4 Steps to Take Before Fundraising

BY HILLEL FULD, TECH MARKETER AND STARTUP ADVISER@HILZFULD

One of the biggest problems or challenges with starting your first company is that a lot of your views and perspectives on the entrepreneurial journey are based on anecdotal stories or on the false glorification of tech.

If I were to read the tech press, I'd think that founding a company is all about raising monster rounds, hitting aggressive milestones, and exiting for a billion dollars.

What I won't read about is how difficult the path was to raising that monster round, how it affected that founder's mental health, how hard he had to work to hit those milestones, or what went into that billion-dollar exit.

So let's talk about fundraising and what you can do to prepare yourself for this exhausting process and how you can increase your chances of success.

1. Identify the right investors for you

There are some very big decisions you're going to make along the way that will fundamentally change the trajectory of your company. One of them is whom you raise capital from.

Contrary to popular belief, not all money was created equal.

Before pitching an investor, do the research and determine which investors invest in your space and your stage and are not invested in a competitor.

2. Research investors before going on a first date

Many people have made the analogy between marriage and the relationship between a company and its investors.

That analogy is pretty spot on, but it goes deeper than just the relationship post-investment. Before going on a blind date, wouldn't you do some research about that person first? Well, before taking someone's money and giving them a say in how you run your company, it's a good idea to research that investor first.

The best way to do that? Speak to founders who previously fundraised from that investor and ask how their experience was.

3. You found the right investor and researched them? Great, now study them

So you have found the right investor and determined that this is the type of person you want as a partner. Now it's time to find out how that person likes to date.

Start with going to the investor's website and reading about their philosophy. Do they have a form on their site for you to fill out and send your deck with, or do they prefer to get an intro? And if they want to meet founders via an intro, who is the ideal person for them to make that intro?

Learn what excites that investor and what space is grabbing her attention nowadays. Learn how that investor likes to conduct her meetings. Are they more focused on your mission or your unit economics? Or maybe it's both. Are they looking for more risk or do they want to invest once there's a product-market fit?

Before entering that meeting room, before even sending your deck, familiarize yourself with that investor and how she likes to conduct herself.

4. Answer questions before they're asked

Your deck should accomplish one thing and one thing only. It should answer the question, "Why should I take the meeting with you?"

Of course, you can have a deck that you present in the actual meeting, but first and foremost, make a deck that'll answer any question that investors might have when deciding whether to meet you.

Some of those questions might include:

• What is the pain point?
• What is the solution?
• How big is the need?
• Why are you the right person to solve it?
• What is the timeline?
• What does the competitive landscape look like?
• How much are you raising?

That's a good start.

The bottom line is, don't jump to raise capital before preparing yourself, just like you wouldn't jump to marry someone before making sure you know all there is to know about that person.

Photo credit: Getty Images.