Fundraising is an essential activity for small and medium-sized businesses—but it’s also one that too many startup founders and executives struggle to do effectively. In this article, we’ll discuss five of the best ways to accelerate the fundraising process and get your company on the right track.
1. Find the right investors
Not all investors are created equal: some are truly passionate about the cause or problem you’re trying to solve, while others will never be convinced it's worthy of an investment. The key to fundraising success is figuring out how to tell the former group from the latter.
If you’re just starting out in the fundraising process, it can actually be better to first approach investors who you think will be more skeptical. This will give you the chance to get valuable feedback (see below) that you can use to improve your pitch for the investors who you really care about. Even meetings that don’t pan out initially can help you in the form of referrals and introductions to investors who may be a better fit.
2. Tell the right story
Before every meeting with a potential investor, be sure that you prepare your pitch, which will help you make a good first impression. A good pitch includes telling the right story about your company: the vision you have as a startup founder, as well as the trajectory you want your company to follow.
Part of telling the right story includes creating a strong pitch deck. Your pitch deck should incorporate information such as:
The sustainability of your business model, including your long-term plans for generating revenue.
The growth potential of your company. This includes fact-based arguments about your customer base, the projected demand for your goods and services, and your opportunities for expansion across different sectors or geographical regions.
The competition you face and the distinguishing features that give your company a competitive edge.
3. Work with mentors or startup accelerators
While it’s tempting to think that your efforts can succeed just on the strength of your business plan, to a large degree fundraising still depends on the reach of your network and community. If you don’t have previous experience with startup fundraising, getting advice from a knowledgeable mentor can be invaluable. Reach out to industry leaders and other contacts in your circle to see if you can find someone willing to serve as your confidant during this process.
Looking for a more structured mentorship opportunity? Startup accelerators are fixed-length programs where participants enjoy coaching, mentorship, and instruction. Joining a startup accelerator might just help you make a critical connection that will get you through your next fundraising round.
4. Set up a Virtual Data Room
If your fundraising pitch gets far enough, investors will want to perform due diligence by looking over more sensitive documents about the company and its financials. However, exchanging this information over email is insecure, and you have no control over how the files are shared beyond your conversation.
Virtual data rooms (VDRs) have been designed exactly for this purpose: secure databases hosted in the cloud for storing and exchanging confidential information during financial transactions. By using a VDR, you’ll have complete visibility into who accesses which files and when, as well as enjoy advanced features such as watermarking and electronic signatures. Setting up a VDR ahead of time will mean that you can move quickly to the due diligence process as soon as investors express interest.
5. Listen to feedback
It’s never easy to hear “no” in response to a fundraising pitch, but the reasons for that “no” can help you improve and get to a “yes” next time. Listen to the feedback you receive from potential investors. What reasons do they have for declining, or what reservations do they express?
For example, some investors may worry that your business model isn’t solid enough, or you haven’t tested your product among a wide enough range of customers. If this seems to be a common theme in the feedback you receive, take this opportunity to collect more data and run more focus groups to prove the worth of your concept.
The path to acquiring funding can be challenging and time-consuming, but the tips above should help you navigate the process more efficiently.