After the massive influx of venture capital investments that our startups saw in the first half of the year, serial entrepreneur Bhavna Suresh jumped a new high with her startup 10Club. The entrepreneur closed the largest seed round funding in South Asia recently for a whopping $40M, thus etching a new record in the history of unicorns for the country.
As an early stage entrepreneur looking to take the next step, if there is anything that you can learn from these marquee big ticket deals is that investors are betting big and betting bold in emerging startups. They are not afraid to take risks and test new waters. Investors are now open to newer ideas and are willing to give an opportunity to entrepreneurs that have the capability of being catalysts of change.
However, there is a drawback. In this initial stage of fundraising, most startups are so involved in achieving coveted business numbers that they often overlook or are not familiar with what investors are actually looking out for, thus losing out on valuable opportunities.
Hence to help entrepreneurs walk this difficult road, after speaking to over 600 founders last year, I identified best practices that can help entrepreneurs get that initial funding for their business.
These best practices are divided into three stages depending on the level that you are currently at:
Before the Pitch
1) Know whether you’re ready to raise or not
First and foremost, founders should determine if the startup has reached the right stage to raise funds or not. This depends on the present situation and nature of your business (whether you have MVP and early traction), business goals for the next 12-18 months, and the funds required to achieve them.
2) Determine your outreach strategy
Next, prepare a list of investors interested in the stage of your startup. Since barely 10% of them would show interest, it’s vital to have sufficient options. Cold emails have a queue of their own, so it is important to see if you have connections that can lead to warm introductions with investors.
In addition, plan to devote enough time and energy to the fundraising process – at least two to three weeks. For this, factor in the time it would take for meeting preparations, follow-on sessions with at least half of them, and additional buffer time to respond to investor queries.
3) Have the materials ready
Lastly, create an effective pitch deck within 10-11 slides, defining a concise problem statement, hard skills of the team, product features and vision, breakdown of the capital requirements, and your go-to market strategy. Bonus tip – keep a list of FAQs ready for follow-up questions.
Once objective information has been conveyed, you can better utilize your time during the meeting to go through more qualitative data.
During the Meeting
4) Focus on your soft skills
Early-stage startups are still lifting off the ground. While the product or market strategy may be clearly defined, it could change down the line. Therefore, at this point, investors give more importance to the founding team’s capabilities. Keep the numbers and business plan at hand, but reserve the meeting for communicating soft skills.
Discuss the chemistry between the team, strengths of each member, why you are the best choice to solve the problem, your vision, and most importantly, why you would bet your life on this.
Overall, spend this time sharing any value add with the investors that may not otherwise be apparent from the pitch deck.
After the Meeting
5) Be ready to close the round soon
After the meeting, the investor will work on the due diligence process. Here, startups can further aid in the decision making process.
You can do your part to ensure that the round closes quickly to prevent any lag that can lead to disinterest by the investors. Keep a data room ready with key documents for interested investors, be available for follow-up meetings, and inform investors when you would like to close the round.
Moreover, founders should gauge investor interest to decide when to stop exploring other investment options to prevent excessive dilution. At the same time, it is good practice to give investors time rather than chasing them excessively.
In a nutshell
Fundraising can be a time-consuming process because of the mismatch in expectations between founders and investors. However, founders have to be consistent and confident about their business plans. The process can be time consuming and may also be a test of patience – however, once the initial hurdles are resolved, the process becomes more meaningful and efficient, enabling founders to raise quickly and focus on taking their startup to the next level. Hence, when preparing your funding pitch, it is advisable to review your current credentials thoroughly and follow these tips to ensure your seed funding is seamless.
Consequently, who knows – if all goes right, your startup may just be the next one to make it to the unicorn club!
(By Pearl Agarwal, Founder and Managing Director, Eximius Ventures)
