How to Raise Investment(tomblomfield.com) |
How to Raise Investment(tomblomfield.com) |
Start sending thing to all the people you interview for advice, supporters you know in the same space, and peers/coworkers. If you keep a regular email showing your progress, even though you may not have traction, potential investors will see the pace at which you are developing/iterating, and have a reference point to be able to cut a check.
I started this 3 months before I planned on raising any money, and it allowed for people who were on the email to confidently make recommendations on my behalf to investors they knew, and also made our company top of mind.
I have continued this for almost a year now, and its led to customer development opportunities, investment inbound, and a steam of good relevant advice.
Why does that matter?
If things are going well, great - you'll have a much easier time fundraising. The potential investors on your list will see your progress and realize they have a chance to preempt.
If things are not going well, you're providing a continuous stream of proof that you haven't cracked the nut yet. Which there is no shame in. But broadcasting that can be harmful.
So what do you do? It's tempting to hype up your updates so it looks more positive. Or should you be honest (which your ACTUAL investors and advisors need to help you)? Hmmm. Or do you run 2 update emails, the insider one and outsider one?
OR do you just focus on growth, and realize that none of this matters if you're growing 300% YoY at non-trivial revenue? Imagine if the time you spent on a weekly email was spent on making 5 add'l client calls?
Final thing to be aware of. The most powerful force in fundraising is FOMO. Every VC or angel investors has an "oh shit" moment when a startup they kind of know (but had kind of written off) all of a sudden is doing a hot round, and you feel late to the party.
I'm not telling anyone to NOT do update emails like this. Just recognize the signal leakage and really evaluate if the time spent is worth it.
So the main question as a corollary to your statement is: How do you effectively create investor FOMO? Do you have any experience to share here as well?
It seems like fortnightly or monthly gets the same impact with 25-50% effort.
Having discussed with VC a long time ago , it was very HARD to raise money without a very strong traction.
Very often VC were convinced with my pitch , and my product but would not invest either because they had stuff somewhat similar in their portfolio and often because I didn’t have a “track records” to proof my capability.
If I can recommend one thing to technical founder : don’t listen to this and build slowly while creating your own community ( users , customers etc...) and VC will come , don’t worry.
VCs are like dogs when they smell money they have the urge to come at you, you won’t need to call them.
For non-tech founder it’s the opposite : don’t make anything that is complicated or sophisticated, focus 100% on marketing and prototyping , I had friends raising 10M+€ for products that didn’t exist or couldn’t do a tenth of what was promised , but because they graduated from the most prestigious schools in Paris or London and had invested hundred of thousands in marketing ( 50K€ Website , Dozens of Articles in the Press claiming their idea was worth billions , Attending Conferences to reach out to executives in order to get corporates sponsors etc..)
VCs will prefer a strong team with a stupid idea that a Fortune 500 will be naive enough to acquire , rather than a good idea with an unproven team that would make money quickly after initial build phase.
Will recommend.
We actually used the YC seed and A-series pitchdeck templates the OP mentions.
Last thing: everything becomes 1000% easier if you have customers. Focus on customers. Raising becomes almost easy after that.
Just a weird looking TAM (small as all get out and competitive market) is all I can chalk it up to - or I’m a crappy story teller
Lucky for me, I have the Firefox reader mode. But to every regular person, this presentation screams "the actual text is not important".
I'm looking forward to the pendulum swinging back around to 2022, bring on the slow-biz startups, the organic growth, gimme 2x and 3x, bootstrapped on shoestrings, companies run by people who created those companies.
I have this reflex every time I see something cool now where I can't enjoy new SaaS offerings because I'm always trying to imagine the ways in which this new cool thing can backfire and frustrate me once it takes funding or goes public. I don't think it's a problem in me, either, that model just sucks.
www.indiehackers.com
www.bootstrappers.com
https://www.vox.com/2019/1/23/18193685/venture-capital-money...
This article really highlights how stupid frauds like Theranos get funded. The real answer is between the lines:
To get funded:
a) Be connected, physically close and already in the clique. b) Don't be outside the clique.
I mean I get the idea that rich kids giving their rich mates money to start yet another dogshit fintech is just how the game is played, but what a frustrating time it is for the rest of us.
A society where that can routinely be done remotely is certainly physically possible, but it would look very different from this world.
It has always been the case that those who need money go to those who have money, not vice versa.
In a lot of ways it is easier if you are doing something truly out there, like some kind of lab-based science that requires everybody to have a PhD, because it's easier to convince somebody that you know what you're doing if they are completely ignorant of the topic. In the middle ground of more practical applications of technology it isn't sexy enough and isn't esoteric enough to get anybodies attention regardless of the potential or the business model.
Where does someone look for smaller business ideas like this (which may have a higher probability of success, lower earning potential than typical startup targets, less initial capital required)?
My favorite part. The ideal scenario is running a tight, targeted and short process for a hot deal...but don't be surprised if that doesn't happen.
It was written at the end of 2019, do you think it's just wrong? Or has it changed that much in the past 2 years? Or is it a different set of startups?
Actually I've seen nothing to suggest that valuations have changed since our article. If you're seeing differently, all feedback welcome.
I should add that I always have a lingering concern that so many people reference that article - both founders and investors - that in some ways it's moved from reflecting market to making market... which means the bar to making sure it's accurate is high.
The benefits to a founder of shopping around seem clear, so could you quantify the downside risks? Do the risks matter for a “hot deal”?
PS: Thank you so much for your awesome article: it is especially gratifying to see something that isn’t from the valley (I am in NZ).
More commonly, you develop a bad reputation in the VC community, which is very close-knit. Next time you come to raise money, this can hurt.
Looking forward to seeing whatever you do next!
Should European remote startups re-domicile in the US for fundraising (or other) purposes?
We have a London presence/HQ, the team works from 4 European countries, and we raised pre-seed during Covid.
The lowest valuation I've paid was £3m, and this happened exactly once.
My mean valuation for seed is around £8-10m.
It tops out at around £20m.
Perhaps my sample is skewed. Not many of the companies I'm investing in use SeedLegals. Investors often insist they use actual lawyers.
By succeeding.
That sounds either snarky or obvious, however, I mean it quite literally. The absolute single best way to create investor fear of missing out, is to actually succeed at what you're doing. There's nothing close to that. Succeed at whatever stage you're at and be able to demonstrate that to the potential investors. If you're the real deal, you can build, execute and deliver on what you're attempting and claiming. Nothing prompts FOMO from investors like actually delivering and building up a demonstrated chain of success as you go; they see it, and they want to be part of it.
All the other methods are shady, deceitful, disingenuous, fake it until you make it types of bullshit cons. Akin to attempting to trick someone into funding you (ha! look at that! I made myself look more successful than I am, I really pulled one over on them; Theranos).
"Make something people want" is the #1 fundraising hack. If you do it well enough, fundraising isn't an issue.