5 Tips On How to Fundraise Venture Capital During Hard Times
Prosperous times in the economy mean more funding, but the times we live in right now are far from it. The funding is few and far in between, plus the percentage going to female founders keeps shrinking. Yet, it’s not impossible and we have so much more work to get done to achieve equality in funding, so we can’t give up.
To overcome the challenge of fundraising in the current climate, founders have to showcase the value of their offering as well as prove the ability to scale while not going overboard with spending. It’s time for the frugal founders to step in and take over. Investors want to know that you have a product that is scalable, solves a problem for the consumer as well as is something innovative. It’s very important to make sure that your business model can be stress tested against all the pressures that will come your way as a founder and that you’ll be able to weather the storm.
Before fundraising always ask yourself this question: is VC really for you? Would a loan or a grant be better? Is there a way you can make sales without giving away equity?
1. Realize That It's a Buyer's Market:
The market right now (in general) is a buyer’s market. What does that mean to you? It means that everyone is fundraising and investors have lots of option to look at. They’re going to be highly selective in choosing startups to fund. Make sure everything is buttoned up and that you are able to show to them how you’re going to kill the game. Your pitch, deck, business model, traction and everything else in between has to stand our and prove to them that you are THE one.
2. Focus on Fundraising Readiness:
Prepare, prepare, prepare. Fundraising is a full time job, so on top of running your business and fundraising you have to take steps to ensure that no matter what happens your startup is financially prepared for it all. What is your current business plan? Do you have a sturdy financial model? Are your goals and benchmarks built around a practical timeline? Make sure that your “Use of Funds“ page in your pitch deck provides potential investors with a very clear plan on how you will use the funds to scale the business.
Common mistake: People pitch a vague vision and present a deck that has nothing to do with the goals, benchmarks, financial models or even the funds. Make sure that everything sends the same message throughout your pitch.
Example: If you are pitching to get funding to grow your brick and mortar locations, don’t show the investors your vision of how you are going to scale your B2B business. It will leave them confused and show them that you don’t have a clear plan.
3. Network, Network, Network:
This is super cheesy, but networking is everything. People invest in people. Don’t just network with investors when you are ready to fundraise because often they say that people only remember them when they are ready to get some money. Build real relationships with them because at the end of the day we’re all human. Ask your friends and professional connections if you see someone is friends with your dream investor.
Go to events that are VC specific or industry specific to whatever your business is. If you’re not one of the major cities where fundraising is easier, attend online events and email every single person you can find.
Our Pro Tip: Reach out to investors to get feedback before you are even ready to fundraise. Ask them to tear your business into pieces and tell you exactly why they wouldn’t invest. This will not only build your confidence, but also prepare you for the big leagues and expose investor questions you wouldn’t even think about without pitching this way. On top of that, it’s a great way to meet people.
3. Have A Killer Pitch Deck
A pitch deck is something crucial if you’re going to be fundraising and make sure you take 100 hours to even come up with a draft. Ensure that every single page tells a story of why you are the one to get this funding. Each page should sell the investor on your vision, but also be connected to the big picture. If you have a big and somewhat random idea for your business you might want to test, think twice before putting it in. Is it going to confuse the investors or make them think you are a genius?
Does it have to be pretty? Honestly, it depends on the investor. Some of them will yell at you if one font size is off, others will yell at you that you spent too much time designing it and not enough time putting the content together.
Our Pro Tip: Put your bio first. It’s so weird when founders don’t introduce themselves first. Especially if you are an industry veteran and have an impressive bio.
4. Leverage Your Existing Relationships
Always stalk all of your friends and see who is connected with who. You never know who’s dad plays golf with which investor and who can give you a warm recommendation. Ask your team, ask your friends, former colleagues, university friends and professors. There are people out there who are rooting for you and you’d be surprised who is going to send that email out and vouch for you and your work.
5. Be Flexible
You are going to hear no 1,000 times and that’s ok. You just have to keep going, keep pitching and keep on shopping around. Be open to feedback, but never take 100% of it. If someone tells you that the whole thing should be thrown in the garbage, there will be another person who thinks that it’s the most genius idea. Take it all with a grain of salt and always remember that investors are (usually) humans who can’t really be founders. Some of them are the most amazing humans and some of them are on a weird power trip. Don't take things personally.
Happy pitching!
