#15- Groundwork before raising funds for your startup
Raising funds for your startup: Part 1 - How to prepare yourself before your fundraising period starts?
This is Part 1 of the on-going “Raising funds for your startup” series.
Cash is oxygen for a startup. Especially bootstrapped startups that work hard to save every single penny. Running out of cash, and subsequently, the resources that the cash brings, means you are out of business.
Most fundraising tips, tricks, and advice starts at your pitch deck. How you should make the pitch deck, what email should you write, when to send the email, and all the shebang! But I believe that is BS. If a pitch deck made fundraising easier, almost every startup would have cash in their bank.
Shooting out decks the day you start your fundraising is not only sloppy, but also decreases your odds of closing the round sooner - not to mention the bandwidth it will drain from you actually running your company!
This is a multi-part series where I will share my views on how should founders go about their fundraising process.
In today’s Part-1 post, I will explain the importance of the groundwork before your actual fundraising.
Start blogging the day you start your business
You have an idea, a vision, and a business model (hopefully!). And even if you do not, it doesn’t really matter. What matters is that you have a clarity of thought, your roadmap to growth, and the ability to market the hell out of yourself.
The day you start your business, start writing about your journey - it need not be a daily long-format article. You can start off by writing about your vision, your mission, your learnings, some mistakes you committed, and none of these need to include specifics or confidential information.
The more you write, the better a storyteller you become. And the more consistently you write, the larger your mailing list grows. Why is this important? Because this gives you the ability to connect with others, and establishes your position as a thought leader in your space!
Also mind you- as an investor, we love reading founder blogs! If you come across interesting blogs by founders (not Unicorn or 100x founders - because we know them) who are starting out or head small startups - please share in comments!
Create an Investor List
It is obvious that the starting point of fundraising should begin at a list of prospects. This is very similar to your sales funnel. You can just create a potential Investor List on Google Sheets, keep updating as you meet or find out about more investors. Ask your network, mentors, and advisors for contacts and share the list with them for their inputs. Make sure your firm fits in their investment thesis, else it is of no use.
Now you must be thinking - this isn’t rocket science, I already do it! Who wouldn’t? You are right! But do you really convert the data in the list into actionable outcomes?
Find shared connections, and build your network
Connect with founders these investors have funded, share your experiences, struggles, seek their wisdom, and request an introduction to the investor. No founder would refuse. Everyone is in the same boat.
Use the list as a way to create a funnel for backchannel communication. Ask them if you can add them to your investor newsletter, treat them as they are one of your existing investors and share periodic investor updates. Share your growth story, your performance, your team background, your highlights, and your lowlights, and if you’re audacious - also ask them for assistance for hiring, recruiting, or connects in the industry!
Why is this important? Because the day you do want to start raising your round, you need not get introductions and start from the ground up - you have a long thread of trail emails to use as an introductory meeting.
Here is something from Mark Suster that resonates:
Remember that fundraising is a sales process. The investor is a customer and they have money to spend but only for a limited number of companies. They are buying trust in you that you will build a large business that will be valuable. The first "Blink" evaluation they'll make is about YOU and only when they've subconsciously decided whether they find your smart, likable, credible, a good leader, inspirational, competitive and all of the other subconscious attributes they'll look for do they begin to truly think about whether your business idea has legs.
Follow up
Your “networking” doesn’t stop at sharing information. Networking begins at sharing information, but the loop closes when the information converts into communication. Does your communication add any value to the other party? If not, why would anyone want to talk to you? Your emails most likely would end up in the trash!
You have to follow up by sharing updates, requesting feedback, sharing important milestones, any recent piece of information, or article that you read which can add value to the investor! You have to make it worth their while!
The amount of pre-fundraising preparation is indirectly proportional to the time taken to close a round!
The more you prepare before, the lesser the time than it should ‘ideally’ take.
You must be thinking, all the steps mentioned above will eat into my bandwidth! How am I supposed to run my startup? But the fact of the matter is that a founder is perineally into fundraising and marketing and sales mode. About two-thirds of a founder’s bandwidth is spent doing these activities!
Founders need to understand the following:
Fundraising is a numbers game. Do the research, build your pipeline, and have backups!
Date your potential investors - give them a full-service sneak-peek into what it is like working with you
Fundraising if left at the last minute might not even materialize, so please start as soon as you can, even if you dont feel you need to raise! Build intent!
Stay tuned for the rest of the Fundraising Series
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sir, your post is very good, I am eagerly reading all your articles, whatever comes out. I want to ask a personal question, if you ever get leisure, do tell. If a person from a poor family background dreams of becoming a well-known founder, who does not have a good business degree, does not have the means of implementation of his ideas, do not lend even a small amount, as no one would bid on a lame horse. (Cause of Physically Handicapped). How did that person move forward? Will wait to hear your inspirational words.