well as on international startup events and industry congresses where he is often engaged in juries. He lived in Bonn, Indonesia, Hong Kong and San Francisco, US.