How to Raise Money for Your Startup in Ten Steps
We are about to close another round of funding at Kindara. Having been through this a couple times now, here's my advice on how to close funding for your startup in ten steps:
Step 1: Get your story straight and your materials together. At a minimum you'll need a pitch deck, an executive summary, and some sort of product demo. Get all this stuff together and make sure it looks good. I personally think design communicates almost as much as content.
Step 2: Test your pitch and your materials to see if they are any good. Use your friends, advisers & team members. This step serves two purposes: first it allows you to change and improve your pitch, and second it allows you to practice pitching. When pitching, it's important that you appear excited and confident, and use words that effectively tell the story of your product and company.
Step 2 is all about pitching and adjusting. Ask for honest feedback on both the content of the pitch, and on the quality of your presentation, and adjust as necessary. Once you've done this a handful of times in front of people you respect, you'll get a sense for the questions that investors are going to ask you. Make sure you have a good answer for them. Step 2 is done when you can confidently give a good pitch and confidently answer questions and objections. (Note: Step 2 could take a while. If all the feedback you get is that you need to make a big change to your business, like find a co-founder, or pick a new business model, you may need to make these big changes before you proceed).
Step 3: Make a list of investors that (given a great pitch) are likely to invest in your startup. Look at companies similar to yours and see who invested in them. Make a big list. Then separate it into Tiers: Tier 1 will be your wet-dream investors - people who could add a lot of value to your company. Tier 2 will be the next step down, and Tier 3 will be the people you'd take money from if Tier 1 and 2 don't pan out. Once you have the list, figure out how to get intros to all the people on the list (but don't get those intros yet). Use Angelist, Linkedin, your advisors, and 'straight hustlin' to figure out how you're going to get an intro to all the people on your list. This could obviously take a while and could require dozens of coffee meetings and travel. But it's important.
Step 4: You've lined them up, now knock 'em down Get all the Tier 2 intros at once. Get the intros, follow-up and get in-person meetings. Do the in-person meetings and give your pitch. If there is interest, followup while you proceed to the next step. If there isn't any interest or your hit-rate is really bad, it probably means there is something wrong with the story and/or the pitch. Figure out what this is and fix it.
Step 5: Proceed to get all the Tier 1 intros, and follow up with in-person meetings where you give your pitch. Ideally you are still in process with your Tier 2 investors and can use this pressure to ramp buying desire in your Tier 1 investors.
Step 6: To further ramp up the pressure, get your Tier 3 investor intros and follow-up with them. Get them into the round based on all the pressure from the Tier 1 and 2 investors. This is a massive juggling act so be ready to have a bunch of balls in the air at once.
Step 7: If you're good at selling your company, you'll start to get buying interest. Use this interest to get term sheets or commitments and head into Due Diligence.
Step 8: Get through diligence as fast as possible. Make sure to followup every few days to keep it moving. I use Pipedrive to stay on top of the next steps with each prospect.
Step 9: Ideally by this point you'll have more interest in your deal than you have room. Use this interest to pressure towards a close. Get terms hammered out and paperwork signed. This is sales, expect to talk a lot and go way over on your phone minutes in this step.
Step 10: Once you have negotiated the deal and signed the paperwork, it's time to get the money wired into your account. Send the wire details along with a date for the close. Follow up until the money arrives.
And then celebrate! drink some champagne and remember not to go nuts with the cash. Spend it sparingly and wisely so it'll take you as far as possible. The more you raise, the bigger your company will have to get to make the returns you just promised your investors. Good luck!