Top Secrets for Successful Fundraising According to Venture Capitalists

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Raising your capital is the most challenging part of creating a company. You might have the right people willing to work with you immediately, excellent marketing strategies to boost your sales, and a superb product to sell. Still, without a decent capital, all of these will be futile.

This is why it’s essential to take fundraising activities seriously. It will give you the capital you need to start your business, but it will also significantly reduce your risk in your company.

To help you with this, we’ve talked to several venture capitalists about the secrets of successful fundraisings. Make sure to bring out your pens and papers because you will have your capital funding at the end of this blog in no time!

1. Look for target investors.

According to venture capitalists, one of the most common mistakes among first-time business owners is setting up a fundraiser without a target audience. 

Setting up a fundraising activity for everyone is like a bad marketing strategy. You invest your time in people who are not interested in you; chances are they won’t consider funding your company because it simply doesn’t speak to them. Everything will just be wasted. 

Instead, look for people who are already interested in your niche. Say you’re launching a new software for hospitals, doctors will be more willing to invest in your business than a professor. 

In short, put your energy on the right people.

2. Research about your target investors.

When you’ve already created a list of your target investors, make sure you know all about them. This doesn’t just include the amount of money which they can give you, but as much as possible, learn more about their personal life. What are their pain points? What are the problems they encounter every day?

Upon knowing this, position your startup as something that can solve these problems. They will be shelling out a few bucks to get your company up and running in no time.

3. Focus on people who are interested in you.

After sending out a couple of cold emails, focus on people who have already shown interest in your startup. Don’t waste your time sending follow-up emails and running after people who have not shown any curiosity about your work. Use your time developing primers, setting up consultation meetings, and other strategies to make interested investors feel like you value them.

Here’s a pro tip: focus on their initial question. Chances are, the first question that popped into their head is the very thing that will drive them to fund your startup.

Say they ask for the risk management of your startup, make sure to provide a detailed part about risk management on your marketing primer. This way, you will make them feel at ease to fund your company.

4. Check out your competition.

Like in marketing, it’s essential to be very knowledgeable about your competitors. This doesn’t just include the products and services they’re offering but also their overall valuation, equity rates, risk management strategies, and more.

This move will eliminate the nightmarish possibility of connecting to an already associated investor with your competitor. Next, it helps you show your investors that you have a certain edge in your field. Therefore, your business is the one to invest in. After all, no one wants to bet on the losing side.

5. Be honest about your company's valuation.

When investors ask about your company’s possible valuation, be transparent and honest.

Many people will suggest an increased rate of your company’s valuation to make investors interested in your company. Venture capitalists say otherwise. Setting an unrealistic valuation will develop problems in the future that might even be bigger than your capital funds. These problems include equally high equity requests, higher interest rates for investors, and more.

Aside from this, be specific when discussing the monetary aspect of your business, including your valuation. Don’t go with “around 1 million” or “estimation of 500,000” because it will make your investors feel like you don’t know anything about your business. 

Be clear and detailed about everything–that’s the key to a successful fundraiser.

6. Slow down on forecasts.

Like setting increased valuation, you should also slow down on saying forecasts about your company and your potential market. Trust us: your investors will know if you’re making unrealistic promises.

Saying forecasts that are far too impossible to happen will make your investors feel like you will run away with their money if it’s too good to be true. 

Instead of setting unrealistic goals, take time to create a detailed and promising plan about your company that will likely address your market’s concerns and future concerns. Make your investors feel like everything is pretty much done with your company, and the only thing you’re lacking right now is the capital.

7. Have an exit strategy.

Give your investors an exit plan when needed. 

Let’s be realistic, no matter how much you love your company or how successful it is today, there’s still a high probability that you will sell your business in the future. If this happens, your investors should know what will happen to their money. 

Showing an exit strategy to your investors will make them feel like you value them and not just their money. They will know that you will take care of them during the entire duration of the partnership.

8. Be clear on the allocation.

Last but not least, make sure your investors know what you’re doing with their money. It may sound too simple, but first-time business owners forget to answer this as they focus on showing forecasts instead.

This tiny and simple gesture will make your investors feel like you know what they’re doing. And that they’re on the right path in partnering with you.

Now that you already know the top secrets in venture capital fundraising, it’s time to get your fundraisers up and running!

Ben Sztejka ACA

Ben Sztejka ACA

I am an ICAEW Chartered Accountant with one core belief, make accounting as pain free as possible and focus on adding value to businesses.

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