Building a company from scratch is no mean feat. From developing a business plan to finding the right team members, it is one challenge after the other – and perhaps the biggest of them all is raising money. I’ve learnt many lessons since I began fundraising in 2012, and wanted to share my best advice with you to remove some of the mystery and prevent you making the same mistakes.
Here are 5 tips for raising your first (or second or third) round of funding:
- Do your homework
If I could go back in time and tell myself one thing, it would be: don’t waste so much time meeting with people who cannot or will not invest. It’s inevitable that this will happen at least once or twice in the early days, but do your best to combat it with thorough research. Don’t just meet up with anyone who shows interest; do your homework, get references and focus on a small group of relevant funding sources.
And remember, when you finally do get in the room with investors, take it as your opportunity to interview and quiz them as much as they’re quizzing you.
- Be strong
Part of the process of growing a company is hearing the word ‘no’ – again, and again, and again. Many people will tell you that your idea sucks or worse, string you along for months with assurances that they love what you’re doing. There is so much fickleness in the industry, particularly in the early stages of fundraising. So have your wits about you when meeting with angel investors: some aren’t really serious about investing, some are only interested in the figures, and some disappear altogether when it comes to crunch time. Then there are the investors who simply have no idea what they’re doing.
On the other hand – don’t be fooled by the ‘yes men’ who want to dictate how you spend the money. Trust your gut – and know when to cut your losses.
- Choose the right type of investor
There are three kinds of investors out there: angels, who invest their own money; super angels, who typically fund anywhere from a million to 50 million dollars; and Venture Capitalists, which have the most cash in the venture community and invest in dozens of companies all over the world.
Another option for fledgling start-ups is crowdfunding, which we did with Mettrr. We were one of the first companies to successfully crowdfund using Crowdcube, a valuable experience and learning curve as the platform meant we were on show to potential investors who could ask as many questions as they wanted in real-time.
That was back in 2012 – fast-forward to today and now we’re at venture level.
Funding takes time – and it’s very rare for a start-up to go straight from crowdfunding to venture capital. Don’t feel that you should accept any money that comes your way when raising capital – you want to find the right investor who will not only advise on direction, but who has a genuine eagerness to succeed beyond money. To the point above about doing your homework, ask lots of questions to potential investors to ascertain which investor partnership will be best for you.
- Value trusted advisers
When fundraising, it’s easy to have a narrow focus and search only for people that will invest. However, there is more than one route to money and that’s why it’s important to build relationships with experienced professionals in operational roles such as head of engineering, sales or marketing.
You never know what such a relationship could lead to – investing is about the long game. And by seeking advice not only do you see what the mentor would bring to the table as a business partner, but you cultivate a valuable, long-term relationship with someone who may well decide to invest further down the line.
- Sell YOU
When pitching, don’t forget that investors want to buy into the person just as much as the idea. The founder’s ability to execute is the biggest proof point, so keep the company’s vision to one slide and remember to sell you and your team – and its capabilities – as much as your product.
My advice to entrepreneurs is, before approaching the investment community, master the art of selling yourself. It can mean the difference between success and a series of failed attempts at entrepreneurship.
Sebastian was one of the first entrepreneurs in the UK to online crowdfund his business and continues to be a pioneer in the industry. The business idea was born when his Dad who is a tiler asked him to build him a website. Prior to founding Mettrr Technologies in 2012, he was an equity derivatives trader in London.