During the Founder Institute's Founder Lab program, FI Graduates learned tips and tactics for securing a lead investor. In this blog post, we outline some of the most important lessons they learned on how to successfully attract investment from the investors who are most likely to invest in them.
TIP 1: Investors try not to put too many restrictions on what sectors they invest in, but they do try to make sure that have the most experience and knowledge of that sector so that they can add value.
TACTIC: Reach out to investors that have had success in your sector.
TIP 2: In general, investors focus on at least 3 to 4 sectors.
TACTIC: You need to always have a story before you go to raise a fund.
TIP 3: Investors won’t invest in international businesses where they don’t have a network or understanding of the market.
TIP 4: American Investors want to see some traction from your home country before they help you in the U.S. market.
TACTIC: American investors are prompted to see an advisory board if they want to invest in businesses from uncharted lands. This also helps founders make the connections they need. At a high-level, it’s all about connections.
TIP 5: Most Silicon Valley investors have the most knowledge in North American, Indian and Chinese markets.
TACTIC: Don’t go too low on the totem pole. Make the right introduction at the right level. This speeds up the sales process.
TIP 6: Are you revenue positive? Investors expect to see signs of your business model working through revenue.
TIP 7: For ventures, raising one round is not the end-all be-all. Raising a Series A is just a bridge to raising a Series B. Investors try to understand the metrics of raising a Series A, then try to understand what you will need to raise a successful Series B.
TIP 8: If you’ve participated in accelerator programs or have held relations with well-known Angels, VCs are more likely to take an interest in your business. There is a system, that is definitely name based. You move up through well-known accelerators, to angels/seed funds, to micro-VCs, to bigger institutions.
TIP 9: Micro VCs invest around 100K to 700K.
TACTIC: Define a game plan. Before initiating a relationship with a VC, you must understand what stage you’re on from a business perspective. Understand what the VC is looking for and what milestone you’ve recently crossed. Also, make sure to always follow-up.
TIP 10: A relationship with an investor can only be built if an investor is really interested in you, or it will be a waste of your time. The relationship also is based on the confidence he has in your business.
TACTIC: Give investors updates when there are large breakthroughs in the progress of your business. Try to follow-up with VCs when you have big news or much time has passed.
TIP 11: Building a relationship with an investor is a long-term process. It may take up to a year for an investor to make a deal after that initial meeting. The investor is investing not only in the business, but in the person.
TACTIC: Distance isn’t an issue for investors. VCs invest in companies when they have never even met the founder in person. Don’t be hesitant to build long-distance relationships with investors.
TIP 12: Silicon Valley is a global place. Everyone here wants to launch a business in a global way. No one wants to start a Silicon Valley company. It’s about facing the global market.
TACTIC: Look for investors who have experience with companies from your home country. You want VCs to have a large pool of resources from that region of the world.
TIP 13: Some early-stage firms deal with 100 companies a year. That leaves very little bandwidth for involvement. There are two groups in the VC world. One group of VCs have little involvement with the company, and believe that the capital is the only added valuable they can provide. The second group believes their added value can be very influencing on the development of the company.
TIP 14: The founder is not always a good CEO, and investors look at the life span of a company in terms of if it’s ran by an early-stage or growth-stage CEO.
TIP 15: Early-stage CEOs are good at defining the right product-market fit, but once the company reaches 2 million revenue, they lack the mindset of a growth-stage CEO. This is the more experienced guy, who has been involved with large corporations and understands how to further increase revenue to 100 million.
TACTIC: Growth-Stage CEO Formula - Great sales experience, knows how to scale the team, great at using marketing and PR to attract organic traffic and build the brand image, exceptional at fundraising.
Advice from Silicon Valley investors: The startup world is very competitive. Try to do the things that give you a very unfair advantage. This is what prompts investors to take interest in your company. Every idea is not defensible in itself, but why is your background so convincing that you would be the only one to execute? That edge is a much more impressive story.