“Start-up Financing is not just about Finding Funding; it is a holistic process that involves proper business planning with thoughtful marketing approach, growth targets & deciding profit margins – based on the competition”.
Finding Funding Topics: Plan, What kind? the Effort, Choosing a VC, Prep 4 Pitch, Perfecting, the Story, Follow-up.
Success ??? Don’t you wish there was a formula that could guarantee funding success? There isn’t of course, but there are ways to make the process feel less like an impossible quest and more like an achievable goal. So how do you actually go about it? And what are the steps involved? The keys are: 1) getting investors to believe in your story, 2) buy into your vision, & 3) back your management team. Here’s a plan to make that happen below.
1. Create a Game Plan.
I say this over and over, but, (drumroll please) practice Milestone Funding. What do I mean by this? You’ll greatly increase your chances of success if you identify your milestones and calculate how much capital you need to raise before you start preparing your pitch and setting up investor meetings. Here are some examples of reasonable milestones. Ultimately though, milestones are highly dependent on the type of business and stage you’re in.
- Minimum number of Customers
- Customer engagement
- Financial metrics (ie, Revenues or Cash Flow
- Product Launch dates
2. What kind of Capital do you want (and how much it will cost you).
Consider your options and do a Cost-Benefit analysis for each. Of course you can’t understand the pros & cons of different capital types without an understanding of their differences. The main choice is between Debt, usually in the form of convertible notes, and equity, either from angel investors or VCs.
Equity: looking at a priced round (ie, selling shares in your company for a fixed price based on a set valuation.
Convertible Notes: you agree to take on Debt in the form of a Note that will convert into equity on the price set in the note’s terms. Converts have two perceived advantages:
- They can be quicker and less costly than raising equity because there are fewer terms to negotiate, a correspondingly shorter documentation process, and less legal work.
- Because the notes automatically convert into equity at a discount to the business’ valuation at the next equity funding round, in theory they allow founders & investors to defer the valuation discussion. But it’s not always that simple. Investors increasingly demand “capped” notes. Because these instruments place a ceiling on valuation, founders find them less attractive.
3. Take a long-term Business Development perspective.
Understand that it will almost always take long than you expect to develop your product & launch. Typically 2x. Create a Project Plan to set your goals & objectives. Be clear on your company’s Value Proposition, as well as that of any VCs you plan to talk to. Work your eco-system by asking your Service Providers for Investor Introductions.
4. Choosing the right VCs
Do your research well. You only have a small window of opportunity to get VCs’ time. Focus your efforts on the ones who will be most interested in your business and be a great asset to you. Most VCs focus their investments on companies at a specific stage of development, so spend your time trying to meet & pitch those who match yours. A prestigious VC name will give you validation in the market – as well as raise your company’s profile. Consider brand & reputation + evaluate what kind of support network they’ll provide. This can be a huge value-add in terms of scaling your business.
5. Networking & Accelerating.
You never know where your next introduction will come from. Join an Accelerator program if you can. Demo days provide good practice & exposure + can lead to some good introductions. Of course, getting into one is difficult, so consider looking at Co-Working Spaces. The best ones offer high quality programming & networking events with founders, funders & fools (no), advisers you might not get to meet otherwise.
6. Preparing your Pitch
Success. You’ve got meetings lined up. That’s great, but don’t get too excited yet. There’s a lot you still need to do:
- Understand your Goals. You’re unlikely to walk away from a first meeting with a check, so set a realistic goal of lining up a second meeting.
- Know your Audience, so you can determine how to Pitch to them.
- Prepare for Questions. Be clear on the assumptions around your Go-to Market strategy, the competitive environment, your advantages
- Practice, then practice again. Seriously, do several Practice Pitches before different audiences.
- Goal 1 > 2, Your goal in the first meeting is to get to the second one. Be confident and ask: “When can we schedule the next meeting?”
7-8. Perfect your Pitch Deck
Tailor your Executive Summary [1-2 pages], to the specific investors you’re meeting. Your deck should be 1 to 12 pages with any supporting documents (financials, management bios, etc) included in the appendix. Here’s what you need to cover:
- Problem & Solution — What problem does your business address? What’s your solution?
- Market Opportunity — Outline & quantify – Size, Growth, Niche,etc.
- Management Team — The quality of your team is often VCs’ #1 Investment criteria. Describe past successes & relevant domain expertise. Be pro-active about addressing skill gaps. No one expects you to have everything in place yet, but you do need to be able to articulate a plan for filling in the gaps.
- Technology — Walk them through the “How” of your offering and explain its Unique Value Proposition.
- Competitive Landscape — What are their advantages? What is yours?
- Financials are a major consideration. Figure out your key metrics and outline “achievable” milestones.
- Funding Requirements — Summarize your Pitch – including how you will use the $$$ and how it will enable you to hit your milestones + expected future requirements
9. Tell your Story
Be honest & open minded, conveying your Vision & your passion. This is about an exchange of ideas, so engage your audience to get feedback. Respond as best you can to make your product and Pitch better.
10. Follow Up !!!
Persistence pays off. Of course, the key is to do it without being annoying or appearing desperate – by checking in too often. Even if you get a ‘no’ at the end of the first meeting, find out why. If they’re hedging, because they want to see how you execute on your milestones or they want to know your management team, follow up by keeping them in the loop with your successes and you’ll eventually get the $$$.
Comments: Do you know any other Steps to help – in Finding Funding?
from WeWork Creator 21 July 14 enhanced by Peter/CXO Wiz4biz
For more Info, click on Finding Funding.