Over the last two years we saw companies raising large amounts of capital and closing their rounds at a lightning pace. Now that the market has slowed down, a common question I get asked by founders is — how can they increase their chances of getting investments from VCs/investors during current economic conditions? Given investors are spending more time on due diligence to deploy their limited funds, it’s all about getting back to the basics for the founders to get their attention.
1. Make it easy for investors
a. Update your website. Include all updated information on the product, team, traction, awards etc
b. Set up a virtual dataroom. A dataroom is where a company raising for capital (or acquisition) stores all the necessary documents to share with investors for due diligence. Having this well set up in an organised series of folders with clear documentation before a capital raise will speed up the due diligence process and help convince investors you are ready for investment. What goes in the dataroom requires another post :-) . In our experience a good data room can fast track the investment process by at least a month.
- There are many great places to create your data room. We recommend Ansarada because it’s easy to use, share and is secure.
- Use an easy to navigate folder structure. Many templates are available online, or better yet ask your potential investors or a company that recently raised capital to share their data room check list.
- Use images, graphs, numbers, words to tell a story — target all types of analysts who will be diving through your folders.
b. Be clear on how much you’re raising and what you are going to use the funds for
c. Trial your pitch deck on a “friendly” investor first
2. Understand your investors
a. Talk to other founders. Talk to other founders in the ecosystem who have recently raised capital to understand what makes a specific VC tick. Most VC firms’ websites say similar things. However, it is the “nuances’ that makes them different in terms of how they invest and why? Understanding this “why” will help you secure a second meeting.
b. Customise your pitch for the investor addressing their specific requirements.
c. Befriend the Investment Analyst. It’s always good to know who the decision maker is, but it’s just as important to know who influences the decision maker. An Investment Analyst’s role is to gather as much information possible to convince the decision maker that it’s a great investment opportunity. Behind every good question from the decision maker is an…. Investment Analyst.
3. Use existing investors to help
a. Leverage your existing shareholders (if you have some)
- Make sure they know about you through regular shareholder comms.
- They know the market — ask for warm introductions to other investors.
- Secure some verbal agreements to invest — new investors like to see existing investors following on.
b. Your lead investor is your biggest asset — many founders underestimate the power of securing a lead investor. Having a good lead investor can help you close your round in a 4–6 weeks after they have committed. As soon as a lead investor commits, there is a light at the end of the tunnel and a solid capital raise deadline. Generally, a lead investor will:
- Become the company’s champion. They will reach out to other VCs and investors to help close the round. They are constantly sharing deal flow with each other and are usually able to secure a fast decision.
- Share part or all of their due diligence with other investors to fast track the process.
- Guide the founder on which investors are likely to be outside mandate and who is likely to invest — helping you to focus your energy.