Tools of the Trade, Hack Funding 101
Chapter 1: Pre-game
The expectations of life depend upon diligence; the mechanic that would perfect his work must first sharpen his tools. — Confucius
In the first Hack Funding chapter, you were introduced to Hack Funding and how it can help you raise your next funding round. In this second one, we are going through the tools you will need to use. So, the purpose of this particular post is to demonstrate the tools, each and every step of the process will be discussed thoroughly in the upcoming posts.
Why do I need to use these tools?
Using the right tools will help save you a ton of time and provide you with more accurate results.
There are a couple of dozens databases of investors, all of them claiming to have the right information for you. However, most of the tools available tend to widen their scope by offering information for several industries and players. Thus, most of them provide data for founders and investors alike, both for venture capital and private equity investors. The multitude of the tools available brings forward the question; what are the right ones for me as a founder in fundraising mode?
How am I going to use those tools?
The goal of each fundraising process is to navigate through a number of choices available and conclude with a list that best fits your case. The proper tools will enable you to search your market top-down and bottom-up:
Top-down:
a) Define your market.
b) Determine the position of your startup in your market.
c) Discover all the competing startups in your market.
d) Find their investors.
e) Determine the exposure these investors have in the market of interest.
f) Specify the stage they are more likely to invest in.
Bottom-up:
a) Find active investors with exposure in your industry.
b) Identify which of their investments are related to your company.
c) Determine the exposure these investors have in the market of interest.
d) Specify the stage they are more likely to invest in.
I would say that the top-down method provides a more holistic approach, which helps you understand your market and creates a funnel to sort out your available choices. It also places your startup in the center of the research, instead of your potential investor. On the other hand, bottom-up is a more common path for entrepreneurs that do not wish to go through the multitude of choices that are available, for their own reasons. In Hack Funding, we are going to stick with the top-down method.
What are those tools?
The tools you can utilize fall in two categories:
a) Crowd-sourced Databases; like Anglellist and Crunchbase.
b) Data platforms, with advanced searching options, sorting tools, interactive graphs, etc; like Mattermark and Cbinsights.
Every research starts with your market.
My weapon of choice for market research is Cbinsights. It provides and visualizes the data for your market in a unique and comprehensive way. Take a look for yourself:
In the first panel, you can see your industry as a whole and then dive deeper in a specific vertical.
To find competing startups in a specific vertical, I highly recommend using Mattermark. This service provides advanced and intuitive search options that will assist you to create lists of competing startups and investors dealing in your sector. It’s simple as that:
Then, you may return back Cbinsights to determine synergies between investors from this page.
Then, to find each fund’s exposure in a particular industry, Mattermark provides visualized data like the following:
and so on…
Last but not least, you may visit Anglellist to locate angel investors and Crunchbase for data missing from Mattermark, something that is rare in my experience.
Cost
Crowdsourced databases are by definition free of charge. On the other hand, curated data platforms come with a hefty price, often in hundreds or thousands dollars per month. However, almost every single one of them offers a free trial period ranging from 7 to 30 days, which can be adequate for our purposes here.
Alternative tools
There is a dozen of databases and tools providing similar services. My personal criterion for picking the before mention ones is the abundance of available information and their intuitive UI.
In conclusion, this particular post’s purpose is to demonstrate the tools we are going to use in Hack Funding. Each and every step of the process will be discussed thoroughly in the upcoming posts. It is highly recommended that you take the time to sign up for those services if you haven’t already and play around to get more comfortable with their usage before you start putting them into good use.
Next time we are concluding the Pre-game process. In the following post, we will describe a way to define the exact vertical(s) a startup caters to, the business model it follows, as well as methods to improve the competitive landscape analysis.
Till next time,
Happy hunting!
