Introduction
The idea stage of a startup makes getting VC funding and engagement harder. However, there are a few ways it can be done.
Usually, a fundraising round could be closed within 6 – 8 weeks after investors have shown interest, depending on the sophistication of the investors and how fast they do their due diligence and get over the paperwork. But this comes with a few months of prep work, mainly based on networking, monthly updates and a lot of pitch practice.
Below are a few pointers on how to do it:
Networking
- First, you must do extensive research on investors interested in funding your sector and stage. Ensuring they would be relevant for you, and you focus your energy on getting the right people.
- Create an extensive list of these investors, as long as you can make it, and you always need to keep adding new ones until you close the round. For starting to reach out, I usually think you would need at least 100 – 150 investors on your list.
- Prepare draft messages for different things: i) connection on linkedin; ii) intro calls; iii) guidance calls; iv) draft emails to share what you are building. Those would be the basic standard ones, but you can get creative.
- Start with the outreach to these investors by doing a mix between email and linkedin (and sometimes twitter), first asking for a connection (linkedin) and after connecting asking for some guidance thoughts, sharing interesting information, get creative for a way to engage with them without necessarily asking for money as a first way to approach them. Remember to personalize each message.
- After a few months of doing this, you should have spoken or connected with a good amount of investors, and then you would be ready to let them know you’ve opened your funding round and would love to get them involved (hopefully with one already on board); for this, you will need to prepare a data room and some additional draft messages.
- You would also need to make some prep work for the investors’ meetings, but once you’ve started with the meetings, you should experience a snowball effect and create some FOMO on the round, and this process takes around 8 weeks.
Newsletter
- This method is perfect for getting the word out there and drawing some attention to yourself and the company. This consists of monthly updates about your company, what you’ve accomplished, where you are struggling and asking for guidance, key metrics you are measuring and how you are progressing. Basically, a summary of your month and what are your plans and goals for the coming month.
- It is another good practice to start getting some people to know about you. The goal here is that eventually, someone will reach out expressing interest and once you’ve met that investor and get the first commitment, that is when you announce you are opening your round and looking for funding.
- In this newsletter, you start adding investors you’ve reached out to for advice or have made contact with and encourage people to share it.
- Get involved in founder communities. Important to put your business out there. Be active. Go to events. Grow your network. Meet new people.
Improve/Practice your Deck
The way you present your startup is a key factor in getting VC’s/Investors attention. Demonstrating your passion, knowing how much you are looking to raise and why, what problem your startup solves, who is your target audience and competitors, being able to answer every single question that is made regarding your company are just a few important points that separate great pitches from average ones. If you truly believe in your startup, it should be noticeable while pitching. Hence why, it is not only important to practice it as much as possible but it is just as important for your deck to be reviewed by a professional. At EC, we also provide our community with deck review services by our Investment/Fundraising team.
Conclusion
That is a rough guideline of the approach we suggest you take to start your fundraising process, since going out looking directly for VCs at this stage will be too time consuming, and the chances of success are less. It’s best to focus on Angel investors and maybe a few early stage funds around Europe. It might look like a lot of work, but this strategy will provide you with better chances of a successful round.
At EC, we host regular events such as:
Pitch competitions – In which the judge panel is made of Investors. Getting to present on a stage in front of hundreds of founders/investors, also live streamed online. This would give you the confidence to pitch under the spotlight, gain real feedback from successful investors, network and increase your company’s awareness.
Sector specific pitch competitions – Same circumstances as regular, more competitive, considering that you are competing against other companies in the same sector. Would attract the investors that are interested in your sector/stage.
Pitch rehearsal workshops – Quicker pitches, few dozens in the room, questioning and helping each other improve decks with an investor present to give feedback.
Emilio Cuevas – Investment Associate @ Entrepreneurs Collective.
If you have any further questions regarding funding please contact: emilio@entrepreneurscollective.biz