Ideas when requesting funding
I recently attended a panel on start-up funding, and while this information is mostly common sense, its always good to be reminded. So here’s a quick summary of my notes along with my own commentary thrown in.
Prepare, prepare, prepare
Be ready for the pitch, and remember you are making a sale, but at the end of the day, its you they will buy into so BE YOURSELF.
It is not how great the business is going to be, its how you will get those investors to a desire ROI. Spell out how you intend to reach the numbers that would make investment in your company attractive to them.
Different investors approach the business differently so understand what motivates a VC versus and angle versus an institutional investor and taylor your pitch accordingly. DO YOUR HOMEWORK Check out resources like PEHub to see what the investment landscape looks like.
Get to the point, immediately – do not get 10 minutes into the presentation without explaining who you are.
Biggest mistakes seen from the investors
- over selling
- not telling who they are
- not doing research on investors
You must establish credibility, and research helps to achieve that goal.
This note ties back to knowing your VC, know if your product is in competition with one of their companies. If so they might question you all day to get information to help their team. Your company also may be complimentary to one of theirs, and make you even more attractive.
Know Your Market
Remember, market risk is one are that all investors are keenly aware of
Need to identify both total market and addressable market. Investors want to get a sense of your thinking process and how you are approaching your customers. Along with this, in the financials have a bottoms up AND a top down review of the customers, and those numbers have got to match up.
Be able to answer the question “How with the existing market react to you coming into the picture?”
If you plan to go into an established industry, channel issues are huge – make sure you understand them – how you are going to approach them and how your competition already does.
Spend time with the customer, and get their feedback and validation of product. Put the voice of the customer (VOC) into the pitch. Get their perspective first before seeking funds.
For Series A Funding – Days of pre-revenue are over! Must show revenue!
How do you intend to grow your business? Are you going to slow roll it out for more control, or fast to capture a market opportunity?
Have multiple funding paths identified, what is your back up plan?
Know Your Finances
Know your assumptions, how did you get to the numbers. If you can, be prepared to talk to two scenarios: optimistic and conservative. Don’t go crazy: If you are choosing between financial engineering and time with the customer – time with the customer wins.
Much of this section ties back to knowing your market.
Think You’re Done?
You have got to ask for the close, why are you there – be direct?
Ask for feedback from the VC, and if you got to the VC by a contact, get feedback from the contact. Take the information provided and use it to craft and refine your next pitch.
If you think you are ready for your pitch, can you answer the questions I posed? Good Luck!
