4 VC-Approved Tips to Make Your Startup Irresistible
Happy New Year Fundraise Kickoff!
Holidays are over which means…
Investors are back in the saddle, ready to kick ass and write checks!
(ICYMI - Winter break and summer are notoriously slow in fundraising land.)
If you’re a founder getting ready to raise — especially if you’re new to the world of venture capital — here’s what is often misunderstood:
VCs have bosses.
They have to show returns on the money they invest.
Money that belongs to someone else.
Money that comes from:
Non-profits
Hospitals
Pension funds
Higher ed institutions
Family offices
These institutions are expecting financial returns so they can support things like sick kids, scientific research, workers in retirement, and the next generation of thinkers and leaders.
So even if you’re talking to the founding partner of a firm — who seems like a successful, high roller — they are answerable to their “bosses”, they’ve set certain expectations about what and how they’ll invest, and they feel tremendous responsibility to generate returns.
Why does this matter????
It’s important to understand so you can position your business accordingly!
Many VCs care deeply about the world, helping others, doing good.
But they can’t say yes to your company if the likelihood of a large return is not there.
So…make it easy for them to say yes!!!
Here’s 4 ways to align your company and positioning so a VC can easily say “Yes To The Dress Invest!”
1. Pick a big market.
Big market = big returns. An amazing founder or idea in a small market can never deliver big returns. (Which I talk about in detail here and here!)
So even if a VC loves you, if the market is too small, they will pass.
Related — make sure you clearly and realistically explain your TAM SAM SOM. The more realistic the math, the more trust (and excitement) you build.
VCs can sniff out an exaggerated market quickly so don’t try to “check the box” on this.
2. Talk about the money!!!!!!!
The thing that hurts my heart the most?? A founder with traction and a great business model who doesn’t talk about it until the end of their pitch.
PLEASE — for the love — TALK ABOUT THE MONEY!
Do it early. Do it often. An investor’s (love) language is DOLLARS.
(See “VCs have to show returns” above. 😂)
No revenue yet? That’s okay! You can still use dollars and numbers to tell your story.
3. Understand the investment thesis.
Venture firms can vary wildly based on:
Stage
Check size
Types of companies they invest in (software, hardware, consumer products)
Types of industries
What they look for in a founder
Business model (transaction fees, recurring subscription)
Being a “Strategic”
Even partners within the firm may focus on different things.
So make sure you know who you’re talking to and that you’re highlighting what matters to their firm. Save your best for last so you get lots of practice!
Firms will very occasionally make exceptions to their investment thesis or criteria. But it’s usually for someone they’ve known for a long time or a company with insane traction.
4. Believe in yourself.
At the end of the day — especially in the early stages — investors are investing in YOU.
Your confidence, perseverance, creativity, intelligence, vision, ability to sell, and ambition to build a billion dollar company will attract others, including investors.
Confidence and belief are contagious — and vital for weathering the hard times that will inevitably come!
Yes, you need to be coachable and not a dickhead.
But the ability to inspire buy-in from employees, customers, and other investors is something that investors vet heavily.
Kevin Ryan has amazing examples and specific phrases about how this can look in “Step 2” of Step-by-Step Fundraising Tactics from the NYC Legend Who Raised $750M.
Not sure this is you?
The best, most successful CEOs weren’t sure either. They figured out ways to overcome their own doubts, including…
Fake it ‘til you make it!!!
You can also practice and be intentional to:
learn to sell (or improve and grow at anything)
There’s compelling research that the most well-funded founders (regardless of gender) know how to redirect the conversation to talk about the vision and upside.
It’s a strategy that comes across as “confidence” but is actually something that can be cultivated and practiced!
Fundraising is a full-effort process that can take 100+ meetings to get the desired results.
Understanding what matters to VCs and how to best position your business can speed things up.
Want more tips on fundraising or how to work with investors? Check out these resources and reply below with future topics you’d like me to cover!
What’s your best tip for fundraising?? What should founders and startups know before “going out to market”?