Most founders will agree that hearing the chorus of “No’s” — over and over — is the most soul-crushing aspect of raising startup capital.
While fundraising for a young business will probably never be easy, you can get to a “Yes” much more quickly by being prepared.
With this in mind, what are some common challenges you can expect to face, and what tools and resources can you use to overcome them?
Raising capital begins with finding investors to pitch to, and this means building a solid list of potential targets. A good place to start is your current network of family, friends, and contacts from startup communities and networking events. But this won’t be enough.
To expand your reach, platforms like Crunchbase, CB Insights, and UpLead can give you a head start.
They’re designed to make it easier for users to identify investors behind innovative and exciting companies in their sector.
It’s a great way to add angel investors, venture capital firms, accelerators, and corporate investors to your target list. Not only do these investors have the financial means to help, they also have interest and knowledge in your sector.
You can do your homework on prospects too. If they’re already backing other startups in your field, then you can strike them off your list early to save both time and energy, as there’ll probably be no point in approaching them.
Pursuing tens or sometimes even hundreds of investor leads can be confusing. You could come across disorganized if you fail to follow up with prospects on time, or if you repeatedly forget the discussions you’ve already had.
It makes sense to track interactions from one central place, which is why entrepreneurs often turn to CRM software. Amongst the many providers out there, Pipedrive, monday.com, and Zoho are popular options.
Depending on the tool you choose, you can potentially:
Having a central repository of investor information will help to jog your memory of previous conversations. By recording who the decision maker is for each lead, you can focus on building a relationship with the right person.
You can’t improve your chances of landing capital without feedback. Yet founders who ask for it from busy investors will often come up empty.
While the fundamentals of a business idea are what ultimately attracts investment capital, you can take advantage of digital technology to find out if you’re communicating your opportunity effectively.
For those pitching via email, email tracking software such as Yesware, Reply, and Outreach can tell you whether your emails are being read, and for how long.
If a vast majority of emails go unopened, then try to work on making your subject line stand out.
If prospects open but don’t finish reading them, then you could work on delivering a punchier, shorter message.
Potential investors who read your emails all the way through are demonstrating at least some interest, so it’s worth pursuing those leads.
Similarly, you can use document automation software to improve your pitch deck as well.
Find out who read your pitch deck, which pages they viewed, and how much time they spent poring through it with applications like PandaDoc.
Not only will this enable you to follow up with the right contact – i.e. the person who looked through the deck – it also empowers you to cut down on slides or information that are not impactful.
Fundraising rounds often involve lengthy and complicated steps. Many founders learn the hard way through trial and error.
But you can fill knowledge gaps by taking a short course – LinkedIn and Udemy offer many online courses that allow you to study at your own pace.
You can learn about funding options, pitch decks, term sheets, how to prepare for investor meetings, and much more.
Podcasts aimed at entrepreneurs are invaluable as well. Many are packed with lessons and interviews with industry leaders.
There’s nothing like leaning on someone else’s experience for insider tips. Not only will you gain a different perspective, it’s also a good way to feel inspired and stay positive.
Since potential investors take their time to consider your investment opportunity, how can you make sure you stay on their radar and keep them interested?
One approach is to email out regular newsletters. Services such as Mailchimp and Constant Contact are great for creating professional newsletters in a flash, and to track their deliverability as well as open rates.
As a formal record of equity ownership, your cap table is indispensable for potential investors.
They’ll use it to:
It’s crucial that your cap table is correct. Unfortunately, the more financial instruments and stakeholders the ownership structure includes, the more complex a cap table becomes.
Managing it through spreadsheets is an outdated approach because it’s time consuming and will likely lead to errors.
But using a dedicated cap table management tool such as Adnales revolutionalizes the process.
Adnales offers instant traceability of every equity transaction that has taken place as changes are tracked automatically. You’ll get ownership information that’s clearly organized and customizable, allowing potential investors to easily evaluate their investment.
Achieving success in funding rounds isn’t just about having a sound business idea. You need to target the right people and present your opportunity in the best possible way.
Technology can help. Not only will they keep you organized, they will also help to hone your message and improve your delivery.
What’s more, strategic digital assets such as Adnales keeps your cap table in a valid state for potential investors. Remember, they’re unlikely to part with their money unless they understand the equity structure of your company.
To find out how Adnales can fast track your fundraising, request a demo today!