Startup fundraising can be all-consuming. It can feel like a full-time commitment, taking precious time and attention away from your actual job: building out a product or service that gains traction with customers. So it's no surprise that raising a round can be one of the most stressful times for founders.
Yet, no two fundraising rounds are exactly the same. Each company has a unique journey that doesn't necessarily provide a blueprint for others. Success requires a process, largely oriented around 1). defining what makes your company an exceptional investment opportunity, and 2). getting it in front of the right people.
To get the skinny on startup fundraising success, we reached out to several investors and startups in the Voyager family on how to network smart and build a successful fundraising round for your startup.
#1: Start early
When raising money, a gut reaction for many founders can be to reach far and wide. While it makes sense at the surface (more contacts = more potential investors, right?), this approach will likely blur your focus, and reduce your chances of finding relevant participants for your round. Using too wide a net can also result in event fatigue and networking overload -- two things that reduce your chances of fundraising success.
To avoid stretching yourself too thin, the best way to network for fundraising is to start early. Founders should protect their time by being selective when choosing which events and conferences to attend, says founder & CEO of White Fox Scooters, Sidd Saxena:
With the plethora of events, it becomes very important to distinguish the high-quality, worthwhile events from the events that may not be as useful. Any event that's invite-only or more curated is always better. I also highly recommend pitching at high-quality pitch competitions for exposure and potential connections.
Investor Nick Dolik of Dolik Ventures sees timing as dependent upon each company's circumstances. Nonetheless, the earlier the better:
Even if you are way too early, it’s still powerful to start building a relationship and keeping investors updated so they can see the traction and get more excited about the opportunity when it is the right time to raise.
Geri Kirilova, Principal at Laconia Capital Group, prefers to meet with startups prior to fundraising so that the team can get to know the company:
We like meeting founders a few months before they kick off their seed round. This timeline allows us to get to know the team a bit and get a sense of their execution. These earlier meetings also help founders do their own diligence on which investors they would like to have as partners.
Action item: Always be building your relationships. Prioritize your time by selecting the most promising events and then spend time to follow up on the relevant contacts. Stay connected with Voyager's highly-targeted travel tech industry events.
#2: Be strategic
Adopting a strategic mindset means that you look carefully at each investor’s priorities to be sure that your startup fits into their playbook. Whether seeking an introduction to another investor or reaching out as a potential investment, intentional outreach makes an impression, says investor Nick Dolik:
I prefer when startups request introductions with specific reasons on why it could be a fit to invest or build a long-term relationship. When you show a targeted and thoughtful reason for reaching out, it goes a long way.
Being strategic also requires clarity. You should have a short-but-targeted list of ideal investors for your next round. Then, work backwards to find the events that bring you closer to them, either via direct introductions or through other people in your network who can provide a warm introduction when the time comes. With strategic advance planning, you’ll have made the connections and nurtured the relationships that reduces fundraising friction.
When raising the latest round for White Fox Scooters, Sidd Saxena created a list and built his outreach around it. This structured the entire process, he says:
We made our list of potential prospective investors and did a systematic outreach. It's really a numbers game and the key is to make sure to have at least a couple hundred potential investors on your list to reach out to. Many investors had verbally committed but had no urgency to sign the SAFE and close the round so after receiving our first check from a family office/angel, the other checks followed soon after.
Tastemakers Africa team - Founder & CEO, Cherae Robinson and CTO, Chip Kennedy, have shared their perspectives on the fundraising process. For them it's more of a marathon rather than a sprint -- and can deliver unexpected dividends:
It sounds tiring, but this process starts long before you are actually raising money. Many of the investor conversations we had in this round came from investors we met years ago while making connections in New York. Although we weren’t always a good fit, those initial conversations left the door open for us to re-approach the same investors as a viable investment opportunity down the line.
Action item: In the months prior to launching your round, make a shortlist of ideal investors and then prioritize the events and activities that bring you closer to those people. Being prepared pays off!
#3: Avoid cold intros
Investors are highly networked at a global scale, building connections and partnerships with other like-minded investors. To cut through the noise and identify promising startups, investors use their networks as filters.
That's why warm introductions increase the odds and investors will make time for a meeting or informational chat. Investors prioritize introductions from trusted sources as an initial form of social proof: “If a person I trust introduced us, it must be worth my time.”
With that in mind, it's more important than ever for founders to get a warm introduction. To earn these introductions, White Fox Scooters’ Sidd Saxena recommends not just attending events but also looking to the founder community for support:
In addition to curated and high-quality events, network with other founders who recently raised rounds. They’re great resources to ping and ask what worked well for them. Maybe they can intro you to some of their investors.
Laconia’s Geri Kirilova agrees:
It’s no secret that getting a strong warm intro often helps pique interest, such as an emphatic customer referral, endorsement from another founder, or intro from a trusted investor. If founders are unable to get a strong warm intro or meet investors directly, their best bet is reaching out directly with a succinct, personalized email.
