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Fundraising for Your Startup
Getting funded is the ultimate goal for any startup. Here are some tips for getting the fundraising ball rolling.
Typewriter with the words Venture Capital
By Matt Hallowes
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8 minute read

How to Fundraise for Your Startup

You've got a billion-dollar idea (or so you think), but you need the funds to grow your userbase and scale your startup. You decide it's time to pitch venture capital firms (VCs) and angel investors—but you don't know where to start!

This article gives you a brief rundown of how to get funding from VCs and angel investors. We've also included some resources to help build a successful pitch deck and tools to streamline the process.

Is it hard to get VC funding?

Short answer, yes! Getting VC funding is difficult and time-consuming. You and your founding team must prepare for a lot of rejections! Founder of Slidebean, a pitch deck builder tool, talks about how it took 142 "NOs" to raise $800,000.

VCs receive hundreds if not thousands of pitches a year. If your startup isn't unique and your pitch deck doesn't stand out, then you're unlikely to raise the capital you need.

Having said that, there are steps you can take to increase your chances of securing VC funding.

What are Angel Investors?

Angel investors are wealthy individuals who back startups with capital in exchange for equity. Angel investors often fund startups based on an idea, MVP, or prototype before the company has any users or revenue. This type of investment comes with a high risk because they don't know if your startup will even work!

In contrast, VCs rarely back startups without some business success, a founding team, and revenue to base an evaluation.

How do I get Access to Angel Investing?

There are websites that connect angel investors with startups and entrepreneurs, but many founders pitch wealthy family members, friends, and other associations.

Networking is the best chance of securing angel investment. Attending conferences, cocktail parties, dinners, and other events is the best way to meet people, talk about your idea, and get introductions to angel investors–"Oh, my uncle invests in early-stage startups, let me set up an intro."

Do Investors Steal Ideas?

A common concern for founders and entrepreneurs is that VCs or angel investors will steal their idea. While this is a valid concern, execution is the most challenging part of any business. An investor will have to pay someone to execute your idea, and they will want the most qualified candidate, which is you.

Think of all the startups that appear on Shark Tank, sharing their ideas with the world. That's a global audience compared to the few hundred investors you'll likely pitch. Unless you hand over your R&D, experience, knowledge, patents, and other business documentation, it's very difficult for someone to steal your idea. Even then, they need the people and resources to execute.

As Tim Ferris once said, "One can steal ideas, but no one can steal execution or passion."

Investors are looking for great ideas, but they're also looking for competent entrepreneurs who can scale a business and deliver a return on investment.

How to Pitch to Investors

Step 1 - Create an Incredible Product

It might seem obvious, but creating a great product is the first and crucial step for attracting investment—even from angel investors. One of the keys to product development is creating something that's:

  • Desirable: People must want it
  • Viable: It must have business value
  • Feasible: You must be able to build it You must be obsessed with building an unbelievable and serving your customers. If you can prove that people love your product and experience good organic growth, you'll pique a potential investor's interest.

Step 2 - Create a Pitch Deck

A pitch deck is the first thing a VC or angel investor will ask for if you're asking for investment. A pitch deck introduces investors to your startup, product, and a few key metrics to show business value.

Your pitch deck should be between 15-20 slides, and someone should be able to read it in under five minutes. The best pitch decks tell a story with a narration that keeps investors intrigued to keep reading.

According to the UK-based management consulting firm McBoffin & Company, your pitch deck must include the following 15 slides (You can play around with these slides, placing the most impressive and intriguing information towards the beginning):

  1. Cover: Attract attention by including logos of affiliations, awards, media partners, "as featured in" mentions, etc.
  2. Elevator pitch: Summarize your company in 2 minutes or less. Avoid jargon, and don't tell investors you're disrupting anything—they've heard that one a thousand times. Your elevator pitch should succinctly describe what your company does, who you serve, and any wins you've made so far.
  3. Problem & solution: Explain the problem you're trying to solve with evidence. This slide aims to create empathy so potential investors can understand customers' pain points and see your company as the solution.
  4. Product & services: Rather than explaining what your product does, use case studies and testimonials to demonstrate how your company solves people's problems. You can include mockups of your product and a link to a demo if someone's interested to learn more.
  5. Market opportunity: Demonstrating the market size, your current position, and revenue projections as you scale is one of the most crucial slides in your deck. Investors want to know the value of their equity and the potential ROI. Be realistic with models based on your current projection and how you can scale faster with an investment.
  6. Business model: Highlight your top three revenue sources and what sector of the market you're targeting. For example, Hubspot services the premium-end of the market with high subs, while GetResponse offers affordable plans for solopreneurs, startups, and small businesses. Where do you fit in your market?
  7. Marketing & growth: Outline your marketing strategy and how you plan to acquire customers. If you have a unique marketing approach, outline your genius without going into too much detail.
  8. Competition: Prove that you know your competition and highlight 3 or 4 of your closest competitors. The aim is to show investors that you're aware your customers have an alternative to using your product. Never claim to be so unique that you have no competition; investors won't trust your business acumen or ability to understand the market.
  9. Competitive advantage: What makes you better than the competition? How will you achieve market success? Some examples might include better pricing/value, new technology, customer service, business strategy, etc.
  10. Financial projections: You must be honest with your financial projections—err on the side of caution. Investors will do their due diligence. If your numbers are out, you'll lose their trust and the possibility for investment.
  11. Management team: Introduce your team, industry knowledge, and experience. If you're still building your team, tell investors about the positions you're trying to fill and how these people will help you scale.
  12. Funding requirement: Show precisely how much money you need and how you intend to spend it to achieve key milestones (usually customers or revenue). You must also include details about future funding rounds and when you'll need to raise money again.
  13. Traction: Showing your current sales or customer acquisition is crucial for proving that your product works. If you don't have traction, use market research to demonstrate the potential. McBoffin & Company recommends placing this slide early in your deck if you have impressive figures. Good traction is significant because it reduces the risk for investors.
  14. Risk: Show that you and your management team are aware of any risks (market, product, technological, legislative, etc.) and have plans to deal with them. Discussing risk openly and confidently demonstrates good business acumen and builds trust with investors.
  15. Vision & contact: The last slide must briefly explain your vision to inspire investors to want to be a part of the journey.

For more details about how to write a pitch deck with templates, we highly recommend checking out this article from McBoffin & Company. Sildebean also has fantastic resources and a pitch deck builder with templates from YouTube, Airbnb, Uber, and many more.

How Much to Raise from VCs and Angel Investors?

You must demonstrate why you're raising capital, how you intend to spend it, and how it will help grow your business. Don't thumb suck a number based on your valuation. Investors will scrutinize your capital requirements and question your reasons.

This Forbes article from Alejandro Cremades discusses determining the money to raise for your round. His website also includes tons of resources to help startups raise capital.

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