Raising funds is one of the most challenging and all-encompassing tasks that a founder can do to take their startup to its next milestone and ensure it lives to its full potential. It is a scary step – one that is full of rejections and can leave founders emotionally drained. Failure to raise capital could very well spell the end of a startup. After all, lack of funds is often cited as one of the reasons why startups fail.
In a healthy economy (read: pre-COVID), it was already difficult for startups to get noticed by investors, much less get a call or face-to-face time with them. Throw COVID in the mix – with the uncertainty and selectivity it brings, the drastic reduction in physical startup fundraising meetings and events, the subsequent pivot to “online” meetings – and those trying to raise in this climate need to ‘up the ante’ to get noticed by investors.
Here are some steps you can take to approach those investors online.
Prepare your pre-requisites
Mindset: First the mindset. If you are raising funds, expect to get lots of rejections. Even tech giant Airbnb got rejected. Airbnb’s founder and CEO, Brian Chesky famously shared in a Medium post, 7 rejections that they got when they were raising in 2008. Remain undaunted with these rejections but instead take in the feedback/reasons – if given, a lot of times, investors can be vague – why an investor is passing-up investing in your startup and use them to improve on your pitch. Every pitch improves the next pitch.
Pitch decks and business plan: This brings us to next pre-requisites. Your investor pitch decks are the first line of sight to your startup. Typically, you will need a shorter version or teaser (2 to 3 pages), often referred to as an ‘Executive Summary’, as well as the full pitch deck (about 10 pages). For the full pitch deck, it is recommended that you do two versions – one for sending in an email and the other for actual presentation in front of investors. Prepare a solid business plan, including a deep dive into everything about your business, from history to vision/mission, a detailed and concise business model, marketing, operational and financial goals, talent acquisition, use of investment money and exit strategy – it should have it all.
Do the legwork: Research the investors that are investing in startups like yours, in your sector, location and fundraising stage. Too often, founders waste a lot of time by approaching every investor they find. While quantity matters, approaching quality (meaning relevant and receptive) investors will most likely yield good results. Investors can be classified according to the ‘ticket size’ – amount of money – they invest, which is often related to the fundraising stage. Pre-seed and seed investors invest in smaller lots compared to investors in Series A and later stages. Then there is your sector/space and location. There are investors who are geo-agnostic and sector-agnostic, but there are also many who zone-in on specific locations and sectors. Take the case of a European SaaS startup raising a seed round, there investors like Point Nine and Notion Capital who are focused on investing in startups like this.
Useful filters to consider when researching include investors:
- Excited about investing in your type of business model
- Partners you would really like on your Board
- Who can offer your startup the most value beyond the money
- Whose fund is at the right moment in their lifecycle to match your timeline
- Who can you get along with and enjoy building a business with
Network: Connect with the players in your startup sector. Do not just limit yourself to knowing your competition. Get to know the thought leaders, major players, experts and ‘stars’ and interact with them.
Time to make contact
Use your network: Selecting from your network, determine the best entry point and ask to get introduced to your target investor/s. The best introduction comes through someone who has brought deal flow to an investor. Nevertheless, any warm introduction from someone the investor already knows goes a long way. If you are in, be personal and specific in your communication. Do not use generic emails and waste their time. Be deliberate with your subject line and the first line of your message. Write a short, sweet and on-point message in the body of your email. Your goal is to get to the next stage – an introductory call or Zoom!
Interact through social media: Investors that are actively looking for the next investments are very engaged with the ecosystem around them. They are opinionated. They follow the latest issues and trends, not just in the sector/s of their interest but worldwide trends as well. Build your own relationship with the investor over time by interacting with them through social media – follow them on Twitter, read their blog and make thoughtful comments. You can start with seeking advice on specific issues concerning your startups or the sector you are in. If you get useful feedback, execute on it and circle back. Build relationships prior to seeking an investment.
Attend virtual events: From virtual conferences to webinars, there are plenty to go to. According to Venturebeat, virtual events came of age in 2020 and the future will be a hybrid of virtual and physical events. So, while there are still so many virtual events, choose the ones that are useful for your startup, either in terms of topic/knowledge shared or your target investors attending. There are those sponsored by huge tech companies like Oracle that combine innovators, tech leaders and investors. You can also tune into investor AMA’s (ask me anything), podcasts and recently, investors are into ‘drop-in audio discussions’ on Clubhouse.
Build an online presence: Delivering an ‘A-Game’ content and social media marketing strategy will get you positive and organic attention from investors. Maintain a blog and post regularly on Medium, or LinkedIn, about innovations in your sector. You can then use this content or your social media as an entry point to investors.
Check if their website is open for connections: These ‘contact’ and ‘connect’ forms are there for a reason. If you send over a compelling email and pitch deck, chances are you will get noticed. A lot of reputable VC firms even have a contact form to let you in on their community – a network of experts, entrepreneurs and thought leaders. Another useful resource is their newsletter. Subscribe to it. This is where you learn first-hand their investments, and the things they are excited about, as well as the causes and events they will be participating in.
Pitch via digital-first accelerators: In addition to the popular accelerator programmes that are always open for applications from serious investors, there are those that are run by investment firms themselves. One of the latest to launch is the digital, 8-week Unconventional Accelerator programme run by Unconventional Ventures for underrepresented founders in the Nordics. You can get help in refining your startup and in staging your funding rounds as well as introduction to investors. This is done via the ‘Demo Day’, a typical component of any accelerator programme, where startups pitch to a crowd of investors.
Give away your products: One of the best way to get noticed is to share your products. Get your products in the hands of customers, influencers and consequently within the radar of investors. Acquiring real customers, getting referrals from them, generating sales and creating a buzz makes the steps above a lot easier!