April 11, 2016
Raising capital is not an easy process. It can take much longer than you think, causing you to take your eye off running your day-to-day business. That said, in many cases it’s essential to growing your business and realizing your ultimate vision. Alejandro Cremades, the cofounder and executive chairman of Onevest, an investment crowdfunding platform, knows the fundraising landscape very well, and today released a new book titled The Art of Startup Fundraising. The 17-chapter book explores the fundraising journey for entrepreneurs, including understanding investor expectations, crafting the right pitch, negotiating, and closing the deal. It also takes a closer look a the JOBS Act, a historic piece of legislation for both startups and investors, ahead of its full implementation on May 16th.
“Raising capital is an art that requires a great deal of time and effort,” said Cremades. “My goal was to share my own experiences and interactions with literally thousands of startups and investors to cut the learning curve, and give entrepreneurs the tips and tools they need to create their masterpiece.”
We asked Cremades to share his top tips for getting your startup funded and he shared the following in his own words:
1. The Pitch Deck
Keep the pitch deck to no more than 19 slides. The most important slides are the ones related to the problem, solution, team, market, and the amount that you are raising. Ultimately, you will need two different sets of pitch decks. One version will be with a lot of text and information which will be shared with people via email. The other version will be the pitch deck that you present to investors in person with much more visuals. Having more visuals will contribute to having investors focused on you.
2. The Follow-Up
Basically, an investor will invest when the dots of your story connect over time. Let’s say when you meet for the first time with the investor you explain your vision and where you would like to take your company in X amount of time. If a few months down the road you reach back out to that same investor and demonstrate that you‘ve accomplished many of the promises, then you are one step closer to getting that investor REALLY excited.
3. Do Your Research
Entrepreneurs should understand what the investment thesis is of the investor they are meeting with and what other companies the firm has invested in.
4. Never Say You’re Fundraising Unless You Have a Lead Investor
One of the biggest mistakes entrepreneurs make is when they tell an investor they are fundraising without having a lead investor that has established the terms of the round. Unless you have a lead investor, never say that you are in fundraising mode. Some strategies to put the terms in place include doing a syndicate yourself in which you establish very attractive terms for investors or perhaps bringing your ideal investor as an advisor and get her excited to lead the round once she gets to know you, the team, and the business.
5. Master the Art of Listening
When you are raising capital you are always going to get the same type of questions with regards to your business over and over again. Some of these questions will help you understand where you are weak. You will need to listen enough to understand where you need to apply a correction. Such correction will be applied to either the story that you are going out with when meeting investors or to the business itself.
6. Be Grounded with the Numbers
It is a big no-no to not have a clear understanding of your numbers. This involves unit economics of the business, financial projections of the next three years, burn rate, etc. Entrepreneurs need to understand they will be managing other people‘s money. For that reason the founder needs to give confidence to the investor so that they can trust you with a capital investment.
7. Have a Good Amount of Confidence
Without confidence, there is nothing. Investors also smell desperation from very far away. As a founder, you will need to be optimistic and to have that level of confidence where you know that everything will be alright no matter what. It is critical to never be attached to an outcome. There is not one single plan to succeed. There are actually many roads to get to the finish line.
Now these seven tips are just the tip of the fundraising iceberg. There’s always more to learn when it comes to raising a round of funding for your startup. Cremades’s book comes with a foreword by Shark Tank’s Barbara Corcoran, and offers a practical, step-by-step guide to take entrepreneurs through the fundraising experience from start to finish, so they can build and implement a clear strategy for raising capital. If you’re planning on raising funding for your business, you’ll want to add Alejandro Cremades’ new book, The Art of Startup Fundraising to your preparation checklist.
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