Recently, a mentor who is very instrumental in guiding me recommended me Dr. Florian Kandler’s course Startup Fundraising Masterclass: Venture Capital 101.
I’d like to share my experience and my reflections, summarized according to the three main sessions of the course: finding investors, preparing for fundraising, and dealing with investors.
Finding Investors for Your Startup
Session Overview
In this very first session, Dr. Kandler first introduces stages of investment, with common sources and amount invested/share taken by investors. Then Dr. Kandler gives a detailed discussion of each type of investor, including family & friends, government grants, incubators & accelerators, angels, VCs, and corporate investors. After that, a calculation of venture investing is presented. This calculation shows that VCs will check whether the market size and the business model enable 15x growth. This session concludes with key points regarding conversations with investors.
Haydon’s Reflection
In the pre-seed stage, when angels and VCs are yet to come into play, fund sources can come from friends and family, or government grants. Be transparent with your friends and family, and document every verbal agreement. Don’t ask more than what your friends and family can afford to lose. Government grants are basically free money but can come with some additional terms. But don’t let just a few thousand dollars make you work on something unnecessary which wastes your valuable time.
In the seed stage, when working with angels, founders should look for 3 characteristics: wisdom, wealth, and willingness to work.
Later, when dealing with VCs, founders should be very clear about what they need, in addition to the money, from the investor. For example, a founder may need not only business support but also personal development and emotional support.
When talking to VCs, founders are suggested to talk to decision-makers, who usually are higher-level staff in a VC firm. A warm introduction to the investor is a powerful way to start a conversation. So founders should also try to connect with intro-givers.
Preparing for Fundraising
Session Overview
This session begins with the importance of visibility in the startup ecosystem. There follows strategies to increase your visibility, including social media strategy and content creation strategy. The ending subject concerns communities, which contains both entering a community and creating your own community.
Haydon’s Reflection
Preparation for fundraising is more difficult for first-time founders because they usually lack credibility. To be credible, you need to be visible first. Apart from (professional) social media, a powerful way to increase visibility is to create content, such as writing articles. By writing, founders can show the credibility and the progress of their startups. Founders can even try to write guest articles or coauthor articles, with the benefit that the credibility of the blog owner or other co-authors can rub off on you.
When entering a community, a founder should introduce himself and show his passion and expertise in this topic. Contribute first, keep delivering value, connect with people, and only ask for a favor in the end. In addition, having your own community can boost your credibility and help you become the authority in your field.
Getting in Touch with Investors
Session Overview
This session starts with the goal of contacting investors. This is followed by the material required before contacting, i.e. the teaser and the slim deck. Next come ways to contact, both warm introduction and cold contacting. The session concludes with the preparation checklist of the first meeting and the aftermath.
Haydon’s Reflection
There are two situations with which founders should avoid ending up. Situation #1 is that a founder is looking for money for a long time, giving investors an impression that he may not get the deal done. Situation #2 is that a founder only has one offer on the table.
The goal for every contact is to get a meeting. It’s not a good idea to send a full pitch deck to the investor, because doing so can only decrease the investor’s interest in meeting you. Usually, a teaser and a slim deck work better for trigger interest.
The best way to reach out to your investors is to make your investors reach out to you. The whole dynamics would be different than the other way around. The next best way is to have a warm introduction.
If investors know you’re pitching, they will become defensive. It’s better to talk about something else first and let the investors ask you if you’re raising money. Some techniques founders can use here are asking for advice, having an expert conversation, and researching mutual passion.
The goal of your first meeting is to get to the next meeting. A rough time breakdown of the first meeting: 50% presenting, 25% answering questions, and last 25% asking questions.
Limit your first meeting to around 30 min, because if it is long, the investor would think he has everything so there is no need for a second meeting. That will kill the momentum.
Always follow up first meetings. Not-following-up is not saving time but wasting previously invested time.
Conclusion
The course is well organized and easy to follow. I learned the process of startup fundraising, from shortlisting investors, preparing for meetings, to actually contacting investors. As my mentor recommended this course to me, I also recommend anyone who is interested in fundraisings, such as young entrepreneurs or even venture capitalists, to start the fun.