4 Tips to Up the Funding Round Process for Your Startup
Raising funds and capital through the funding round process for your startup, whether it be the seed round or the later Series A, B and subsequent rounds, can be a tough and challenging experience; there’s research to do on potential investors, dealmaking and negotiations to take care of and constant meetings to attend. As funding rounds are a necessary undertaking to get the money needed to get your startup up and running or to grow and expand it, here are some insights that can help you improve the process and make it more rewarding.
To raise and secure funds, you will need to do the math and prepare the right numbers and figures to convince potential investors of your startup’s feasibility. However, numbers and figures are just a part of the formula; if you present them in a dull and predictable manner, chances are you will bore the investors and they will lose interest. To capture investors’ interest, you have to tell a great story. For most startups, the formula for how the story goes usually follows this pattern: there is a problem faced by many people in a market, or the current way of doing things is no longer good enough. Your startup has a solution for their problem, and it’s way better and more cost-effective. Meanwhile, the solution, service or product that your startup offers also contributes to making the world a much better place.
Telling a great, compelling story is what often seals the deal for most startups and companies. After all, if given the choice between 2 similar products or solutions offered by 2 different startups with almost identical numbers and figures, chances are investors will most likely choose the one that provided a more compelling, rich and persuasive narrative. People are human beings, and this means that they make decisions emotionally; numbers and figures are just a way for them to rationalize their decisions to themselves and others.
As you meet more and more potential investors for your startup, you may come to realize that a common thread through all these meetings is the same number of questions being asked over and over again. To better articulate the answers that you provide – and to keep things consistent and on the level so you don’t risk yourself when you inadvertently give different, unexpected answers to the same question from different investors – it is advisable that you build and upkeep a FAQ document for yourself. This FAQ document allows you to draw on concise, well-prepared answers for oft-repeated queries and questions that are being asked of by investors. What’s more, being well-prepared with the proper answers and responses beforehand will make you sound more confident, and investors like a considerate founder who has already thought about their concerns and questions in advance.
During the funding round process you will meet many investors, and most of the time they will give you feedback. Their constructive feedback is an important means of improving your pitch and business, so learning from their feedback is always a good thing. Even if an investor does end up saying no to you, they may still give you solid reasons as to why they declined, which is always good food for thought.
However, there will be some investors who will just not reply to you. It’s not that they are being rude on purpose; some investors, in particular VCs, may not say no to you because they think your startup has potential, and want to keep you on the hook in case your startup becomes attractive sometime in the future. In the funding round process, a “yes” usually comes quicker than a “no”, though sometimes the “yes” may change to a “no” unexpectedly.
The funding round process can be a positive and even fun experience. By building a FAQ document for yourself, telling a great story to investors, using constructive feedback to improve your business and pitch, and understanding why some investors just won’t give you an answer, your startup is that much more prepared for its next funding round.
