THE TRUTH ABOUT FUNDING
Truth 1: VCs invest in markets as much as they invest in people.
The vertical that you choose to focus on matters a lot. Not every industry is going to receive the same amount of funding or even consideration. The venture capitalists are focusing on getting the best return on their investment, no matter how long it takes. An industry like AI or even healthcare will be get more attention from an investor than another dating app or food delivery app.
Truth 2: VCs care about distribution, not just product.
Building an incredible product sounds great. That’s obviously necessary for startup success. But the ability to reach your customers is just as important as features and functionality of your product. You need a clear path to reach customers. This can be a social media advantage or a connection with the other winners in the marketplace through influencers.
**Think of your customers acquisition costs as well. How much does it cost to get more customers? If you have an answer to this question, you’ll be ready to talk to venture capitalists.
Our interviews with founders and investors are virtual and in person.
Truth 3: Your “why now” story matters more than your “what”
Timing is everything for investors. The hotter the market, the more interested other investors are in putting money into different companies. In contrast, if the market isn’t working as well, it could be challenging to raise capital.
Truth 4: Raising takes longer than you think (typical 6-12 months)
Be ready to do a ton of research. I’ve actually learned that its better to talk to less VCs. Instead of taking every meeting just because you can, focus on meeting with the right VCs that fit your goals. This will naturally increase your time to funding.
Truth 5: Its not free money!
When an investor believes in you, they invest in you. But that means they want something in return. Its important that you understand their expectations before you sign the dotted line. This way you can always maintain a healthy relationship.
Truth 6: Not every business is a venture business
This is painful to hear for some founders but its the truth. Most VCs want to see massive returns for what they invest into startups. While this isn’t limited to unicorns, billion dollar companies, you’ll still be expected to generate 10x returns! Really think about the possibilities of your company growing to millions and millions over the next 5-10 years.
Truth 7: You have to treat fundraising like sales
This shouldn’t be a surprise. You need to be comfortable selling your startup as a founder before you hire a sales team. It’s no difference when it comes to getting an investment. Be ready to sell yourself and the mission of your startup.
🎁 Bonus: Download my free Founder Playbook PDF
Until next time,
⚡ Next Round is produced by Hinesight Marketing. We help startups tell their story, get discovered, and get funded.