Tips When Raising The Seed: Startup Pitching
Each month you hear me talk about my experiences as an entrepreneur spearheading my startup Brndstr Inc. Over the past six months, we've covered a lot of the facets of managing a new company, expansion advice, and even how to pitch. I've shared my advice and suggestions from firsthand experience. In this piece, I wanted to go back to the very beginning- raising the cold, hard cash!
As an entrepreneur with a killer idea, you believe that you have all the makings for success but you're lacking one crucial thing: the funds. It is common to hear people say I want to raise $X and give away X% -TV shows like Dragons' Den base their concept around such figures- but how do you get in a position where these negotiations can happen? I have decided to put my suggestions into five points of things that startups may not think about when seeking to raise funds.
1. Who you know is as important as what you know
Networking is integral to your startup's success. People look to VCs and investors for help because they know that these people have a strong network. Their LinkedIn connections are powerful, and their phone books are full of influential people. My advice is that you too can build your own network. If you get yourself out there at events, meet people, mingle with groups that you want to be a part of, you will find you that you too soon have a network. It may not happen overnight, but persistence is key is pays off in the form of a network- potentially leading you to an introduction to an investor.
2. Perfecting your delivery and your pitch
Although you may know your idea like the back of your hand, you need to be able to tell potential investors with a very simple descriptive framework. You need to hook the potential investors, and get them interested in learning more. You need to be able to explain to someone what you do in the time it takes to travel in an elevator- believe it or not it's known as an "Elevator Pitch".
3. Element of surprise
When speaking and pitching to investors I always suggest having something that they don't expect. These guys will see many ideas and business plans- do something that will make them remember you. I have said it many times before but I always personally handwrite a note to anyone I meet. This personal touch goes a long way in a world where everything is digital and online.
4. Failure is only feedback
You will almost definitely pitch to someone who says no. When this happens you need to take the feedback as to why they turned you away, and then build on it. Something I did was when unsuccessful: I would email the person shortly after with a breakdown on their feedback and discuss ways I would overcome the problems that they pointed out. If the case is the person just simply didn't get your idea, then they are not right for you anyway.
5. Be realistic and fair
When you sit down and meet potential investors, you will ultimately need to discuss equity and investment amount. Personally, I would never start by saying how much you need and what you are willing to give away. In your plan and mind, have a range- this means you should be able to quantify the maximum and minimum of what you're willing to negotiate. You may find that from the meeting, that person has a lot more to offer and is therefore worth handing over that extra equity that you were reluctant to part with. Don't get caught up on percentages, in my opinion it's better to own a little of something than a lot of nothing.
Raising money is always a huge topic of conversation in the startup space, and everyone has their own way and ideas on what's best to do. At the end of the day you need to make sure you not only have a partner that can fund your idea, but also one that you can work well with. You are building a long-term relationship so make sure you ultimately get on in terms on vision cohesion and even chemistry. Good luck raising the funds, and catch you next month for more 'trep talk!