Startup fundraising is a full-time job, everyone says. And yet, first-time founders don’t receive formal training on how to juggle multiple business operations and impress investors at the same time.
So, how do you learn? You can build a system based on best-tested practices and methodologies; however, there will always be unexpected aspects and nuances of raising funds that only people who have done it can reveal to you.
At Founder Institute, we keep founders and investors close, help them connect, and create long lasting connections. That gives us the golden opportunity to ask all the questions around startup funding - how, who, where, why? Moreover, at our weekly global webinars, the stage is also open for you to ask your questions to experts in real-time.
In this post, we’ve compiled a selection of invaluable insights that have popped up like jewels during our live events with leading startup investors. Hopefully, these tips will help and provoke you to nail your fundraising challenge.
1. Build your financial model even if your company is pre-revenue
You might consider that it is too early to spend time and effort on your financial model because you are still not generating revenue. In this webinar, Logan Burchett - co-founder of Forecastr explains the advantages of building your financial model as soon as possible and how it would look in its most initial stages:
Key highlights:
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In its core form, financial modeling is a series of really educated guesses.
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If you are pre-revenue and don’t have any data, it is still very important to go through the financial modeling exercise.
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Working on your financial model forces you to put yourself in the shoes of investors and answer the questions they would ask.
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Knowing your estimations and the goals you want to achieve gives you a guiding compass and can serve as a roadmap to follow.
Watch the whole webinar here:
2. Brush up your investor terms knowledge
Besides giving cap table basic definitions and use cases, in this webinar, Jason Atkins - co-founder and Chief Revenue Officer at Cake Equity, translates some of the most confusing investor language.
Key highlights:
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You need to be precise about the difference between pre-money and post-money valuation.
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Not communicating clearly with investors can have a big impact on the dilution you can get.
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Taking time to learn cap table terminology will prevent you from making mistakes.
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Your cap table is a critically important part of your startup journey, and you are going to use it frequently.
Watch the whole webinar here:
3. Do thorough research and tailor your approach when you are reaching out to investors
We invited the Managing Partner at Raha Beach Venture, Ryan Adams, to participate in our fast-paced Q&A sessions Ask an Investor Anything. He amazed us with his accurate overview of the current market and then shed light on what’s exactly happening in investors’ minds.
Key highlights:
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People typically have a hard time imagining how your creation will fit their needs.
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Don’t just tell investors your side of a story; tell them their side of your story.
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Explain to investors how it would benefit them to get involved with your startup.
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Read about an investor before contacting them and understand what their goals and priorities are.
Watch the whole webinar here:
4. Your startup’s unique differentiator is the minimum requirement to play in the fundraising space
Recently, the founder of Equivesto, Alex Morsink joined us for a captivating session on fundraising fundamentals. Before presenting four popular valuation methods, he walked us through the differences between a startup and a small business. Last but not least, Alex stressed the significance of UVPs.
Key highlights:
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The first thing that investors will ask you is what sets you apart from your competitors.
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To even get to the point of getting valuations, you need to have a highly differentiable product that has some sort of moat.
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If you don’t have a moat, you are more likely an SME with a different capital-raising structure than a startup.
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If you can prove that your competitors are not as well positioned as you, your valuation will go higher.
Watch the whole webinar here:
5. Engage with targeted investors on social media
Nathan Beckord, CEO of Foundersuite, made a memorable appearance at our event dedicated to investor outreach. He demonstrated simple tools for contacting investors and provided ready-to-go templates. During the Q&A session, Nathan expressed his positive attitude towards utilizing social media platforms.
Key highlights:
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When building your list, it is useful to follow investors on Twitter and LinkedIn.
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Investors receive hundreds of messages daily, and they don’t have time to read them all, but they would probably notice if you regularly show interest in their content.
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You will leave a positive first impression if you insert yourself in a conversation on investors’ social media profiles.
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Fundraising can be similar to marketing - the more often an investor hears you and sees you, the better outcome you can have from an intro with them later.
Watch the whole webinar here:
6. If you are not able to pitch your company well, then you’re not going to get good investments
In March, we had a stimulating discussion with three fascinating women - Biola Alabi, Dr. Hanan El Basha, and Mercedes Bankston. All three of them are seasoned investors who also work with FI startups as mentors in their free time. In this interactive webinar, they answered a diverse mix of audience questions.
Key highlights:
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If you can’t capture your audience’s interest and intrigue them within the first 30-40 seconds, that’s a major fault.
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One of the biggest mistakes founders make in the very beginning is poor pitching.
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Pitching is the founders' homework. Your elevator pitch matters to make you interesting and give an investor a reason to learn more.
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It takes time to prepare an interesting pitch that shows there is a trustworthy and viable business idea behind it.
Watch the whole webinar here:
7. The easiest way to contact angel investors is through angel groups
At this Q&A event, we heard powerful insights from two well-known members of our FI Venture Network - Alex Morsink, founder of Equivesto, and Sush Bapna, General Partner at Digital Space Ventures. Alex and Sush shared an abundance of knowledge on angel investments, startup valuation, fundraising for solo founders, friends and family rounds, and many other topics.
Key highlights:
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As a startup founder, the lowest-hanging fruit is to reach out to angel investors.
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It’s recommended to update your details on raising platforms like Gust.
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Ideally, you will reach out to angel groups through several different sources.
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Contacting someone on the executive committee and having a coffee with them would be more effective than reaching out on LinkedIn.
Watch the whole webinar here:
8. Answer investor questions confidently but also inquire if these investors are the right fit for you
Rich Maloy, Managing Partner at SpringTime Ventures, enlightened us on the state of fundraising and gave precious tips on how to prepare, what technology to use to make your life easier, where to find investors, and finally, how to interact with them.
Key highlights:
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Not enough founders ask questions.
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When a founder starts a meeting by asking questions, it shows a depth of experience and also, that they are strong fundraisers.
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Inquire about information about an investment fund, like how active it is and how many more investments there are left in it.
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Before you leave, ask one last question: ‘What did you hear today that gives you a pause?’
Watch the whole webinar here:
9. Convince startup investors that you have a durable revenue model
Once again, we gathered together three distinguished investors from the FI Venture Network to provide their input on startup fundraising. Ankur Shrivastava, Managing Partner at Momentum Capital, Diane Yoo, Founder of Fenix, Lance Cottrell, Chief Executive Officer at FeelTheBoot, and Mike Sherbakov, General Partner at The Veteran Fund, offered their unique perspectives on what matters the most in investors’ due diligence process.
Key highlights:
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VCs are currently being much more disciplined compared to previous years.
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Investors now look at 18-24 months ahead.
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A clear path to profitability is preferred to growth to all costs.
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You need to generate revenue within the 5X to 10X multiple.
Watch the whole webinar here:
Check out our upcoming global events
All our investor experts confirm that fundraising skills can be learned. Therefore, we’re determined to always bring you high-quality and timely funding related content.
If you like this compilation and want to keep on track with more startup trends and strategies, check our events page and sign up for Founder Institute’s Insights Newsletter. Remember that in addition to being highly educational, all our global events include a networking portion where you can meet like-minded startup founders, mentors, investors, and other industry leaders from all over the world.
The Founder Institute is the world’s most proven network to turn ideas into fundable startups, and startups into global businesses. Since 2009, our highly-structured accelerator programs have helped entrepreneurs raised over $1.85BN in funding across over 200 cities worldwide.
Learn more about the Founder Institute at FI.co, or join an upcoming startup event at FI.co/events.
