I believe the most important part of the lifecycle of a startup is the moment you receive funding. As the co-founder of a venture capital firm, I have experienced being on all sides of the investment equation throughout my entire entrepreneurial career. From investing and obtaining funding to now supporting our portfolio companies on their journey with securing funds, I’ve learned a thing or two.
There are many moving pieces when it comes to finding, communicating and executing a pitch for investors, but I will cover the four crucial yet simple steps needed to help your startup achieve investment success:
I wish I had a silver bullet, but there isn’t one in the startup world, as I always say. Funding is about figuring out what works best for you by taking imperfect action. Nearly 65% of founders use their own savings or family savings to fund their businesses when just starting out, according to a 2019 report by the Ewing Marion Kauffman Foundation. But to eventually grow and scale, many companies require outside investment. You can start by reaching out to those closest to you to see if they're interested in investing in your business, such as family and friends. This might also include other founders in your network.
You could also choose to work with a venture capital firm. You’ll want to develop an ongoing prospect list of VCs for easy reference. Some places to search are VC webinars, podcasts and networking events. Leaving no stone unturned, you could also scour Google using the correct keyword search terms. Also, understanding VCs based on their thesis will save you time. The thesis is knowing what stage they invest in, such as pre-C-round, seed round, etc. or their particular verticals such as financial technology, healthcare and so on.
Do investors dislike cold emails? No, I believe that is a myth. Just make sure you do some preliminary research to formulate a brief but succinct email. I suggest using an email merge service that works inside your email because it doesn’t look like a newsletter.
VCs are very busy, so drafting an email that is brief and to the point — but gets their attention — is an art you must perfect.
You can do this by starting the email with how you heard about them. Then, weave in personalized details followed by a brief description of your startup and the problem you solve. Finally, remember to include your deck and calendar link.
Rocking The Pitch
When pitching to investors, I recommend discussing the “pitch trifecta,” meaning yourself, your team and your product. Sometimes, new founders make the mistake of only talking about one or two of these elements. But you, your team and your product all comprise your startup’s story, which is a huge part of your pitch, so don’t overlook it.
What was the lightbulb moment for your idea? How did you arrive here since then? You’re building a legacy, so you want to tie your story to your previous successes and failures.
Always come back to, “Why are you the best team to bring this idea to the market?” If you’re only raising money on your idea, it’s going to be incredibly difficult. Therefore, traction is an important piece to weave into your pitch.
VCs want to hear what you’ve accomplished, especially if your startup solves a unique problem, has taken off or has grown in a short amount of time. If you have accomplishments you’re proud of, don’t hesitate to share that at the beginning as an attention grabber.
Following Up And Closing
Don’t be afraid to follow up. In my experience, VCs would much prefer a persistent founder vs. a passive one. You just want to be prepared for further questions before expecting a commitment from them. You can prepare by calling other founders the VC has already invested in to get an idea of the types of questions they ask.
Furthermore, whether by phone or in person, make sure to confirm a commitment with a VC. For example, they might tell you they will invest a specific amount of money once you reach a certain milestone, such as a number of leads or a particular profit margin. Always be sure to secure what I call an “email handshake” in writing. Send them an email immediately repeating what they stated so that you can confirm the commitment and let them know you will be reaching their preferred milestone soon. Then, you can work toward that goal.
Since we know time is the most valuable asset next to money, I challenge you to implement these four key principles when finding and contacting investors, as well as perfecting the art of the pitch.
Originally published in Forbes