Six investment mantras for early-stage entrepreneurs to raise the first VC cheque
While cold emails could help a founder introduce themselves to potential investors, being plugged into the startup ecosystem will often open more doors in the VC ecosystem.
Saturday April 08, 2023,
4 min Read
Fundraising is an art form that requires a delicate balance of strategy, persistence, and a touch of luck.
As a startup founder, you may find yourself with a great product and solid traction but struggle to secure funding, while others who are several steps behind you seem to raise capital with ease.
It's a common and frustrating experience, but take heart — there's no one-size-fits-all playbook for fundraising success. However, I'd like to share some mantras or insights that may help you navigate the process and improve your chances of raising VC funding for your startup.
Mantra 1: Introduction to a VC firm
The first step in raising capital is making an introduction to a VC firm. While cold emails and shooting your shot can work, it's often best to be plugged into the startup ecosystem and find a warm introduction to your target VC fund.
This could be through one of their portfolio companies or other angel investors who have invested alongside the fund. Just make sure that they are your evangelists and believe in what you're building. If you can't find a way to introduce yourself, try attending networking/startup events or building your social media presence by sharing your journey and story.
Mantra 2: Know your investor
Raising capital isn't a one-way street. It's essential to know your investor and their thesis for investing. Research your target investors to understand their core thesis, what sector they invest in, and their average investment amount.
You can do this by understanding their portfolio, speaking to founders who have spoken to that fund before, or following your target investors on social media.
Mantra 3: Pitch Perfect
Your pitch to investors is crucial, and the first pitch is probably the most important one. Clearly articulate the problem statement and the solution you're building, but also make sure you present it well. Here are some tips to help you nail your pitch:
- Don't narrate off a fixed script during your pitch: Be human, be organic.
- Read the room: Get the background on your investors, understand how much they know already about what you're building, and what needs to be double-clicked on.
- Share insights and add examples: Make yourself and them more relatable to the problem.
- Leave room for interpretation and curiosity: Have a dialogue and not a monologue.
- Learn from your last pitch: Take a mental note of what worked in the last one and what didn't. Spot those eyebrow-raising moments.
Mantra 4: Know your strengths but also your weakness
Leverage your strengths as an entrepreneur and demonstrate why you're the right person to build this startup, but acknowledge that everyone has weaknesses. Show investors how you plan to build a smarter team than yourself or hire smarter people to address your weaknesses.
Mantra 5: Follow up
Following up after the pitch is essential to keep the conversation going. Rather than just asking for the next steps, providing updates on how the startup is progressing and highlighting any metrics that have changed since the last conversation can demonstrate progress and prompt the investor to take action.
Mantra 6: Don't be afraid to ask
Investing is a two-way street, and it's essential to ask your investors what excites them about your business. Don't be afraid to ask for help. VCs are typically well-connected, so even if they don't invest, you could potentially get a business lead.
Apart from these mantras, it's also imperative to have the following keys in place:
- Focus on building a compelling product or service.
- Build a strong team.
- Maintain a lean and agile approach to business operations.
- Focus on customer acquisition and retention.
- Be passionate and willing to take risks.
At the end of the day, raising venture capital is a tough game. But with the right mindset, preparation, and execution, you can increase your chances of success. Remember that every "no" is just one step closer to a "yes," and that rejection is just a part of the journey.
Keep in mind that raising capital is not a guarantee of success, but with these mantras and a solid foundation, you can increase your chances of building a successful startup.
Edited by Affirunisa Kankudti
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)