Getting outside funding is a necessary step for many businesses, but lacks transparency and turns into a very frustrating process, especially for first time fundraisers. In the Investment Readiness coaching sessions, I hear often from founders `I should have known these before spending so much effort for no results’ , hence sharing here few of the most ignored advices, in my experience.
#1 Quality over quantity
In the previous post, I mentioned the basic starting point in the fundraising: the indirect research - understanding the preferences and the current portfolio of the investors targeted, learning from peer founders who got funded - . This comes up on my list as the #1 most ignored advice. It may be counter-intuitive, but more meetings does not equal more money. What is likely to bring more money is quality introductions to investors who are identified to be a fit. This comes from thorough investor research and segmentation and will lead to contact probably 20 investors, not 80. More effort in preparing and planning the fundraising approach will pay off in faster funding.
#2 Keep your pitch deck at max 10 slides
It is important to realize that investors reviewing pitch decks will have different expectations on how a deck should be presented. If you are in fundraisingmode, takea look at some of the top pitch decksthat have been successful in raising capital, in your industry.
One clear investor preference, is : Lead with the Investment thesis.
A most favoured sequence is: problem – solution – opportunity - competition - business model – team –financials. Deal terms disclosure in the deck is not a one-for-all approach. Instead, should be tailored to the investor requirements (circling back to the point #1 above).
A Docsend study indicates the Top 3 pages reviewed by investors are: Team, Financials, Competition. And yet, 1/3 of seed decks do not include competition information and only about ½ include financials.
#3 Articulate the opportunity and your competitive advantage
The same Docsend study states that ¼ of pitch decks are missing the opportunity sizing. Often, where the information is covered, we see tendencies to overblowing the target market size or just using generic numbers, not really focusing on the addressable market size.
Everyone has competition, the pitch deck needs to explain how is your business better. If partnerships and intellectual property are the arguments for competitive advantage, know that partnerships are relevant only if they actually impact directly your bottom line and that patent defensibility is very low, because it comes at very high cost, most likely unbearable for a start-up and unappealing to most investors. Defensibility is more in the market approach and not as much in the patent.
For my posts on how to navigate the funding maze, click here.
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