By Fernando Berrocal

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Being a startup entrepreneur is a challenging process.  There are many obstacles along the way. One of the main hurdles is fundraising, which is defined as the process of soliciting financial support for the development of a startup. As a business founder, you created your own business to build something–not to ask for money. However, any entrepreneur can tell you that seeking capital is a core aspect of the startup experience. In this article, we will explore how to keep the momentum going while fundraising for your startup. 

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Sometimes, as a startup founder, fundraising can seem all-consuming.  How can you continue to expand your firm while looking for the investment of a venture capitalist (VC)? First, you must manage your time well–it is the most valuable resource you have, especially in the context of running a startup operation that needs funding and day-to-day leadership. Second, instead of attempting to meet with every investor that responds to your messages, concentrate on reaching top candidates. Third, avoid wasting your time by establishing specific expectations for each business meeting. Treating the pursuit of investors as a numbers game is one of the most common errors startups commit. Iif one of your objectives is attending a thousand pitch meetings, then go ahead! However, if you want to develop a strong business, you should prioritize quality over abundance.

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When you’re considering reaching out to a venture capitalist, the question to ask yourself is: does this person treat investing as a business or a lifestyle? Many lifestyle investors enjoy attending large gatherings where they may network with other businesspeople–and hear their pitches. They enjoy talking about being an investor, dislike being forced to give precise details, and don't want to conduct due diligence (or send over a term sheet). They prefer to express their enthusiasm for your proposal in general terms, and invite you to speak with them again. Since lifestyle investors won't comprehend why you must end the meeting shortly to attend your scheduled sales calls, they aren't truly engaged in expanding businesses. 

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The other kind of investor views VC as a means of generating income. They make annual investments in many small businesses and are keen to either seal a deal or try to understand why this project is not right for them. Since they are equally busy - and don't schedule meetings for the sake of amusement - they will appreciate that you are busy. So, in summary, spend as little time as possible in pitch meetings.  Stay away from lifestyle investors.  Follow these rules and you can focus on growing your business. Speaking of which; how do you accomplish that with all these fundraising efforts going on?

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1. Treat investor meetings as if they were sales meetings.

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This primarily serves as a means of monitoring the process of finding the right investors–that process essentially being the reduction of a big pool of prospects into a core of committed, devoted clients. The funnel's biggest area is at the top, where it includes everyone who might one day purchase your products.  Where you want them to end up is at the base; it’s the narrowest section, since it’s where you've already ruled out anyone who currently owns what you're selling (or isn't actively searching to buy right now). Thus, adopt this same perspective when considering your investor pool.  Cast a wide net, and reduce the larger group down into viable candidates. 

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Find out in advance if they fund businesses in your industry or make investments of the amount you're looking for.  Establish whether they are active or lifestyle investors. There are many ways to find out this information, including chatting to other founders, looking at their web catalogs, using online databases like Mattermark or Crunchbase.  You can also just ask them directly; they may appreciate your candor. Finally, you will see that serious venture capitalists (VCs) will typically inform you if your business is a bad fit for their organization. They don't want to waste time investigating a business that they would never fund.

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2. For any meeting, establish realistic expectations.

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Create a clear agenda in advance of any meeting with a possible investor. You should have made plans for what you'll talk about, how long, and what you'll ask them for at the conclusion. You must have a clearly defined outcome–let the investor know that you are seeking a business. That doesn't mean you have to demand that they immediately take out their checkbook. A "yes" could be a term sheet, a planned meeting, or a deadline for supplying them with supporting evidence for their due diligence. Whatever it is, it should at the very least advance them closer to a signed contract.

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3. Send an invitation and follow it through on the event.

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Never accept anything more or less than the agreed-upon start and end times. A clearly-defined timeframe makes it much simpler to come to a close when there are a few minutes left on the clock. At that moment, you should return the dialogue to one-word responses (“yes” or “no”).  If you truly need to leave the meeting, say something to the investor along the lines of, "It appears we have a short time left so before we finish; is there anything you need to clarify?” Then, hold off until they explain what you can do to change the “no” into a “yes”.

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In summary, fundraising is an inevitable part of the path of your startup–unless you're fortunate to be a billionaire. However, don't let the pursuit of capital distract all of your attention from the work you truly enjoy. Target investors that are actively seeking businesses like yours in your search. Establish clear meeting hours, agendas, and objectives. If you demonstrate that you value both your time and that of the investor, they will respect you more.

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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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