Sebastian Lewis, CEO at Mettrr Technologies
There are myriad challenges to building and running a successful start-up. From drawing up a business plan, to finding the right team members to raising money, the hurdles can seem constant and initially insurmountable. Since I started fundraising in 2012, I’ve learnt a lot – be it the art of storytelling or remembering to always trust your gut. While there’s no doubt that pitching to a room full of people with years’ worth of experience and limited time is a scary prospect, these tips gleaned from past experiences and mistakes should hopefully demystify the process somewhat and prepare you for your first, second or third round of fundraising.
Read on for my 5 top tips to raise investment as a start-up:
- Target the right investor for your business
One of the biggest lessons I learned after multiple rounds of fundraising was not to waste time meeting with people who cannot or will not invest. In the early days, it’s tempting to meet with as many people as possible –that feeling of never knowing when you might come across a lead or valuable new contact is a hard one to ignore. However, with time one of your most precious commodities, it’s vital you are selective.
There are generally two types of investment: the investment made from a purely financial perspective and the more common investment made by those who want to play an active role in the business. In that situation, the investor(s) may be part of the management team or bring with them skills that the existing team does not have.
Do your homework, get references and focus on a small group of relevant funding sources. Have an outline of who your qualified target is: young start-ups should be looking for angel investors, those more established companies should look to venture capitalists most aligned with their market.
- Prepare to be resilient
Running a start-up is the quickest way to develop a thick skin. You will hear the word no again and again and again – and people will have no problem telling you that your idea sucks or worse, string you along for months with assurances that they love your product.
The world of fundraising is rife with fickleness – particularly in the early stages – so have your wits about you and, most importantly, trust your gut. You will come across many types of investors: from those who aren’t really serious about investing, to those who are only interested in the figures, to those who simply have no idea what they’re doing. Then there are the ‘yes’ men who want to dictate how you spend the money.
Eventually, you will be able to spot these different types a mile off – and you will save much time and heartache by cutting your losses as soon as possible.
- Understand the differences between investors
Fundraising takes time and, typically, a few different steps. For Mettrr, our first round of investment came from crowdfunding platform, Crowdcube, which was a fantastic experience and valuable learning curve. We answered questions from potential investors in real-time, and got a feel for the wants and needs of the investor community.
Crowdfunding platforms aside, 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 pounds; and venture capitalists, who have the most cash in the venture community and invest in dozens of companies all over the world.
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 financial gain.
A key question when seeking the investment is: “What do we need?” or just as important “What don’t we need?” For a big investment (or one from venture capital or structured private equity investors) a seat on the Board may be requested (or even demanded). This can result in anything from a huge skill boost to stifling interference and everything in between.
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
As well as trying to find the right investors, don’t forget the value of building relationships with experienced professionals in roles such as head of engineering, sales or marketing. Though they aren’t the ones directly holding the purse strings, their influential position will mean they can offer you advice and access to a network that may reap rewards further down the line.
By seeking mentors, not only do you get to see how they would fare as business partners but you cultivate valuable, long-term relationships with people who may invest – or who will help you find someone who can.
- Master the art of selling yourself
When pitching your product, don’t forget to sell your company’s most important asset: you. Every single start-up founder has an advantage over the rest – the story that makes you unique – so make sure to share that with investors. What makes you the best person to launch this particular product or service? What experiences have you had that set you apart from the competition? Keep the company’s vision to one slide and remember to sell you, your team and its capabilities as much as your product.
Master the art of selling yourself – it can mean the difference between success and failure. It’s true what they say: people buy people.