The venture capital industry was well worth over $200 billion in 2018 – quite an impressive figure if you looked at on it’s own.
The devil is in considering the number of deals that have resulted in this figure compared to previous years – they’ve actually reduced considerably, particularly in the seed stages.
And that means it’s just a few startups getting all of the money.
What this implies is that founders have to level up their game if at all they want to raise funds. So how do successful founders engage capital?
Short answer: preparation.
They know how to carry themselves in the stages leading to meetings with investors. Below is an eight-point checklist of doing this.
1. They Take Care of Themselves
Raising funds can be a rigorous process. To perform at their peak, successful founders know just how important their state matters – physically and mentally.
Successful founders have strong routines and take care of their health – the age of the exhausted, ramen-powered greasy-haired founder walking out of a16z with a Series A are long over.
2. Targets – They Choose Them Wisely
Investors aren’t looking to put their money anywhere they find. They have preferences – the amount of risk they can tolerate, the industry, stage of funding, etc.
Astute founders screen potential VCs under these points. That way, they make sure that they’re trying to win over someone with an interest in taking on what they have to offer.
The “Shotgun approach” is a very inefficient fundraising strategy – pick your battles.
3. They Are Always Sprucing Up their Pitches
Successful founders don’t keep the same pitch for prolonged periods. They’re always tweaking it as per what they’ve learned in the preceding investor meeting – like adding detailed answers to frequently asked (and challenging) questions.
They also make sure to include any worthwhile developments and iron out the overly-technical stuff.
4. They Talk to Professionals
As green thumbs in fundraising, trial-and-error is what most founders go for. But that dooms their situation from the word go.
For successful fundraising, exceptional founders seek the guidance of professionals – attorneys, mentors and advisors (especially past founders). And it’s not just expertise that these professionals bring – they have access to a wider network of prospective investors.
The best deals are usually sourced from personal networks.
5. They Leverage the Connections of Investors They’ve Already Interacted With
Existing VCs aren’t only potential investors but also a rich source of connections – of other VCs. And that means more opportunities for raising funds.
Successful founders build relationships with VCs – especially the ones they don’t end up making deals with, and leverage those relationships.
6. Communication Is Their Forte
Communication is everything in any scenario, more so when a founder is trying to fundraise. Good founders get back to investors as timely as possible, availing any new developments and answering questions.
7. They Have Their Teams in Order
Investors love to see a team behind a founder, a skilled one at that. And successful founders have just that.
It’s not just employees: a board or industry advisors are also part of the mix. Successful founders have their human resources in check.
8. Their Books Are Presentable
Successful founders have well-organized books for their entities as per the industry norms. Be it actual or projected values and every other month financials, everything is laid out in an easy-to-read arrangement for the investor.
Final Thoughts
Preparation is crucial in fundraising. Successful founders have mastered it.
A solid focus on the fundamentals, a persistent approach to fundraising and a small dose of luck are the key components to a successful raise and a profitable venture.
Good luck!
