START WITH EXISTING CONTACTS
The majority of early stage start-up funding is best sourced from existing contacts. Typically you will find co-founders, friends and family are responsible for supplying funds and are betting on you more than the business. When the size of a deal increases, especially after seed funding, raising money from banks, angels and venture capitalists becomes more of a focus.
THINK CAREFULLY ABOUT WHO YOU WANT TO APPROACH FOR INVESTMENT
Before you start to seek and pitch to investors, you need to ask yourself what kind of person you would like to take money from. A big part of an investor value proposition is their background, expertise and personal network. The person will likely be involved in many key questions and steps your company is going to take. Ideally you want someone who does not only share your vision, but can also provide some help and assistance to accelerate your growth. It is ideal to facilitate a warm introduction to an angel investor or a venture capital firm; preferably somebody that has worked with them before and that has credibility to introduce you.
PITCHES ARE EITHER ANALOGY DRIVEN OR DATA FOCUSSED
You need to be able to demonstrate that your idea complements important trends and has real potential to capture market share through a disruptive business model. Or even better, capitalise on traction that has already been achieved.
IT MAY TAKE MORE THAN 100 INVESTOR MEETINGS UNTIL YOU GET YOUR INITIAL INVESTMENT
Raising an investment is not as easy as pictured in technology and start-up media outlets. Getting an initial investment consumes a lot of time and energy, both of which are among the key resources that start-ups can’t afford to waste. Investors are on the lookout for companies with a strong founding team, a strong market and a disruptive product that has been very well executed. They are also looking for passion. Investing is all about psychology. Whether investors admit it or not, they’re humans, governed by a fear of losing and a desire to win. No matter how passionate you are deep down in your heart, it will only help if you show it.
A FINANCIALLY SAVVY ADVISER WHO HAS EXPERIENCE IN THE START-UP SECTOR CAN HELP YOU PUT TOGETHER YOUR FINANCIAL PICTURE
Investors want to see documentation and high performance in three areas: 1. User traction – users, retention, on-boarding rates, monetisation and referral rates. 2. A cap [capitalisation] table which includes funding rounds and valuations and growth projections. 3. Revenue charts if post-revenue.
BEING CREATIVE IN YOUR PRESENTATION IS PIVOTAL TO SUCCESS
Chances are the investors you’re pitching to have sat in many pitches previously, so it’s vital to leverage your creativity to ensure you stand out.
PUTTING TOGETHER A PRESENTATION SHOULD BE A TEAM EFFORT
There should be input from your startup co-founder, advisers (especially one who has raised money), and you will need a good designer on board to bring your vision to life.The key to a successful presentation is to be well spoken, well presented, succinct and provide realistic numbers. If successful with your pitch, you will need to raise more money and future round investors will check that you are able to deliver on your promises.
A PRESENTATION NEEDS TO HAVE A BALANCE BETWEEN THE VISION AND THE FORECASTS/FIGURES
Word of warning: being too visionary without showing traction, a strong team and demonstrable execution is a red flag to investors. If you’re going to talk the talk, you’ve got to walk the walk.
MAKE USE OF PITCHING OPPORTUNITIES IN THE START-UP ECOSYSTEM
There are ample opportunities for start-ups looking to attract the right investors. Some of the options on hand include graduating from an incubator program and pitching at demo day, pitching at start-up events like TC Disrupt [TechCrunch Disrupt] or leveraging your own network and inviting potential investors.
YOU SHOULD BE LOOKING TO BUILD A BOARD OF ADVISERS FROM DAY ONE
Reputable advisers will not only help you stay disciplined but also provide a much needed social proof for an unknown start-up. Find someone enthusiastic about your idea, someone with a track record or successful career in the industry. Successful people like to help, it’s up to you to hustle it out and get them on board.