Fundraising as an early stage founder
I have been talking to quite a number of young entrepreneurs recently and many of them have been asking me about my experience with fundraising and also my past as an analyst in a Medical VC firm. (Disclaimer, it was a short stint there). I decided to pen down my thoughts on this matter. Also, I will only be sharing about the seed/pre-seed stage fundraising and nothing else. I have tried to summarize everything into 4 main pointers.
Passion in your product
It is especially important to believe in your product and know that your product is indeed solving the problem that you have identified. Many times, VCs like to question a founder till the breaking point to see if the product is something that intrinsically is important to the founder or is it just a fleeting thought. Passion in a product does not necessarily mean it is something you will be giving your life for, but what passion means is it is something which is anchored in your heart and mind. A few tough questions should not shake this. Imagine, as a young founder you already lack experience in terms of domain knowledge, getting thrown a bunch of questions and also potentially struggling with impostor syndrome. I cannot stress the importance of belief and passion in the product.
Do not fundraise too early
There is no right time to fundraise, but there is a time when you should not be fundraising. A lot of times, young and first-time founders tend to get excited of the whole fundraising process. Like who would not like the sudden surge of $$$ into their banks right? However, the biggest problem with fundraising too early, even if you succeed is that most of the times, the valuation is likely not favoring you. As a founder, you might not have the best deal for your start-up where VCs can list a whole bunch of reasons why your start-up should have a much lower valuation than you proposed. So just wait, hit those milestones and objectives, then fundraise. You have a much better chance like this anyway.
Be as structured as you can
Fundraising successfully requires a bunch of items, that include things ranging from pitch decks to executive summaries to project management details. Make sure that you have everything in order, things ranging from your company’s accounts (financial expenditure) to the team’s resumes and certifications. Due diligence from a VC is very comprehensive, and it will include going through many types of paperwork. The more prominent the institutional VC is, the longer and thorough the due diligence is going to be, and you need as much clarity and structure as you can. One of the things that I advise other fellow founders, is that joining an incubator/acceleration program is a very useful thing. As much as some of these incubators are very academic, they tend to provide a lot of structure to a start-up and prevent the founder from getting lost in the whole process.
Sell your vision in the right manner
Remember to always research the VC/funding body thoroughly before presenting to them. As an early-stage founder, your company’s vision is the most powerful tool you have. Communicating this vision to the right people in the right manner can go a long way in ensuring success for your start-up. For instance, to a group of technology savvy VCs, you should consider pitching the tech roadmap and paint a very futuristic yet technically feasible vision to them. To a group of very commercial and realistic VCs, you should paint the economics of the start-up and show them how economically profitable the venture is. Remember, VCs are investing in what your start-up could potentially become. Show them that it is in line with what they want and what they believe in too.
That is all folks! Pretty much summarizes the 4 key points I suggest you look into when pitching and starting your fundraising journey. These are some of my learnings along the way and of course there are many other things to note and am happy to have a conversation on this with others! I will be writing next about the key things that investors look for before investing in a start-up. Feel free to leave your comments or thoughts on how your fundraising journey went and if you have yet to fundraise, write your fears and concerns. I will try to address them 😊 Have a good day!
You can reach out to me on LinkedIn
Also check out my main hustle :) Invigilo AI