Geri also has a word of caution when it comes to using intermediaries to approach investors. Investment bankers and brokers often promise to use their networks to expedite introductions, and thus move the fundraising along faster. This may not be the best route, as there may be other agendas (and hidden costs) in play.
To get more warm introductions, White Fox Scooters’ Saxena shared a key tip for founders in networking mode:
One tip that I've found to be helpful is to always add business contacts on Linkedin while you're at the conference or as soon as possible after meeting them. Your warm intros to potential investors will come from your first degree connections and you never know who will be a "super-connector," or someone who can intro you to many suitable investors.
Action item: Do your homework on potential investors and rely on your network to help you get your pitch to the right people.
#4: Share your progress
Both investors and founders agree that regular updates should be a priority. These quarterly updates should document your progress over the past few months, including milestones met, hires made, problems overcome, and customers/users won, as well as product plans and business targets for the coming quarter.
These conversations should continue in between rounds as well. Relationships are like gardens: they need to be tended overtime to avoid wilting. Keep sharing your progress and maintain the relationships that will be useful in the future. Networking isn’t just about going to events and making new connections; ongoing maintenance is a critical piece of networking that is often overlooked.
This works at scale, says Nick Dolik, which allows founders to stay in touch with many contacts at once:
Ask permission to put new investor contacts on your list. You would be surprised how effective regular updates can be. Sometimes an investor that said “too early” or “pass” sees something change after reading an update and will reach out to you.
Laconia’s Geri Kirilova also sees value in startups nurturing relationships with investors over time, recommending the following:
Monthly update emails usually work well, as do interim check-ins with specific action items, such as intro requests and updates. It can also be really effective to set up working sessions with investors on certain topics (go-to-market strategy, financial/operating model, pitch deck/fundraising positioning), depending on investors’ strengths and areas of expertise. These sessions can help both parties test the waters of the potential working relationship.
Action item: Open your calendar and schedule time for the next four quarters. Updates should go out around the same time, so give yourself sufficient time to gather, create, edit, and send.
#5: Be realistic
When it comes to raising a round, founders must be realistic about two things: the time it will take and the valuation you will seek. For nearly everyone, it takes longer than expected to raise money. That's why you need to be realistic with your runway and be sure that you won't run out of money midway through your raise. A good rule of thumb is to give yourself 3-6 months for each round, in addition to 3-6 months of planning. The longer it takes, the harder it will be. Each round should support 18-24 months of growth, so keep that in mind as far as timing your round.
Part of being realistic is to avoid wasting your time on investors that aren't likely to invest. Look for signs of disinterest, suggests Artem Fedyaev, Co-CEO and founder at Grabr:
Signs that an investor might not be the right fit for your company sometimes emerge from the first interaction: they cannot relate to the problem you are solving, they don’t show genuine interest in your business (but only think about potential upside), or they benchmark your company against a portfolio company's progress.
Also, when considering timing, take an honest look at your existing relationships with investors to make a realistic forecast for how long you expect this to take. Then, work backwards to ensure that you are doing adequate networking today to prepare yourself for that timeline. You’ll need to be realistic in your appraisal so that you can identify the events and intros necessary to filling the gaps.
As far as valuation, don’t go nuts. The recent news showing the tremendous pain of bloated valuations causing down rounds and delayed IPOs is a reminder to stay grounded and be realistic as you raise your next round. An overly ambitious valuation targets may turn off investors.
Action item: Make a realistic timeline for your round and give yourself plenty of leeway in case things go slower than expected.
#6: Nail your pitch
And yes: the pitch still matters. Especially the elevator pitch that you’ll deliver to countless people at events and conferences. If you can’t nail the pitch, you’ll diminish enthusiasm and come across as not ready for funding.
As far as what makes a good pitch, it’s brevity and clarity, according to White Fox Scooters’ Sidd Saxena:
The key is to be as clear as possible. Everyone should be able to understand exactly what your business does in one quick sentence.
Another central aspect to a great pitch is strong storytelling, says Grabr’s Artem Fedyaev:
Make the pitch personal. Tell a story that the person you are pitching can either relate to or could share with someone else who might relate to get that assurance that its a good idea worth investigating further.
Ultimately, it's all about adjusting to your audience, says Tastemakers Africa team:
Know your audience. Don’t be afraid to ask questions of the person you’re talking to. The more you learn about a person, the more information you have about how to communicate with them and relate to them in your pitch. Also, especially when it comes to pitching, two-way conversations are a lot more engaging for all parties involved.
Action item: Practice your pitch until it becomes natural and engaging. It's your verbal calling card and should reflect the passion and care you put into your company. But don't be afraid to adjust on the fly to accommodate different audiences!
As you look ahead to your next raise, stay resilient, optimistic, and prepared. Position your company so that it puts its best foot forward with investors. With the right mindset -- and a promising product or service that can demonstrate solid progress on your KPIs since your last financing round -- you’ll find the ideal investors that help move your business forward!
PS: To give you some further reading for homework, we asked our investors for the essential book for startup founders in fundraising mode. Venture Deals by Brad Feld & Jason Mendelson was recommended several times, so check it out for in-depth expert advice.