STARTUP FUNDRAISING AND PAIN POINTS
Based on FintechMeetup Las Vegas Panel: How to Raise Capital in a Challenging Environment
Dan Rogers, CEO
I had the honor of moderating a panel in Las Vegas last week on this topic with world-class investors. It was great to spend time with the pros who shared many of the insights that I’ve incorporated into this post.
Fundraising is hard in normal times. Founders need exceptional plans, teams, and progress at every stage to compete with thousands of companies. In today’s challenging environment, it’s even harder. Valuations are down, investors are protecting their existing assets, and the exuberance of 2021 and 2022 has subsided. Founders need to be deliberate in their preparations – because exceptional fundraising execution is just as important as your idea, your brilliant code, and your capable finance team. Here’s the secret sauce.
LEVERAGE YOUR EXISTING BOARD AND NETWORK. I can’t say this enough. It’s their job and role to make connections and help you fundraise. It’s good for them to protect their investment in your business, and also show their colleagues how smart they were to invest in your business last year. Your Board will send you to like-minded investors, so you’re saving time on diligence. Introductions from investors derisk you and your company in the eyes of the receiving investor and give you instant credibility above the crowd. If you’re a seed-stage company and have no Board, use your network and financial advisors: they can achieve the same effect. Relying on your Board and network will accelerate the process, save you time, and have compounding benefits.
REFRESH YOUR DATA ROOM CONSTANTLY. Every week you should be refreshing your Docsend account with slides, a model, incorporation documents, a cap table, pipeline reports, and sales materials. The average VC looks at 2,000 deals a year. They have no time to wait for founders to update materials in the data room. Companies need to share their best selves in real time. When you leave the Zoom meeting, send the link to your data room so they can look at the materials that night. Keep the momentum. If it takes you two weeks to update your model and cap table, you’re not going to get another meeting. Be ready to move as fast as your investors.
POSITION YOUR BUSINESS TO SUCCEED IN THIS EXERCISE. If you have no momentum, a skinny pipeline, and two months of runway, investors will conclude that you don’t know how to run your own business. From your own perspective, you bring no leverage to the term sheet conversation. It’s a losing proposition. Make sure you have at least 6 months of runway and can stretch to 9 months if needed. Build a pipeline of clients: a lot of SMBs or some well recognized whales in your target vertical. Unless you’ve done this five times and have the magic touch, you should run a smart, sound business based on the fundamentals. 90% of start-ups fail because they run out of money, and this simple idea will help you outlast the competition and be confident in the asset you’re selling to investors.
In the current environment, you need extra time, extra friends, and extra luck. You can manage this challenging space if you follow the steps above. Beneath each of these steps is a project plan of To Dos, so they should all be taken seriously. If executed effectively, you will fundraise faster than your peers, build on your existing relationships, and get back to the business of building faster.