Breega #Startup tips n’ tricks
If you’re an early-stage startup looking for an investor for the first time and wondering how to go about finding the right one, the following tips are for you :)
1. Angel or VC?
You can pitch an Angel when you have a solid proposition with demonstrable market potential and you need more capital than you can raise from family and friends. Individual Angels invest between $25k and $100k of their own money. A group of Angels could get you up to $700k. You can pitch a VC if you’re looking to grow your company at a pace that will require raising additional funds every 2–3 years. You’ll need to prove scalability with healthy revenue and/or engagement metrics that are growing consistently at no less than a linear rate.
2. Do you want/need more than money?
The right VC will also offer you advice and support to maximize the chances of your success (and their return). It’s what we do at Breega :). Angels that invest large amounts are more likely to want to be your mentor. If they’re only investing a small amount, it usually isn’t worthwhile for them to spend unpaid time helping you (sorry). You can also pay for an advisor or mentor, either through shares or on a retainer basis.
3. If you’re pitching a VC, make a plan Stan
Fundraising is pretty much a full-time process that’s all about organization and timing. If you want it to be fruitful, then adopt a military approach.
*Prepare your offensive by thoroughly researching potential VCs (investment thesis and requirements).*Gather intelligence from your contacts and ask for intros.*Identify your target (VC person). *Master your data and metrics.*Drill your pitch. A lot! *Adopt a multi-pronged approach by contacting several VCs at once and keeping discussions simultaneous. *Advance at a steady pace and aim to get everyone to the term sheet phase around the same time.
4. Get your foot in the door.
Attend as many startup and industry events as you can. Engage with VC reps with energy and passion and convey your business’ strengths. Reach out to VC people through LinkedIn or other social channels, getting your point and achievements across quickly. For a VC to be interested in a company they either have to be particularly interested in your specific sector/problem space, or you have to show levels of growth and customer traction that gets them excited immediately.
5. Sell well
This means having your data room and metrics in order. You want to be ready to respond quickly to any question a VC may have, momentum is your friend in this process. Make sure you have rehearsed your pitch and refined your deck, maybe using friendly VCs — really, they do exist :) or other entrepreneurs for feedback. You only get one shot at a good first impression so make it count.
6. Look before you jump
Don’t be tempted to go with the first VC that offers you cash. This is a long term relationship so pick a VC that you like and think you can work with. Check their values match yours by seeing what they say about themselves, how they do things and what other founders say about them.
7. Don’t give it all away
A VC will ask you for equity (15–25%) but they should ensure that there’s enough “skin in the game” for founders to stay motivated, for this round and future rounds. If you are too diluted, this may not be a VC that understands the long-term importance of a motivated founding and exec team. However, VCs need to protect their investment, so it’s usual to have terms around liquidation preferences, founder vesting, founder warrants, and actions that require investor or Board approval. A good lawyer here is essential and they can help you negotiate a fair set of terms.
8. Choose your VC wisely
Chemistry and trust are key here. Ask yourself who do you want advising you when you face inevitable challenges? With whom do you want to be negotiating future compensation plans and having weekly conversations about your strategic plans? You also want a VC that can help you with business leads, management advice, and introductions to potential acquirers.
9. Balance your company board
If a VC is investing a significant amount in your business and will hold more than 10% of your equity, they will expect and deserve a Board seat. However, you need to manage your Board composition carefully. If it’s only made up of investors, your Board meetings will end up being more about metrics and governance than about strategy and business planning. We recommend you do a Board review at every fundraise to be sure you have a good balance of investors and non-investors ultimately creating a winning team.
10. Know that raising requires work
As any startup who has been through the process will tell you, raising funds is grueling work and keeping yourself and your company sane throughout the process is not easy. But it is an essential skill for an entrepreneur to learn.
Once you’ve made it through to the other side then celebrate! And once the hangover subsides, dive into the challenging but rewarding journey of turning that money into impact and substance.
We hope you found #Startup tips n’ tricks checklist useful. For more in-depth advice on finding the right investor for your startup, check out our interview with Alicia Navarro founder of Skimlinks (the leading content monetization platform) and don’t hesitate to comment, like and share. Otherwise, stay tuned because there’s more to come :)
Yours, Team Breega
