X
insights
< Back

The Right Mindset for Startup Fundraising

March 23, 2015

You know the steps for startup fundraising:

  1. Target potential investors.
  2. Get warm introductions.
  3. Set up tons of meetings.
  4. Get serious with a handful of prospects.
  5. Make your pitch.
  6. Negotiate your terms.
  7. Sign term sheets.

Voila, you’re funded!

While this seems straightforward, in reality the startup fundraising process is much more fraught. In the best case, getting funded can take months, and in the worst, you might end your quest without a single signed term sheet. Oh, and have I mentioned that it’s a full-time job? Physical endurance is one thing, but how do you prepare yourself for the mental and emotional toll fundraising takes?

Here are 3 tips to get you from searching to funded while staying sane!

1. Planning

The more you organize in advance, the better your chances of startup fundraising success. What’s involved here? I’m talking about strategic preparation. Develop a high-level project plan and detailed workflow of all the steps you need to take, from identifying potential investors, to researching them, to developing a target list, to tapping your network to score referrals and warm introductions. It’s important to include timeframes to keep you motivated and track your progress, but also include a buffer because the process always takes longer than you think it will.

2. Pitching

Once you’ve scheduled some meetings, do extensive prep beforehand. You’d be surprised how many entrepreneurs flub this step by not preparing enough for meetings. This goes beyond the basics of practicing your pitch and anticipating questions.

One way to turbocharge your odds of success is to get inside the minds of your potential investors. This means trying to understand what makes them tick and being really up to speed on which kinds of investments they like, in which sectors, their typical deal size and stage. Don’t be a stalker, but try to find out about shared interests—maybe schools, sporting activities, social or professional memberships—anything you can leverage to build rapport and give you insight into how they operate. This will help you tailor your pitch.

Despite your best efforts though, you’re still going to hear no a lot. So develop a thick skin and don’t take it personally. Be confident enough to ask for referrals to other potential investors at the end of every meeting. Do this even, and especially, when the answer is no.

3. Pacing

The key to successful startup fundraising is to make sure you stay on investors’ radar screens, but not to appear desperate. Reach out with useful news, keeping potential investors up to date on any successes you achieve, and also letting them know if you’ve added high-profile advisors to your roster.

Don’t forget the other side of the startup fundraising equation too—the investor. If you see that the investor (or one of his portfolio companies) has had a win, reach out to say “congratulations.” Likewise, if you come across an article or some bit of news that you think would interest the investor (maybe something that references a topic you discussed), forward it to him. Basically, you want to keep a dialogue going and use it to convey your business’ desirability and viability, as an investment.

Of course investors will do their due diligence before deciding whether or not to invest. But part of the decision, particularly if you barely have revenues and have no cash flow to speak of, is motivated by whether or not they believe in you and the team you’ve assembled. This is true of all investors, but may especially come in handy when dealing with angels, who are often driven by more than numbers and may be entrepreneurs themselves.

Take every opportunity to instill confidence and convince them that you’re a safe bet for their money. If you have more than one party interested, you can try to speed things along by making sure potential investors are aware that you’re entertaining several offers.

That being said, know when to fold ‘em. If and when it’s clear they’re not biting, move on. It’s all about cost-benefit, and the more investors you can get in front of, the better.

The views, opinions, beliefs, conclusions, and other information expressed in this material is not given, verified, or endorsed by Square 1 Bank, a division of Pacific Western Bank. Instead, this material is solely the work of the author, and represents his views, opinions, beliefs, conclusions, and other information he wishes to present, in all cases without any manner of endorsement from or verification by Square 1 Bank, a division of Pacific Western Bank.

This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that the author believes to be reliable, but which has not been independently verified by the author or Square 1 Bank, a division of Pacific Western Bank, and, as such, we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal, or other advice, nor is it to be relied on in making an investment or other decision. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to this material should be construed as a solicitation, offer, or recommendation to acquire or dispose of any investment, or to engage in any other transaction.

All material presented, unless specifically indicated otherwise, is under copyright to the author or Square 1 Bank, a division of Pacific Western Bank, and is for informational purposes only. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied, or distributed to any other party, without the prior express written permission of Square 1 Bank, a division of Pacific Western Bank or the author. All trademarks, service marks, and logos used in this material are trademarks, service marks, or registered trademarks of Square 1 Bank, a division of Pacific Western Bank.

Square 1 Bank is a division of Pacific Western Bank, member FDIC.

Secure email message: Your privacy is important to us. To protect your account information, we use Zixcorp Secure Mail to send and receive messages about your accounts. If you need to contact us securely, please use the Secure Email link on the Get in Touch page in the top navigation.

© 2005-2019 Square 1 Bank, a division of Pacific Western Bank. Member FDIC. All rights reserved.