Blog post: April 6, 2021
Aspiring entrepreneurs are often intellectually curious. They want to know about how to start a business, how to build a team, and how to accelerate growth. Most of all, they want to know how to successfully raise capital. While there is no secret hack or formula for raising capital, there are a lot of best practices that can be employed.
I interviewed dozens of founders as part of a video series dubbed, “The Fundable Founder.” Each fundable founder was asked to provide their elevator pitch, what inspired them to start their business, and their strategy for fundraising.
I also asked the fundable founders to describe themselves in one word, and here's what I heard: Tenacious. Intense. Energized. Curious. Resilient. Energetic. Explorer. Positive. Pragmatic. Compassionate. Gritty. Wind-up-toy. Fearless. Purposeful. Diligent. Commercialization. Driven. Persistent. Intellectually-Curious. Doer. Passionate.
After just a few interviews, I started seeing some patterns emerge. After 20, I started to see a map that aspiring entrepreneurs can use to become fundable founders. Building a business is a journey…use the map wisely to find the fuel you need to get to your end destination:
1. PICK A DESTINATION AND YOUR TRAVEL COMPANIONS: Find a problem that you are passionate about solving. Investors invest in teams and are looking for people who are passionate, hard-working, intellectually curious, and good at making decisions, especially when their back is against the wall. Your goal should not be raising venture capital. Your goal should be to build a great company and a great product.
2. PREPARE FOR THE LONG HAUL: Don’t start your training in the middle of the marathon! Do your research. Think of this as investor discovery. Who is a fit and why? Tell the investor why you reached out to them and why they would be a good fit. This is how you can get a response to cold outreach or an even warmer introduction. Continue the research throughout the process by asking investors what they need to see next on your growth journey. Have the data room ready to go so you can respond to investor requests.
3. TURN ON WAZE: Build your network. It’s painfully obvious that a good network is highly correlated with a successful fundraise. Over and over in the interviews, I heard MIT, Harvard, family, prior colleagues, etc. But there are also founders who built their network from scratch. How does a founder from Worcester State build a network? She attends every event she can. He participates in pitch competitions, applies for and gets into MassChallenge, and asks for connections. It might take a while, but anyone can build a network of hundreds to help them on their journey. Think of your network as the support team that can help you avoid speed traps and let you know when there is a Dunkin Donuts nearby to keep you going.
4. HEAD NORTH (STAR) and FOCUS ON THE ROAD: Develop your mission and the core pillars for your business. This will help anchor the founding team as well as provide a great basis for the elevator pitch and business vision. Seed-stage investors invest in the team (see above) and the vision. While the grand vision is important, investors want to see a focused plan to get there. Shore up the plan with more customer discovery than you think you can manage…then double it. One of our fundable founders did 500 discovery calls in one month. Lead with the vision, then tell the story through the lens of the customer.
5. SIPHON SOME GAS FROM FRIENDS: Hack your way to traction. While honing your pitch, enter some pitch competitions and win some money. Enter some accelerators and get investment and prizes. Find customers willing to pay for pilots and product development. Find non-dilutive grants through the federal SBIR program and grant programs offered by local government. Find employees who believe in the vision and will provide a lot of value at little cost today.
6. TAKE THE FORK IN THE ROAD AND PICK UP SOME VIRTUAL HITCHHIKERS: Do investor discovery quickly. Find the investors that will fall in love with you instantly. The right investor is usually an obvious fit. Listen to and filter advice. Be intentional about the decisions you make. Bring the investor on the journey with you and keep them informed along the way. Monthly updates to a curated group of investors can go a long way. I see about 200 investment pitches per year, and I would estimate that less than 10% take the simple step of sending a monthly update. It makes a difference!
7. ACCELERATE: Build to an inflection point. Figure out the inflection point by listening to what gets investors excited. Create the fear of missing out and a sense of urgency. Investors need to know why now. Take a detour to other cities where investors live to create FOMO. Strike while the iron is hot.
8. SELECT THE RIGHT OCTANE, OR GO ELECTRIC: Cheap fuel can create engine problems down the road. Don’t focus on valuation. Focus on the investment firms(s) that will get you to the finish line. Remember, this is only your first stop on the journey.
Fundraising never stops until the journey is over and you reach your business goals. Go on the journey with people you care about and with whom you want to share those experiences. Make sure to send pictures and souvenirs from the journey to those that help you along the way.
Photo credit: Kelly Lacy from Pexels