Raising money for a startup is an adventure. Initially, friends, family, angels and seed investors place a high value on the team, the grand idea, and its overall potential. Overall, they are a very supportive bunch that gets a startup through the first year or so of its development. But when it comes time to bring in additional money to grow the business, the numbers matter and things get tough.
Venture capitalists are a notoriously fickle bunch and generally dislike parting with their money. Further, there’s a well-publicized Series A, B, C, D crunch happening as investors retrench owing to flagging market conditions. So as a startup founder heading out fundraising post the seed round, get ready for battle. A few lessons:
Beat up your network: Use every angle possible to get the meetings that you need. Assume you won’t get the dream pitch to Marc Andreessen unless you get a warm intro by someone close to him. Working one’s way through the network is tough and must be done in a sophisticated manner. Do it aggressively and with purpose.
Be a geek on a plane: Startup travel budgets are thin, but be willing to jump on a plane at anytime to go anywhere. Striking while the iron is hot is critical and so be sure to follow up on leads with an immediate face-to-face. As long as they will let you in their office, keep going back until you have a deal or that intro to Marc.
Know your numbers: As startup financing markets toughen, be prepared to show real numbers– like revenue, a forgotten word in the startup world. The so-called frothy times are gone so be prepared to show and prove. Further, do a VCs work for them. Matthew Nordan of Venrock did a great piece on how to do VC math. Learn to do it.
Be different: Find ways to stand out. In your pitch, be more than the next “x for y.” An entrepreneur I know recently pitched a Silicon Valley VC and, having done lead generation scrub on that VCs Twitter and Foursquare, found that he was particularly fond of a Las Vegas gentleman’s club. High risk, yes but it made for a memorable meeting and some killer introductions.
The financing roadshow is an inglorious endeavour. Learn the lessons as you go, be persistent, and good luck.
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Thomas Rankin is the investment director at Innovacorp, a Halifax-based early-stage venture capital fund making investments in internet, mobile, energy and medical technologies. He tweets @rankinthomas and blogs at impossibleconfidence.com
