This is the second blog in a three-part series by High Alpha’s Senior Financial Analyst Maddy Cutler. You can read the first blog here.
As a first-time founder, raising venture capital may feel ambiguous and difficult to navigate. But, I assure you, that you can be successful. I’ve helped many first-time founders through it and aggregated their advice to help you through, too.
In my first article of this series, we covered three pieces of advice from High Alpha CEOs:
- Jim Goldman, CEO and Co-founder of Trava. Trava raised a $3.5M Series Seed in March.
- Lindsay Tjepkema, CEO and Co-founder of Casted. Casted recently raised a $7M Series A in April.
- Darin Brown, CEO and Co-founder of Docket. In December of 2019, Docket raised $1.5M in Seed funding.
Each founder graciously shared their tips for creating a strong narrative and building out a visually appealing deck. Armed with this new knowledge, you’re set to go pitch your dream investor right? Almost! Below are four more tips to help you stay organized through the process and strengthen your investor pitch.
Tip #1: Understand your ideal investor fit.
“At the very beginning, I didn’t ask enough screening questions before I had a meeting. So now, before I accept the meeting, I ask, are you investing in any other companies in the following spaces? And if so, which companies?” – Jim Goldman, CEO and Co-founder of Trava
As you craft your narrative and build out your pitch deck, you should also be researching potential investors and building out a strong list of investors who fit your ideal profile.
Similar to your sales pipeline, this list will need to be fairly exhaustive at the start to account for any “no’s” you may encounter throughout the process. There are several key considerations to research when building out this list:
- Does an investor invest in your round size? Your time is valuable. Don’t spend time pitching investors who only invest in Series A or above if you’re raising a seed round.
- Are they interested in your space (or learning more about your space)? For example, as Lindsay began her Series A fundraising process, she was largely focused on investors who were either current customers on the Casted platform or had a podcast and understood the podcasting space.
- Have they invested in any competitors? If an investor is already invested in potential competitors, they are more than likely not going to invest in your company too.
- Will they lead a round of funding or only act as a co-investor? Securing a lead investor is crucial for closing your round and will increase credibility and trust with other prospects. Knowing or asking about this information when beginning your fundraising conversations will allow you to focus your time on securing a lead investor first.
The more information you can capture on the front end of this process, the more selective you can be about your investor conversations and save yourself significant time and energy.
Tip #2: Start and stay organized.
Staying organized is crucial to keep both you and all major stakeholders informed of the status and details for each investor at all times.
As you build out your ideal investor list, lay the groundwork to use this list as the source of truth for all things fundraising. You can then easily see each investor profile, track the status of each conversation, know where you are in the process with them, and prompt reminders or follow-ups if time has passed without any communication.
Leveraging your network and board connections is also incredibly important to getting warm introductions to other investors. Creating a shareable tracker for your board and any other major shareholders will help you track who can provide these connections. This tracker can be as simple as a Google sheet with the name of each firm, your primary contact, the status, and any notes, such as average check size and preferred round size. The board can also see who is currently on your list and provide additional suggestions or contacts.
As you get further into the process with multiple conversations every day, you (and your board) will thank you for building out such an organized tracker.
Tip #3: Build your confidence.
“I start with some known investors to get some practice. The worst that happens is you get some no’s, maybe even you get some people who are really interested that you didn’t expect, but save your dream investor or top firms until you’ve got a lot of confidence.” – Lindsay Tjepkema, CEO and Co-founder of Casted
As Seth Corder, Principal at High Alpha, has seen from experience, most founders are eager to jump right in. Often their mindset is, “I’ve got these three key firms, so I’m going to pitch them first, get a term sheet and save myself some time and energy”.
Instead, his recommendation is to practice, practice, and practice again. If you can, schedule one to two practice pitches with your board to get candid feedback, then start reaching out to some “friendlies” (i.e. investors you already have an established relationship with). Use these early pitches to get feedback, and adjust your pitch before you meet with new investors. Once you’ve built your momentum and confidence, pitch your dream investors.
Tip #4: Tailor your pitch to each investor.
“It’s always important to understand the other party first, understand where they’re coming from, et cetera. So, do your homework, and come well-prepared.” – Jim Goldman, CEO and Co-founder of Trava
“I have a deck with twice as many slides as what I actually show, but I switch the order of it, depending on who I’m talking to. I would recommend getting comfortable talking to each individual slide and not having a memorized talk track. I’ve gotten comfortable talking about the main points of each slide, then building the narrative depending on what order I put the slide deck in.” – Darin Brown, CEO and Co-founder of Docket
Always focus on personalizing your pitch for each investor. For example, if you know an investor is metrics-focused, adjust your pitch to focus more on the KPIs and financial aspects of your deck. If they prefer to be more conversational and focus less on the deck, then move in that direction. Utilizing your research to understand their preferences prior to each meeting will set you apart.
As demonstrated by advice from our founders, spending time understanding your ideal investor fit, organizing your conversations, building your confidence and tailoring your pitch are incredibly valuable things you can do for yourself and your company.
Stay tuned for part 3 of our fundraising series for more on understanding each investor’s process, maintaining connections and handling feedback.