During the writing of my book, The Art of Startup Fundraising, I tried to distill all of my learnings during my years connecting startups with capital. However, I thought it would be interesting to put together a quick roadmap with what it takes to go from nothing to a substantial amount of funding.
Nowadays $5M in funding could either be considered a Seed round or a Series A round of financing. Probably more closer to Seed if you take into account that top tier Venture Capital firms like Accel or Sequoia are investing $10M tickets and up on Series A‘s. Nonetheless $5M is still a significant amount of financing that should support the execution of your business for the next 18 to 24 months of runway.
After helping companies raise well over $100M, I have been able to understand certain patterns that repeat over time on these companies that secure financing. Such patterns are below in the form of a roadmap.
1) Understand the passion that drives you
It is very inspiring when you see an incredibly passionate entrepreneur pitching their business. That kind of passion that is contagious for anyone that is listening. This comes in the form of trying to resolve a problem that is extremely frustrating.
What really pushes people over the edge is to be able to make a difference. To have an impact. If you are able to convey your problem and to show your passion investors will jump and follow you all the way to the end. Understand that investors at an early stage are investing for the most part in you and then the business. For investors returns are important but if they know that they are also making a difference that is the complete and ultimate package.
For that reason, I would invite you to understand why are you doing your business. Is it because you are trying to get rich quickly or because you are extremely passionate about it? Steve Jobs for example had this ritual where he would wake up in the mornings, look at himself on the mirror, and ask if this was the last day in his life would he continue doing what he was doing. I suggest you do the same.
2) Become a storyteller
There is nothing like becoming a storyteller. Forget about being a visionary. The absolute most incredible entrepreneurs are those individuals that are able to tell their story, convey their vision, and discuss their future like no other. This is something that gets investors excited.
I would recommend that you stop right now reading this piece and go over to read my post Want To Master The Pitch? Elon Musk, Steve Jobs and The Power of Storytelling. Once you have read that post and watch the videos then come back to this post to continue reading. I promise it will be worth your time.
Now that you have watched Steve Jobs and Elon Musk pitching, you might have a clear understanding on how it looks like when you have mastery at story telling. From Steve Jobs I like his use of linguistic. Words like revolutionary, extraordinary, etc ultimately enhance the attractiveness of the message that you are delivering. From Elon Musk I really like his authenticity. Just being able to be yourself can take you a long way in life and especially in fundraising with investors.
3) Have an awesome pitch
In addition to being a great storyteller you will need a set of slides that will support whatever you are saying. Normally you don‘t want more than 15 slides as investors don‘t spend more than 3 minutes on average on pitch decks.
A rockstar pitch deck should have your story outlined in a simple way with a fantastic design. To give you an idea, professional investors review well over 1,000 pitch decks every year. For that reason you don‘t want to loose on the opportunity to come through in a powerful way where you increase your chances of having them remember you and perhaps funding your business. I would highly recommend that you use my free pitch deck template which you can access below.
Moreover, the three most important slides in your pitch deck are those related to financials, the team, and the market. The other slides are also important don‘t get me wrong. However, according to a study by DocSend that analyzed more than 200 pitch decks it discovered investor behavior and how their considerations would be influenced for the most part by these slides. See below a break down of how the time is spent reviewing pitch decks.
4) Connect on a personal level
Your secret weapon when you are either doing sales or fundraising is the background relatedness. This means being able to connect on a personal level before you even start discussing business matters. People like to do business with individuals they enjoy being with. For that specific reason you want to increase your chances of receiving an investment by having that relationship being built along the way.
Some of the tips I could give you on this front are related to doing some research on the investor before you meet or connect with them. Do they have kids? What school they attended? What is her hobby? You should know all of this by now. There are no excuses with how transparent the internet has made our lives. You can use tools like Linkedin or Twitter to find this out.
With that being said, have conversations about sports, weather or anything else before you jump into business. Once you have connected then I suggest that you start to dance with the conversation. Some key points to keep in mind here include:
- Make people feel important
- Seek out the common interests
- Don‘t work from a script
- Ask effective questions
- Be an exchanger and not a taker
5) Master the art of listening
In my opinion listening is an art. For that reason we have two ears and one mouth… By stepping up your game at listening you will have a level of awareness that will make you be more effective. Listening will give you access to understand the concern of investors in front of you.
Fundraising is really a process in which you are addressing concerns from investors over and over again. If you are able to address these concerns then I promise you that you will have the money in the bank. Concerns will be for the most part shared amongst investors that are looking at investing in your business.
I most definitely invite you to write down the concerns that you are receiving. Analyze them, discuss them with your team, and figure out what can be done to have investors being at a stage of comfort in which they either see or hear future plans to address such concern in a very powerful way.
Moreover, the famous Silicon Valley hockey stick in pitch decks that shows your month over month progress is important. I have to say that listening plays a key part on that as well. You want to listen to your customers and understand their behaviors. Especially listen to your angry customers as they will educate you the most on what you are doing wrong. Don‘t get defensive or think they are annoying. View them as your ticket to reinvent your business to provide a service or a product that people truly want to use.
6) Embrace rejection
I very much appreciate the following quote from Brian Tracy:
From my point of view, Tracy is right on the money. During the fundraising process you can estimate at least 100 conversations with investors to get one single investment. In that process the word NO will be heard many times. However, you need to embrace this and keep moving. Some investors may provide constructive criticism while others will only reject you with nonsense.
Take good notes from the constructive feedback as this will be a great opportunity for you to learn how to fill some of the holes in your business as well as the holes with your fundraising pitch story.
7) Assemble an A+ team
Investors will most definitely want to know why you have the right people seated on the right seats to execute on the 18 to 24 month roadmap. You want to provide details on your team‘s background and credentials to be able to assure that you have a chance to finding the way to promise land.
The team will include at an early stage a great founding team with the skills that your business requires. One cofounder would be a problem as the investor will think that your story was not good enough to convince people to join you. Two cofounders in my opinion is the ideal number and more than four cofounders can get complicated as there might be too many decision makes and egos to deal with.
If you need additional support with building your team as well as putting together a powerful group of individuals for your advisory board I would recommend that you go right now to CoFoundersLab, which is the largest network for entrepreneurs where they can find their cofounders and advisors. This way you can fill in all the gaps of your executive team as well as your advisory board. You can use CoFoundersLab for free but the unlimited messaging on the premium account makes the small fee a must.