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So, I’ve compiled six lessons I suggest every entrepreneur keeps in mind before heading into their first major round of venture capital (VC) financing:
Get a head start.
Something I quickly learned was that whatever timing you have in your head on how long the financing process takes, double, triple or even quadruple it. Getting from start to finish with a series round can take a lot longer than you might expect. So, start meeting with VCs months before you need to begin fundraising. By starting early, you can confidently say you don’t need funding right now, which isn’t something they hear every day. These early conversations don’t have to only center around money. For example, these discussions can focus on your company’s goals and initial growth plans and how you plan to disrupt your industry.
With my company, for example, we started speaking with VC firms six months before we needed to officially begin the fundraising process. This allowed our discussions with VCs to have a more relaxed dynamic because we had the time to get to know one another. Our series A-2 took six months, and that’s not including the six months of pre-work we did to start talking about it and build relationships.
Build your relationship with VCs.
I found that relationships are critical in fundraising. We started building relationships with future VCs before we were even targeting them or needed to raise money. You can schedule proactive meetings without pitching to them to help build the relationship and get on their radar. It helps to be a known entity before you start. For example, you can proactively offer in-person meetings with potential investors by either attending the same conferences or letting them know when you’ll be in the same city as them.
Make an effort to hold face-to-face meetings.
Whenever possible, aim to hold face-to-face meetings. I learned this is particularly important in the early stages of fundraising because, at least in my experience, the first few meetings tend to focus on the team, rather than financials. During the initial phone call, discuss the investment opportunity. Then, hold a face-to-face meeting in which you present the opportunity to the VCs.
Additionally, if you’re not in the same area as the VC, set aside two to three weeks early on in which you’ll be working in the city — and let them know. Consider setting up shop at a co-working location nearby to get work done, and try to schedule a number of meetings with VCs in that area. We did this on both coasts and spent two weeks in New York and two weeks in San Francisco.
Remember to keep running your business.
Having the right team to support you during the fundraising experience is a massive component. I found that most VCs look at a number of combinations when deciding if your company or product would be a good investment. For example, some might consider the track record of the founders and their history. In our case, having four co-founders allowed us to have two people focused on the business while two people focused on fundraising. That way when investors looked at our financials, they saw the business was still running well.
Don’t ignore your business while you’re fundraising. That’s again why we had two co-founders focused on running the business every day while two of us were fundraising. You don’t want your potential investor to think the business wasn’t moving forward while you were focused on funding.
Talk — a lot.
Be intentional and thorough when communicating with investors to help maintain your relationship and ensure they still feel comfortable investing in your business. Be open with them about who you are talking to, potential leads and how it is going. For example, once things were moving along for my company, we made a point to let VCs know who the new lead investor might be. I found this helped ease comfort levels and kept everyone on the same page with our fundraising efforts. This might seem small or even easy, but in the rush of everything, being transparent and clear can easily be forgotten.
Here’s why it’s important: You don’t know when your paths might cross again. Let’s say your deal ends up falling through; you still want to be in the good graces of the other VCs you met with, and communication is the first step in keeping that.
Let your top choices have a sneak peek.
Before you start your fundraising roadshow, give a preview to your top choices. Your lead investor will want to be ahead of the process and to know they’re seeing it before the overall masses. Then, when you’re at the point of the roadshow, you can let others know that a certain VC has seen the opportunity and is ahead in their own analysis. I’ve found this particularly helps if you’re mentioning firms they have respect for as well.
These lessons will be useful in our future rounds, and I’m sure we’ll learn new lessons during those raises as well. You’ll likely learn a few lessons of your own throughout your fundraising experience, but keep these six lessons in mind, and I believe you can get started on the right foot.
May 9, 2019 at 08:45AM
Forbes – Entrepreneurs