Fundraising advice: from an investor
by Andrej Steinberg~ an Auxilia supporter
Raising your first round of Venture Capital is a challenging task. Fortunately, there is lots of good advice out there that lets you draw from the experiences of successful founders and investors who share their insights. At the end of the article, I am providing links to some of the most useful content I know.
When you speak to us at Calm/Storm Ventures you are probably in the earliest stages of your company’s lifecycle. You have an idea for a great product or service and just started building your MVP. Now you are looking to raise capital to build the product, hire an initial team and get validation of demand.
Your considerations regarding fundraising can be split into 3 categories:
Process is mostly about who and when.
Who do you want to speak to? Who are the most relevant firms and the most relevant partners of these firms for your business? This is not just about picking the most prominent firm but the person who could actually be interested in your field and who might have expertise in the specific industry. Good indicators are past investments, content the person shared on social media and of course references. Speak to other founders and people from the ecosystem about their experiences. Segment potential investors into different categories — high, medium and low priority.
When is the right time to approach them? Don’t just start fundraising but be prepared. Build relationships, before officially kicking off the process. Test the waters to find out who is genuinely interested. Keep the high-priority / high-interest targets informed regularly. Start collecting small commitments from angels and lower priority investors to build momentum. The idea is to create a sense of urgency with your favourite VCs. They are able to move fast if they have to.
Content is about why and what.
Why are you doing this and what are you doing? Most importantly, why is this an insanely good investment opportunity?
The typical problem/solution slide can easily lead you to focus too much on the product and less on how you are actually going to sell it. Especially in crowded markets, it is important to show your unique angle, your unfair advantage or your unmatched team composition and you should anticipate questions in that direction.
Storytelling is about how you are selling your idea and your vision to investors.
This is an often overlooked but important aspect of fundraising. Make sure you know how to shape your content into a compelling story. Any good story needs a relatable hero (this could be you) and a story arc. Even if it is a great and somewhat obvious investment opportunity, there will be risks and obstacles that you will need to overcome. Don’t focus only on the opportunity but also mention the risks and explain what your plans are to mitigate them. Many founders are trying to convince investors that what they are trying to achieve will be easy. That won’t be true and if it was, then maybe it is not a good investment after all. Venture Capital is all about a positive risk/return relationship. Good investors are risk-takers, and their job is to price risk. Tell a compelling story of how you and your team understand the obstacles in front of you and how you will overcome them.
Best of luck!
Here is a list of materials that I find helpful:
Technical guide by Y Combinator: https://www.ycombinator.com/library/4A-a-guide-to-seed-fundraising
First Round Capital on fundraising tactics: https://review.firstround.com/the-fundraising-wisdom-that-helped-our-founders-raise-18b-in-follow-on-capital
Ann Bordetsky on desirable qualities in founders: https://annbordetsky.medium.com/the-founder-ceo-scorecard-6bbe3227c039
Storytelling by ex Pixar CTO Oren Jacob: https://review.firstround.com/Tell-Stories-Like-This-to-Take-Your-Fundraising-Pitch-from-Mediocre-to-Memorable
Data on successful pitch decks: https://techcrunch.com/2019/04/12/data-tells-us-that-investors-love-a-good-story/
VC database incl. their theses: https://www.openvc.app/
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