This week I’m talking fundraising.
I just started my own fundraising journey so it’s front of mind.
I’ve been reading, prepping and talking to experts about the topic.
Fundraising is supposed to be hard, and if it was easier, the market would be even riskier than it already is. But with the right playbook, there is a recipe for success.
If you are curious or looking for some tips on that journey, today’s goal is to give you a few tips to avoid the common fundraising pitfalls.
This week I chatted with James Church, who works with founders on all of their assets to be (and I am quoting James) that make it 40 times more likely to get investment.
James is an absolute fountain of knowledge.
You can catch the full episode with James here
Take baby steps
Raise the right amount for your business at its stage. Ideas are easy, everyone has them. Proving you can execute will make it easier to get more funding at each stage.
The more you have real proof that you are going to spend an investment well the easier it will be to raise.
Show them how far you have gotten without investment or with family and friends investment.
If you’re trying to raise large sums of money with little evidence and little kind of progress to date, then you’re going to spend 6 - 12 months trying to close your round.
Whereas you could go and raise €50K for three months in that very early stage, early stage, just to get your idea off the ground and make that impact straight away.
Then go and raise another €150K to last you six months. You know, prove what you can do with that. And then so on to raise more.
And those rounds will take less time to close because they’re more realistic deals that there’s something in investor.
This is a no brainer because you’ve proven so much with the money you’ve spent so far.
With less risk, you have the ability to retain more of your business in these rounds too which is usually something we need to keep us motivated and excited about building our businesses.
Less proof = More equity cost to raise funds to offset the risk.
Investors are looking for proof, not possibilities. - James Church
Researching your target investors
You can search through Crunchbase for people who have closed similar round sizes recently in a similar space. Then you can find the investors who were registered for those rounds.
Find them on LinkedIn and start to make connections with them and kick off a conversation.
“I realise that you just invested in the pre-round of this company. We are in a similar niche doing something very different. I think you’ll love what we’re doing. Should we chat?”
You already know that they invest in your type of business at your stage of the journey, because you’ve researched it.
This isn’t glamourous work but it’s effective.
You know that you are talking to the right people who are actively investing.
Expression of interest form
This is a simple, non-binding piece of paper or an online form made in Google forms
or my personal favourite, Typeform
With it, you can find out very quickly if someone is serious about investing.
You can ask questions to qualify such as “What do you bring to the table other than money?”, are they using investment schemes like that of the SEIS for UK investors or EIIS in Ireland?
This can also show how prepared you are which can also create confidence in you as a founder.
“Would you mind just filling in this form to express your interest? It’s not legally binding; it’s not the heads of terms. It’s just so I can better manage the round”.
Suddenly they’re putting something in writing.
If it makes them feel uncomfortable, and they might say, “oh, I’d rather not”. You know that they are not interested at that point.
If they put that information down, you’ve got a red hot lead to follow up with and start going through those second or third meetings that your diligence process.
If you search online you will find plenty of templates and example questions to ask at this stage.