15 February 2020|Crowdfunding, Fundraising
By Tom Fairey, founder of Stakester.com and host of the BackYourself podcast. In 2019 I had that pivotal life moment where I started a conversation with ‘wouldn’t it be cool if…’ and before I consciously knew what I was doing, I’d founded a startup.
If you’re reading this, you’re probably in the same boat. It’s an intoxicating feeling; for maybe the first time in your life, you are in complete control of your own destiny. Inspiration fuels you like a performance-enhancing drug and you scribble down ideas faster than an actor playing a genius in a biopic. You are the hero of your own story and you are going to slay that age-old nemesis, mediocrity.
And then you do some sums and your heart breaks like a contestant on X-Factor who didn’t make the live shows. You’re going to need money, and way more than you’d saved and that £512.54 left on your credit card isn’t going to cut it.
So unless you’re already well connected and have a godparent who has believed in you since your first nativity performance, you’re now going to have to find other means to raise the cash, lest you forget your entrepreneurial vision and that dream of running through your open-plan hipster office high-fiving your 400 employees.
I’ve been through this, I’ve been startup-ically broke and I’ve had success raising. I’ve also interviewed some savvy investors and founders on my show that know a lot about this topic. So here are my top tips to help you supercharge the process and hopefully win.
My assumptions — you have a good idea, you have thoroughly thought through the problem you’re solving, there’s a market for you to tap into and you are willing to work your socks off.
Raise your personal profile
If there is one phrase that is consistent across all investors I’ve met, pitched or interviewed, it’s that the people are what matter most. And it makes complete sense because, in the early stage, that’s your only asset. So you need to make this asset attractive enough to invest in.
So where do you start? Begin by putting yourself in the mind of the investor. What would you want to see? Relevant experience? Subject matter expertise? Where would you look? LinkedIn? Google? Twitter? Crunchbase? The answer is yes to all. So you need to make sure at the bare minimum these are tip-top and a fair reflection of what a good bet you are.
But as I said, this is the minimum. You need to stand out. If you’re an expert, talk about it on podcasts, ask to join panels at events, write on Medium.
Now the hard bit, networking. Nobody likes it, it feels awkward and rarely natural. Unfortunately, you need to suck it up. Alex Dunsdon, one of the top investors in the UK says that serendipity is a true superpower, and you can improve the chances of having it by meeting more people. Go to startup events, meet other founders.
I used MeetUp and yes, some were terrible, but one gave me an investor, so it was worth it. If you can’t find a good one with a topic you care about, make one.
Make the opportunity attractive
Investors have money, and money makes them attractive to startups. And like a vet carrying a leg of ham at a kennel, they are getting lots of attention. The average VC gets over 1000 applications a year and Angels will get over 100. It’s super competitive and you need to make your opportunity stand out. The things that make it attractove are obvious; Returns, Innovation, Sector and as per point 1, the team. Make sure you shout about these. Make sure the investor looks at your pitch and thinks ‘yeah, this is cool’.
And after you have one investor, you can now create the most powerful investor emotion — fear of missing out. If people are investing or even just committing, make sure other investors know about it. VCs will always say that the most costly decisions are when they missed an opportunity, not the ones that went bad. There is no better validation for your opportunity than others investing and nothing will make people invest quicker.
You don’t know where your investment will come from. And anyone that tells you they do, are fibbing. So you need to try all angles. Case in point, our second investor came from a chap who overheard me pitching to someone else in a coffee shop and another was a listener to my podcast. You can’t predict this, so you need to try all angles. I recommend the following;
Investment Networks — my fave is Angel Investment Network and SeedInvest, they’re halfway between traditional crowdfunding and a syndicate. You post your pitch and can contact angels directly if you think they’ll be interested. Conversion is low, but it’s relatively time-efficient and the audience is specific and large. Here’s ours if it’s helpful to look at a live example.
Direct contact — find angels on LinkedIn and VCs on Google and contact them directly. Keep your email concise (team, problem, solution, market) and tailored with a ‘why them’ for each email and you will get better results.
Referral — ask funded founders for a referral to an investor. They will know lots because they’ve been through it and referrals have the best conversion rate.
Podcasts — go on lots and talk about your company. Spotaguest.com is great for finding shows that need guests.
Word of mouth — talk about your company to EVERYONE. We did it and in a rather cliché moment, we were offered investment on a golf course. Which if you’d seen any of us play golf, you’d know was quite remarkable.
Rejection sucks and often hurts like being hit by a truck. And you are going to get rejected. A lot. I wish I had been told this before I started so I could prepare myself. It was after the ninth straight ‘no’ I started to doubt if we’d ever get funded and whether I had what it takes. Maybe I just wasn’t investment material, maybe I should have done an MBA instead of Theology, maybe I should hand the reins over to my colleagues and get a regular job. But then a wizard of the startup world (Warwick Hill) told me, ‘there are ten thousand reasons someone might not invest, and you may only be 1%. Don’t take it personally’. It’s the same logic as dating if someone says they don’t want to see you after the first date, it’s not because you’re a loser, you’re just not right for them.
Rinse and repeat.
Fundraising doesn’t happen overnight. Building a profile, finding investors, speaking to investors, answering their questions, updating your deck, re-engaging with ones that have gone quiet, all take a ton of time. It’s slow, it’s frustrating, it’s repetitive and eye-wateringly hard. But you have to play the long game. Treat it as a specific part of your job and allocate structured time to it with specific goals.
It took us nine-ish months to complete our first raise and all we had was an idea. It was brutal and the whole team went through consistent uncertainty and heartache. The hardest thing isn’t rejection, it’s the pace. You are expected to move mountains within seconds and yet your investors move pebbles in months. But you have to expect this, learn to handle it and preserve. If you stay focused, maintain diligence, keep outreach activity high, take feedback often and refine your pitch accordingly, you will win. And that dream that started with ‘wouldn’t it be cool if…’ will evolve into ‘wasn’t it cool when…’