By Fernando Berrocal

Entrepreneurs may improve their fundraising strategy by better understanding how investors evaluate startups and how to avoid cash management errors. Every successful entrepreneur understands the value of investing in a great product, establishing a strong staff, making consumers feel welcome, and increasing revenues. Unfortunately, most entrepreneurs overlook the importance of ensuring that their business can continue to obtain funds at increasing valuations. 

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The elements of a Successful Fundraising Approach:

Set Deadlines: Fundraising may be an exhausting and time-consuming process. Employees, customers, and everyone else in the organization still expect the CEO's input. The faster the fundraising process is completed, the better the business operates. When given the option, investors are more likely to take their time. This means that investors will have more proof and data points to consider when making their selection. Tight processes give investors the impression that the business is punctual and confident in its operations.

Providing investors with deadlines and due dates is also beneficial to marketing efforts. Find a suitable event that will motivate the businesses involved to make the best option for the organization. Anchoring the fundraising around a specific time, such as Y Combinator, allows an early-stage entrepreneur to brand the fundraiser and generate a lot of publicity around that time. You must, however, honor requests from partner firms or investors for more time to complete their work. Most startups rely on long-term collaborations to succeed.

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Make clear the solutions your business offers: Every investor believes that a successful business offers a viable solution to a problem or has significant market demand. Excellent branding can provide a business with a positive image in the marketplace. However, without a clear definition of the solution being presented to the market, it is difficult to persuade investors to offer fantastic offers. Entrepreneurs must be aware of their organization's purpose and must be able to persuade others to join their business endeavors when they are invited.

Identify the businesses or investors you want to work with: Relationships with businesses and people who support the firm's growth go a long way toward deciding how engaged they are in fundraising. An investor spreadsheet with priority scores will assist you in identifying the finest businesses to contact. It’s advisable to create a spreadsheet for investors that includes columns for priority score, business, lead, connector, average check size, risk-adjusted check size, notes, last action, and action item. While most startups may overlook the importance of some of these sectors, they are all critical in evaluating which investors or organizations are the best to deal with.

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Understanding the Investor Spreadsheet:

Making a spreadsheet with a priority ranking for each possible partner can help you figure out which businesses to target when promoting your fundraiser. In that manner, you can attract the attention of investors who are interested in your organization's best interests at heart.

• Lead priority scores help you figure out which businesses or investors are most likely to invest as lead investors in your startup. Making a list of the businesses whose recent interactions with your organization indicate shared interests allows you to focus your fundraiser marketing efforts on organizations that can lead your fundraising round. 
• The average check size and risk-adjusted check size provide you with an idea of how much money the fund can put into your business. It enables you to maximize your fundraising efforts by determining how much money you may and cannot pool from the fundraising firms with whom you are working.
• Information on the last communication with the firm, the last to-do from you or the firm, and what needs to be done by you or the business is contained in the last touch, last action, and action items. This data allows you to stay on top of your fundraising efforts.

Put strategies in place to create a FOMO effect among investors:

Backchannel your friends or coworkers, conduct additional press, and spread the word that your business is the best deal to fundraise. While conducting due diligence with an investor, the business or CEO's name should ideally come up frequently. It's important to your fundraising success that everyone knows about your deal and feels driven to tell their friends about it. If one of the top-ranked firms spreads the word, others are likely to hear about it and get on board. Entrepreneurs should make use of the fact that people discuss.

Most CEOs will benefit from these word-of-mouth techniques, but minority entrepreneurs may have a much more difficult time maximizing their plan, even after following the procedure recommended by other founders. Entrepreneurs can meet and get supported by potential investors by putting themselves in networks or circles that can provide them with a valuable ear. Fundraising is all about who you know, and the easiest approach to meet and get to know CEOs and investors is to naturally join their networks.

Have a clear estimate of the funds required:

While this is a part of the business plan, it is something that entrepreneurs should focus on more. Investors can know exactly how their money will help the organization by quoting and justifying the objective of the required funds. This builds trust, and the information should be presented or read in the most straightforward manner possible. Gaining the trust of investors and partner firms can pay off handsomely after your fundraising campaign and in the long run.

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Ready to bring your startup to the next level? Apply to MassLight’s next batch. MassLight supplies capital and a dedicated tech team. We take equity in return. Have questions? Refer to our FAQ page.

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