As a startup founder in Silicon Valley and advisor to some of the hottest startups in the last five years, I have had the opportunity to understand founders, fundraising and the startup growth process. (Full disclosure: I was a consultant for Uber and Airbnb and a startup advisor for Salesforce Ventures and Google Ventures.) In 2018, I moderated 12 pitch competitions across the country, funding 10 up-and-coming startups. But it isn’t easy being a founder in highly competitive Silicon Valley, and funding is becoming scarce. Here are my top dos (and don’ts) for grabbing the attention of Silicon Valley investors.
When you’re raising capital, a great startup pitch can make or break your funding efforts. I’ve heard thousands of pitches over the years, given quite a few of my own, and spoken to hundreds of entrepreneurs about their experience with raising capital. What I’ve noticed is a pattern that emerges again and again: the founders who get funded are the ones who use every rejection to improve their pitch.
Just as the best businesses are the product of many failures along the way, the best pitches are born out of many bad pitches that came before. The entrepreneurs who give these pitches take constructive criticism to heart, constantly reworking their slide deck and tweaking their delivery until they have a truly outstanding pitch that investors respond to.
Even if you think you already have a great pitch, there are some really helpful strategies you can use to inspire investors and customers to take action. Drawing on my own experience and feedback from fellow entrepreneurs, here are proven strategies to deliver a pitch that resonates.
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Today, Series A investors are now looking for more and more traction before leading large Series A rounds. Institutional seed investors have followed suit — increasingly investing only in companies with some demonstrable success in the market. And because institutional seed investors are funding slightly more mature companies, a new pre-seed category has emerged to fund companies one step earlier.
Finding startup investors. Entrepreneurs make a common mistake when it comes to raising money for their startup — they don’t start soon enough. They think they should put their heads down and develop their prototypes or set up their business, and then put some thought into getting funding. But it doesn’t work like that. You can’t spend six months building a prototype, then wake up one morning and decide it’s time to fundraise and watch the money flow in. You have to network in the finance community as you build your business to secure the right funding.
A while back we had a sponsor called StartEngine and I was really excited about it. The reason was because it was a new way to raise money. But what really got my attention was the bio section of the founder. His background was fascinating.I invited him here to talk about the revolutionary was his company is enabling entrepreneurs to raise money as well as his previous companies.Howard Marks is the CEO and Co-Founder of StartEngine which is an equity crowdfunding platform, connecting investors with startups.
The pitch deck is a presentation that entrepreneurs put together when seeking a round of financing from investors. On average pitch decks have no more than 19 slides. Ultimately founders need two different sets of pitch decks. One version will be with a lot of text and information which will be shared with people via email. The other version will be the pitch deck that entrepreneurs present to investors in person with more visuals. Having more visuals will contribute to having investors focused on you.
A cold email. Everything you’ve read has probably told you that to get a meeting with a VC you need to get an introduction. This is only partly true. An intro is going to increase your odds tremendously, but what if you can’t get an intro? What if you want to meet with Mrs. X, and you can’t find anyone to introduce you to her?
Cryptocurrency is changing the world as we know it, and one of most relevant ways is how startups are fundraising. Typically a startup would have a few options to get their company off the ground: bootstrapping using their own money, VC funding, or most recently crowdsourcing using tools like Kickstarter. Now, with the trend of cryptocurrency spiking, startups can get creative and raise money using this new form of payment.
There are quite a few platforms and companies that are now making it even easier for startups to fundraise using cryptocurrency.
How to calculate how much you should raise. I’ve found it helpful to outline what I’ve interpreted as the current state of the milestones investors around here typically look for at each stage. And of course, how much you raise needs to get you to the milestone at the next stage.
Many investors have written about how they need some companies to win big in order to cover for other companies failing completely. As a simple example, Fred Wilson at Union Square Ventures tells his investors to expect a third of his investments to fail, a third to return their capital (which is also failure—they sell for a small enough amount that investors just get their money back, and in most cases the founders and employees get nothing), and a third to “succeed,” where his definition of success is that they return five to 10 times the original investment.