7 Lessons Learned to Increase Your Fundraising Possibilities
Fundraising is a full-time job. It’s intense and draining, just ask any startup founder who did it and very few will say it was a pleasant experience. Although difficult, it’s just another challenge in the journey of building a successful company. Since 2012, Rockstart has helped 39 companies with Rockstart Accelerator (applications now open to our Web & Mobile program) with the challenge of raising money from investors. This week we sat down with Rockstart co-founders Rune Theill and Don Ritzen to talk about important lessons learned on fundraising:
1 – Know your type of investor: if you’re building a disruptive company you need more than money. You need smart money. Knowing the profile of the investor you are looking for is key to get it. Study the companies they invested in. If they have experience in the industry or area your startup is active in, they’ll be more excited about what you do and be a great mentor or coach for the years to come. Micha Hernandez from Wercker understood that early on. Back in 2012, Wercker pioneered continuous deployment and was able to get investors on board such as Notion Capital or Tola Capital with experience in SaaS solutions. Both investment firms were also part of the latest round of $2.4 million and are very involved in helping the company with its challenges and growth.
2 – Don’t cold email. Get introduced instead: cold emailing investors (almost) never works. If you’d like to get in touch with a specific investor, the best approach is to get an introduction. Either from a fellow or current investor, mentor, or from a company that received investment from a specific investor that is high on your wishlist. Get in touch with the people who can make you that introduction, show what you’re doing, be passionate, ask for feedback and if there’s a click, ask if they think your startup could be a good fit for their investor. If that’s the case, kindly ask for an introduction. If you get a good reference from that person, your reputation among the investor is already higher than many other companies. Finally, follow up after the introduction: say “thank-you” and tell what the outcome was: it’s the best way to build lasting relationships.
3 – Build relationships with potential investors early: approaching investors to ask for money right away is never a good call. They invest in lines not in dots. From our experience, startups should focus first on explaining what they are doing, asking for advice and perhaps an intro to a potential customer and share what they are planning to do next (including fundraising strategy). If there’s a fit between the startup and the investor, the conversation will naturally evolve into investment. If that’s not the case at that point, no problem. Eventually, at a later stage or round, you can contact those investors again or keep them informed in the meanwhile.
4 – Keep potential investors up-to-date: we highly encourage our teams to keep mentors, investors and potential investors informed on their latest developments. We recommend sending a newsletter on how the business is doing on a weekly or biweekly basis on a fixed time and date, e.g. every Sunday, 18.00. The goal is to keep everyone posted on the company’s progress without having to set up meetings or send separated emails. In the update you should include:
- What you did: achievements from the previous week(s) (e.g. launch of a new feature)
- What’s next: milestones for the following week(s) (e.g. close new affiliate partnership)
- Help requests: what your team need help with (e.g. finding an account manager)
- Metrics: key metrics of your business (e.g. number of users or transactions).
Bram and Brian from 3DHubs started doing these updates since the early days of the program and it paid off. For example, they closed their first round with Balderton Capital in August 2013. Last September, Balderton lead the $4.5 million Series A round and Mark Evans, General Partner at Balderton Capital, joined their board of directors. Why is it so important? Sending a newsletter on a regular basis shows all the right things: structure, discipline, keeping your promises and creating lines (see previous point). We’ve had several VCs complement us about our alumni and that they wished their companies would keep them up to date in the same way.
5 – Expect to hear “no” a lot before getting a “yes”: fundraising is an emotional rollercoaster. You jump from meeting to meeting, send tons of emails and, most of the time, the answer is “no”. Be prepared. It will probably take a lot of “no”s to get a “yes”. Our mentor Renato Valdés Olmos met more than 40 investors to get their first investor locked at Human.co.
6 – A “maybe” often means “no”: investors usually don’t want to say “no” to a startup: they might lose a great investment. Most of the time they ask founders to keep them posted as “they are interested and want to keep informed”. The reason investors do it is because they feel bad about rejecting you. They could be wrong, and you might create the next big thing. In case you suddenly get lots of traction and other investors want to jump on board, they want to be able to say that “they can still get in on the round as they were still talking to you”.
Our advice: Take “maybe” as a “no”, but put them on your mailing list (point 4). Keep looking for other investors who are willing to be first to invest and don’t waste more time on people who are not willing to pull the trigger.
7 – Talk to other founders: Investors are often connected and share the best practices among each other. As a founder, you should do the same. Look for fellow founders (eg. from companies in the investor’s portfolio) and learn from their experience going through the fundraising process.
We created a 50 day follow-up program after the first 100 days that focuses exclusively on raising investment. VC’s come in and share how they assess startups, there are fire side chats with renowned angels about what’s the best way to approach them and get them to sign a term sheet and much more.
Interested? Apply before December 10 to our next batch
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