Oftentimes, I read articles offering tips for entrepreneurs that revolve around generic advice on getting started. However, what is often direly needed is how to appeal to investors and raise smart money — knowledge that is essential for fundraising and a master key to building, accelerating and scaling your new venture.
The investment platform I founded and run, VenturePole, is the investment partner of HealthInc, the health tech accelerator of Startupbootcamp, the biggest startup accelerator organization in Europe. As part of my role as a partner of HealthInc, I sit on the jury for the startup competition in which 20 finalists pitch their ventures, with 10 then selected to enter the program. The winners receive support, including an investment, to accelerate and scale their ventures. In my additional role as a mentor, I help these startups get investment-ready in the program.
LinkedIn co-founder Reid Hoffman once said, “Starting a company is like jumping off a cliff and assembling the plane on the way down.”
In my opinion, jumping off the cliff is the easy part; assembling the plane before you crash into a million pieces is what keeps founders up at night.
As a founder and investor sitting on both sides of the table, I have consolidated my knowledge into the following tips for founders to raise smart money — funding from investors who can help you build your plane — which is one of the most beneficial things you can do for your company.
11 tips to raise smart money for your new business
Be the know-it-all
Be the smartest person in the room when it comes to what you do. Whatever your product, technology and target market may be, it’s vital to know the ins and outs.
Prepare to answer questions about all facets of your business. This means developing a thorough understanding of the problem you are solving, talking to potential customers, researching your competition and knowing your key metrics and financials like the back of your hand.
Be the learn-it-all
Underrepresented folks in entrepreneurship and venture capital, including women, people of color and LGBTQ individuals, are often led to believe we must be overqualified to start a business, join a VC firm or become an investor.
We don’t. We just need to want to do it and be willing to learn along the way. Listen to constructive criticism, and learn from useful feedback, but always carry a dignified bearing. For example, remember to finish your point if you are interrupted during a pitch.
Keep it simple, stupid (KISS)
Investors receive a lot of pitch decks on a regular basis, but we spend on average about three minutes on the ones we actually open. Remember most investors are not experts in your field, so it is your job to get us to understand what you do. Investors can only start trusting you after we know what you will do with our money.
Physicist Richard Feynman said, “If you can’t explain something in simple terms, you don’t understand it.”
Unless you are presenting to an audience who are experts in your domain, I implore founders to pitch in layman’s terms and leave the technical jargon in the backup slides for the Q&A.
Keep it short
When investors listen to pitches, they are oftentimes back to back (for example, in a startup competition). If you’re lucky, you have about 10 minutes before we zone out. In my experience, investors’ attention spans wane considerably fast, so aim to pique our interest in the first three minutes of your pitch.
Hone your pitching script to get to the point quickly, preferably with little jargon and a wow factor.
I use separate scripts for one-minute, three-minute, five-minute and 10-minute pitches; I then save them in the cloud for fine-tuning any time I have an idea.
Franklin D. Roosevelt’s advice resonates here: “Be sincere, be brief, be seated.”
Multiple studies have found informal and formal networks are major sources of deal flow for investors, meaning we look at startups referred to us by someone we know.
In contrast, cold emails from founders we don’t have any connections with often get lost in the black hole of our inbox. So, try to get a warm introduction to help you get your foot in the door whenever possible, and follow the next tip to build your network.
Put yourself out there
I am an introvert with Asperger’s and relish alone time as a researcher, programmer, poet and pianist — perhaps too well.
While you may be resistant to attend yet another networking event (either virtual or in person), a big part of being a startup founder is having a commanding presence; you have to believe that you have every right to succeed — and then go out and do it.
Apply to competitions and accelerators, update your LinkedIn and other professional profiles and bring your business cards to events and functions, especially if you’re in a more conventional industry.
Be a leader
In 2018, I started building what became VenturePole. I recruited two top-caliber experts as co-founders, but they left for different reasons during a critical time. Later on, down the road, I had to dismiss new co-founders who proved unsuitable for the job. These experiences and difficult decisions took a heavy toll on me then, but looking back, there was always a silver lining in the form of a valuable lesson.
Entrepreneurship is everything but sunshine and lollipops: expect a brutal roller coaster ride, learning, reflecting and cultivating your skills as a leader. Stay in the know and up-to-date on best practices for leadership and management.
Use those jazz hands
The top-viewed TED talks have double the hand gestures the least-viewed do, at 465 of them in just 18 minutes. Hand gestures are a signal to your audience that you are enthusiastic about your topic and that your presentation is lively and interesting. Using those jazz hands goes a long way in perfecting an engaging pitch!
Be fully committed
I poured time and money into VenturePole from the get-go and did not have a plan B on the back burner. As an investor, I love to see founders have skin in the game. A successful business is rarely built part-time, and fundraising alone can be a full-time job. You are more persuasive if you commit fully to your role as founder.
Being comfortable in your own skin gives you a sense of style and poise. Early-stage investors bet on the jockey (you) more than the horse (your venture), which is why over 95% of VCs see the management or founding team as a critical factor in their investment decisions. Showing you’re human also makes you seem more authentic, so don’t fret when you make a mistake in your pitch.
When I started raising the seed round for VenturePole, I was rejected almost 70 times before securing our first investment. It takes grit and spunk to get back at it every morning after fighting floods of self-doubt and the temptation to quit. Being rejected is the norm for most entrepreneurs. Have the humility to filter out constructive criticism, improve your business with this criticism and go back knocking on doors with poise.
Key takeaways on how to raise smart money
This is by no means an exhaustive list of tips and advice that will boost your chance of raising smart money, but I believe these are golden nuggets of statistics and lore you need in order to master the art and science of fundraising.
Now get out there, and build the business of your dreams!