Funding is one of the most difficult challenges entrepreneurs face. In most cases, you’re either bootstrapping or asking people for money to invest in your venture. At the third session of 1871’s Groundwork series -- a set of public workshops focusing on foundational topics for newly-minted entrepreneurs -- Tony Wilkins, Sonia Nagar, Andrew Schwartz, and Charlie Connor discussed best practices to secure funding from investors.
With the popularity of shows like Shark Tank, it may seem easy to get funding for your startup. One quick pitch, a few questions answered, and then a big beautiful check ends up in your hand. Unfortunately, that’s not how it works in the real world -- it takes a lot of chemistry, time, and finesse to win the confidence of an investor. The tips below come from leaders in the funding space and can help you in your quest to land that term sheet.
- Brevity is Key
Keep it short and to the point. There are times for compelling stories about your company, but a first-time investor meeting isn’t one of them. “For you to interest me, for the lights to go on, you can’t bury the lead. You need to tell me in preferably six words what you do,” said Tony Wilkins, a private investor in Chicago. And if investors ask questions? A direct answer is what they want. If a VC asks for your churn rate, give them a number, not a lengthy story that explains the number.
- Numbers Speak Volumes
Make sure to include your numbers when talking to investors. Sonia Nagar, a VC at Pritzker Group Venture Capital, pointed at/specified dataless pitches as some of the worst she’d seen. “Revenue numbers, audience numbers, survey data based insights - at any stage you can generate a set of data,” said Nagar.
- Don’t Force It
As high school has taught us, you can’t force someone to like you. Sometimes your company just isn’t a fit for the investor you’re pitching. Trying to evangelize an angel or VC who isn’t interested in your product doesn’t work. You want to find someone who is excited about your company from the get-go and then build your relationship from there.
- Work Your Network (and Everyone Else’s)
Most investors don’t respond to cold emails or random LinkedIn messages. They want to work with entrepreneurs who know how to network and make connections. The best way to get in front of them is to have another investor, advisor, or other successful founders make an introduction. And if you do get in front of an investor who’s just not interested, ask them if they can introduce you to someone who might be. Their goodwill may be the key to your success.
- Time, Time, and More Time
Finally, and this is the truth that’s hardest to swallow, it takes a lot of time for an investor to write a check. “There is a big component that just comes down to relationships,” said Andrew Schwartz, Managing Director of Innovation Banking at CIBC. Most VCs or angels like to develop a rapport with an entrepreneur over a long period of time. For example, Wilkins once met an entrepreneur who he believed had an extremely promising idea. However, he wanted to ensure that she could execute her business plan and waited three years before writing her a check.
There’s no easy answer or quick fix for fundraising, but with a clear idea, some sweat equity, and a time commitment, any entrepreneur can find themselves with a term sheet in their hand and a smile on their face.
Would you like more startup insights? Then make sure you reserve your spot at our next Groundwork workshop, How to Create a Killer Brand.