As developing a new product is time-consuming and unpredictable, the ability to seek more funding is vital to startups. The process of searching, applying and pitching could be tedious and overwhelming. Berlin-based VC firm Point Nine Capital has listed nine rules to abide in order to be more effective at fundraising. These nine points can be divided into three core strategies. Follow them to increase your chance of success.
Strategy No.1: Knowing your secret weapon, the battlefield and the targets
1. Product
This is the secret weapon you have been dreaming about for months or years. I know you can describe it at length but you need a concise description for the future investors. Make the answers to these questions short, special and memorable:
- What is your “special power”? – or the problem your product solves
- Who would love it? – or the group of customers it helps
- What is the distinguished core feature?
- How will it develop in the next six to twelve months?
Show, don’t tell
Let the investors try your product. If it is not quite ready, send them a demo, demonstrate the details with videos and screenshots.
2. Competitions
What is happening on the battlefield?
You need to know your competitors, their strengths as well as weaknesses, and the gaps on the market. Most importantly, show investors the way you will build your long-term competitive advantage.
3. Target market
You don’t need a win on all fronts, but the right ones. Make sure to choose the most suitable targets and get to know them well, meaning:
- Be as specific as possible: “2 – 4 years companies, with 200 – 3,000 employees, in Western Europe”, works better than “small and medium-sized companies”
- Use reliable data to estimate the size of the market
- Study the structure, current trends, and future opportunities
Strategy No.2: May the odds be ever in your favour
Learn the data and its meanings because numbers speak louder than words.
4. Traction
You need to track the Key Performance Indicators (KPIs), from the launching point to date, so that you can show them to the interested investors. Some common KPIs for a SaaS company are:
- Visitors & Signups
- Paying customers
- Monthly Recurring Revenues
- Customer Acquisition Costs
- Cash flow
A cohort analysis takes the numbers you track and give readers a clear overview of the product’s usage and retention. Basically, it turns hard raw data into something more comprehensible. Better still, show the number and size of opportunities in your sales pipeline. They indicate future growth and give investors the guarantee they would appreciate.
5. Acquisition
Specify how you have gained the current paying customers, how you plan to acquire more in the future, and at what cost.
Some acquisition channels are:
- SEO
- Paid search
- Direct sales
- Partnerships
- Content marketing
- Events
Nobody puts a gun to your head to make you use all these channels. However, you want to show that you didn’t (and won’t) hesitate to hustle.
6. Pricing
Your price determines your revenue, and consequently the return of investment. Therefore, investors would be interested in how you price your product, in comparison with your competitors.
Strategy No.3: Humans – the ultimate power
7. The Team
An innovative idea could wow investors, but they tend to put the bet on the people. Make sure you show off the strengths of the founders and the quality of the first hire. Highlight all the technology as it is the key to the success of most SaaS projects.
8. Money = ???
Your team need to commit to delivering certain milestones with the funding you’ll get.
Show funding history of your startup, also: who invested in you and what your achievements were.
9. Testimonials
Provide feedback from a favourite client or an industry expert. Investors would like it more if you can arrange for them to talk directly with your client so they can see your product from a different perspective.
Though investors prioritise differently on their selection, most of them would want information on these above points in one form or others. Make sure you have them prepared and best of luck with the fundraising efforts.
(h/t: What do we base our investment decisions on? Savina van der Straten/Point Nine Capital)
Piggybank image by Shutterstock
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