November 5, 2017
Getting funding for your startup isn’t easy, and it might be getting harder. Venture capital funding has dropped in the past few years and is pretty much stagnant. Value has actually increased by 15 percent — in the form of larger rounds for older companies. While nearly $50 billion was raised for new ventures in 2016, most of that money was seen by just a handful of businesses. Startups hoping to be among the lucky few will have to do their best to stand out.
The process of raising funds gets redundant and tiring, and rejection certainly stings. But each failure holds a lesson: Maybe an investment isn’t a fit because of timing or market conditions, for example.
In my experience, the funding process differs depending on location. On the West Coast, I’ve seen that VCs are less likely to invest unless they’re presented with a guaranteed home run. But if they believe in you, you’ll often see a larger investment. On the East Coast, however, they’re more likely to invest — but they'll do so conservatively.
Personality, it turns out, can also play a role in whether you seal the deal. VC firm Mistletoe's founder and CEO Taizo Son says:
“My criteria to invest are the founders. … I focus on the founder’s mindset [and] passion.”
Israeli investor Yossi Vardi agrees, saying:
“It’s about execution and the personality of the people, rather than about the idea.”
To wow VCs and show them you’re worth an investment, try these three methods:
Be an Overachiever
Always do your homework, including learning about previous investments the firm has made in your space. Target your pitch to match the values and results in which the firm has previously shown interest.
VC David Selverian says startup founders make two main types of mistakes — related to either content or behavior — during their pitches. His advice is simple: Know the background of the investor you’re speaking with, and know how to articulate why he or she is the exact right fit to invest in your company.
Give Your Brain a Rest
This one should be obvious, but people fail to fulfill it regularly: Sleep. The startup funding process is, as I said, exhausting. Prepare yourself for the wear and tear by being rested and healthy before you travel anywhere or speak with anyone.
Not sleeping enough slows down both your response time and how your brain behaves, making you less productive and less able to focus. If you're a leader, research shows this fatigue can spill over to your team members, who are less likely to be inspired by their leaders and less likely to work hard if they themselves aren’t getting enough sleep.
Tag Team It
Don’t play the part of the lone wolf or overwhelm investors by inviting along the entire company. Stick with a small team that can feed off one another’s energy and can keep the momentum going if there is a conversational lull. Show investors that the foundation they’re supporting is strong and creative by bringing a few key players along. Karlin Ventures Managing Partner TX Zhuo stands by this idea, saying,
“The team is the foundation of any successful startup, the fixed point from which all ideas and developments originate.”
Securing startup funding has never been easy, but it might be getting even more difficult. Help your startup get where it needs to go by getting enough rest, including supportive team members, and thoroughly preparing for each presentation.
Read more about raising funds from VCs on TechCo
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