I’ve been contacted by several members the VC Cafe Network on LinkedIn who are asking for assistance in fundraising for a web startup or a mobile app. I’m writing today to share my recommendations with all who have enquired, and with the broader group of VC Cafe readers.
An experienced VC would have heard thousands of pitches in his day. The good ones would tell you that they have developed a “pattern recognition”. After a while, they are able to determine (at least in their own minds) what startups would succeed or fail. There’s obviously lots going on in a pitch – verbal and non-verbal communication, chemistry etc. In this post, I will outline both platforms you should consider and tools to make you improve your pitching success, before you get into the VC’s office.
Fundraising tips for startups
1) Put your startup on AngelList – if you’re on to something solid, you should have no problem getting noticed by the top guys. Best way to get noticed is to be referred by a member – let me know if you need help with that (angel.co)
2) Spend $19 and treat yourself to this course on raising capital for startups and what to include in your pitch slides. This online course consists of 8 lectures and over 6.5 hours of content (including a sample pitch deck) . Speakers include Naval Ravinikant (co-founder of AngelList), Dave McClure (500 startups) and Adeo Ressi (founder Institute) providing different angles to the pitch. It’s cheap coaching to nail the structure you need in any fundraising presentation http://goo.gl/iqHt0
3) In his class CS183, on startup conception, launch, scaling, and growing of a successful tech company, valley investor Peter Thiel referred to two different decks for the same company. A good deck and a bad/traditional deck, explaining the relevant differences. Access the “good deck” on Blake Masters’ class notes posts (converted to PDF thanks to Andreas Klinger)
4) Look at other pitching examples – recently launched PitchEnvy has over 20 recent pitch decks that raised money!
5) Create an intro video as a teaser – while it’s risky, creating a video can be cheaper than you think, and it can help establish the concept of your startup in a clear/clever/fun way for users and investors alike. I found Startup-Videos to be an excellent resource for seeing what’s out there. There are some platforms out there like PowTown If you’re going to do it yourself, you better get some training. Crowdsourced education platform Udemy comes to the rescue with How to Create an Awesome video demo for your startup. Animation platform PowToon, an Israeli startup, is another free tool to help.
6) Equity Crowdfunding – I’ve covered the different types of Crowdfunding on the post Startup Equity Crowdfunding grows in Europe. In a nutshell, equity-based platforms like FundersClub (US), Seedrs (UK), and CrowdCube (UK, mostly non-tech) and others, enable anyone (not just accredited angel investors), put small sums as little as $1000 towards an equity investment in a startup. The sector is yet to be regulated and there are concerns about alignment of investors, but nevertheless it is a viable way to get the first bucks to build a product.
7) Donation Crowdfunding platforms like Kickstarter, Rally and IndieGogo are essentially early-sales platforms, which works especially well for physical products. For example, Pebble was able to raise $3.4 million in 3 days for its smart watch, which grew to over $10 million in one month from 68,000 backers, without losing a single percentage of equity in the process. People who pledged money towards the project got in return units of the product, or the ability to choose a color for their Pebble watch depending on how much they paid. Another example is Ze Frank, who raised $146,000 from 3,900 people since March. He included several ‘awards’ for different levels of fundraising including “I will whisper words of encouragement into a small jar, label it, and send it to you + One black on black fuzzy duck t-shirt” for people who pledge $250. It doesn’t work for everyone, but is certainly a channel worth considering, for the right product.
8) Get on accredited lists – this is a bit of a chicken and egg. You need funding, VCs like traction. If you can show you have traction, it will be easier to get funding. One way of doing that is getting ranked by industry accredited lists. Associates at VC funds will regularly go through lists like Deloitte Fast 50, Telegraph 100 to look for hidden gems. If your startup was ever on one of these lists you probably received unsolicited phone calls asking for meetings. Another way of accomplishing the same effect is to sign up for visible pitch competitions like the Startup Bootcamp’s Tech Allstars (a competition for startups in EU who were part of accelerators), or LeWeb’s pitching competition.
9) Get media/blog coverage before you launch – staying on the traction point, any prospecting investor will do its due diligence on the company, product or team. Since there aren’t too many data points in the early stages of a startup, getting featured by a reputable media outlet (ideally national, but niche works too) will create another entry point for people to find out about your product or service. A friend of mine got featured by Wired, GQ and BBC before he went live with the product because he was focused on a ‘sexy’ area. The result: oversubscribed angel rounds and a long waiting list of beta testers for when the company is ready to flip the switch. Of course if you aren’t ready for publicity it’s better to wait before you attract all that attention. A ‘soft’ way of getting noticed is answering questions on UGC sites like Quora or LinkedIn, submitting a guest post on your area of focus without being too salesy and starting your own blog, to establish your voice within the community.
10) Get on stage – practice your pitch as much as you can. If you live near a vibrant startup community, there should be plenty of opportunities to do pitch practice. From community meetups to university clubs, getting on stage will not only improve your confidence, but can also produce valuable feedback before you get on to the real thing.
Any of these techniques is most likely to work best for kick ass teams with experience and products that tap big and growing markets in a scalable way. No harm in trying, but don’t put the cart ahead of the horse! You are of course also welcome to visit the VC Cafe Startup Resources page for additional tools, reading lists and recommendations