“Turn a perceived risk into an asset” — Aaron Patzer

As you know or will find out, raising capital is no quick feat and is constantly on your agenda as a startupper. I hope this post helps you when you raise your first round, your second, or other endeavors.

Preparation is everything when raising capital. You need to be ready. All your investor materials need to have went through many feedback loops amongst your team members and advisors before you speak with anyone. And if you’re not ready, don’t even begin any form of investor conversation because they might ask to see something as soon as tomorrow. I know you think you can pull an all nighter and have that doc ready the day after they request it, but it won’t be your best foot forward and trust me from experience, the investor will know that. They’ll know you weren’t ready. Don’t lose an opportunity by not being prepared.

There is no exact or calculated route to take when raising capital or most things in the startup universe. But there are best practices and experiences you can learn from. Again, this post is from my perspective so I welcome any and all feedback based your own personal experience. Also keep in mind a lot of the things you need to have before speaking to investors is based on what stage your product is in. I’ll talk about that as well. Below I go through 3 main things that I view as the first important steps to raising capital. After these 3 I highlight other things you’ll need if an investor likes your deck and more due diligence occurs.

1. INTROS are everything

Before you can even talk to an investor you need to strategize how the hell you’re going to get in front of them. I wouldn’t waste your time with cold emails. There needs to be a familiar face who intros you or some kind of synergy elsewhere.

I highly recommend creating your “ideal investor list”. Basically a target of whom you think can benefit your startup with capital, expertise, and value. EXPERTISE & VALUE being the most important. Once you know whom you want to talk to and when the time is right, dig through your network to find a way to get in front. Make sure the timing is right. Make sure you’ve got traction, a solid deck, and a kick-ass team. Do not go in asking for money right off the bat. Never do that. Ask for advice, feedback, or to play with your beta. Make some type of connection, get their interest. Let me know that you need them, not just their money. Because in the end you do. Yes, capital is great. But if you haven’t had a successful exit yet then you’re going to need some help! Don’t think you can do it all. They’ve been there before. Let them help you in other ways.

2. TRACTION — show them something!

Unless you’ve sold your last company and made serious cash, investors want to see traction. It’s a huge factor of whether or not an investor will jump. They want to know you’ve gone as faaaarrrrr as you possibly can with the limited resources you have.

If you haven’t shipped yet (i.e. launched) then you better have a working prototype to show them. Even better, one with active users and engagement. And what if you have shipped? Show them the numbers! Downloads and sign ups are often just vanity metrics. Are the users coming back? That’s what you need to find out. If it’s in your favor, highlight engagement and retention. Those are critical. And what if it’s not in your favor? I would start A/B testing ways to strengthen this sooner rather then later.

3. DECK — be concise & play to your strengths

You’ve probably read a million posts already about what goes into a deck. Guy Kawaski’s 10/20/30 rule is a great read. He more or less nails it on the head through focusing on keeping the deck simple and concise. Don’t forget you’re pitching to an investor, not a user, not a client. Make sure it’s updated with your most recent metrics, comp. analysis, etc., and titled accordingly so you don’t accidentally send an old version — oops! Yes that seems minor but it could become major if you send an investor an outdated, shitty deck. Do not let the small things fall through the crack, another example is saving your Deck as a PDF. Make sure you do this, who the hell wants to open a massive PowerPoint doc? They’re not compatible with most devices like PDFs are.

Typically you want to grab the investors’ attention right away so start with the market opportunity or the problem. Again, there’s no formula for every startup — PLAY TO YOUR STRENGTHS! I can’t stress that enough. If it’s your team or your IP, put that at the beginning. If you’re metrics are roaring with engagement, highlight that, make sure they see that!