A startup founder’s first fundraising round can be both terrifying and exhilarating. It’s the moment where you share your passion with others, and take them on the journey to your vision. But it is also the moment when you have to put yourself out there, share your beloved idea, build a strong case on statistics and numbers, and reach out to strangers with a request for their money as investment.
Oddup connects with thousands of startups and founders annually and the conversations brought to light a very critical fact. A relatively small percentage of founders who approach venture capitalists and angel investors succeed in getting the funding they want. The reason for this is what they do, or more importantly, don’t do, before approaching investors. Whether you’re approaching a large investment firm or a smaller angel investor, there are certain things you can do to make the process easier and more effective.
Here is a list of the top ten things you should definitely do when planning your first round of fundraising, as listed after insights from numerous startups.
Give yourself time
Fundraising isn’t something you can do overnight or even in a week. Keep in mind that it can take up to six months (more if you run into problems) from the moment you start planning to get your first investment. Use your time well instead of looking at it as the enemy.
Keep some funds aside to invest
You will need to invest money yourself to get your first investment. Expenses such as paying for travel and hotel stays when meeting investors, participating in events to gain exposure and experience, and basic development costs are inevitable. Save up beforehand to avoid hitting a dead end due to lack of funds when you begin your fundraising journey.
Build the right team
The team that you begin your startup journey with can make or break your success. Take time to choose the right people so that they can add the value you need as you work towards establishing your business. These team members will be instrumental in developing the pitch you use and can also contribute to the network you build, both of which are integral to successful fundraising.
Identify the right investor
Not every investor or firm invests in every type of business or sector. Spend a lot of time looking into the profiles of investors to identify the ones whose focus is met by your startup. This may reduce the number of investors you approach, but will definitely help you create a more targeted list of investors who are more likely to be interested in your business idea, and may contribute to its success with advice along the way.
Personalise your message
Don’t send an investor an impersonal, generic message; and don’t underestimate their ability to identify these types of messages. Take time to cater your message to each investor specifically. Identify reasons they may be interested in your startup and make sure to mention them. This will greatly improve your chances of getting a response.
Explore different channels of communication
Not every investor needs to be approached via an email or phone call. Reach out to them on Twitter if you find a mutually shared interest about which you can talk. Or drop them a message on LinkedIn. If you personalise your message, you can make different channels of communication work for you.
Build a prototype
This is where you will spend most of your development expenses fund. No investor is going to be thrilled with just an idea or concept. They want to see it in action. Spend time, effort, and money to build at least a basic version of your idea, whether it’s tech related or not. This is one of the biggest pitching tools — ensure that it’s attractive and engaging enough to warrant investor interest.
Get some feedback
Investors want to see what kind of response your prototype has received. Running your prototype by a group of people prior to a pitch or even opening it to the market for live testing will help you in two ways — you will have statistic-backed information to share with investors, and you will be able to identify and resolve any problems so as to include the best iteration in your pitch.
Explore your network
A professional network is one of the biggest assets you can have. Use the time you spend developing a prototype to also build a substantial network. Don’t add people just for the sake of it; engage with your network and take a real interest in what they’re doing and saying. Build relevant connections and where possible, ask for referrals to investors when you’re ready to make a pitch.
Increased brand awareness and brand value can be a valuable asset when approaching investors. You can use social media, guest blogging, and other online tools to improve your presence amongst existing and potential customers. By increasing your exposure, you gain more investor attention, which makes pitching for your first investment easier.