Fundraising Tips #2: Learning from Mistakes

Welcome to the second part of our Fundraising series with Mercury.

Starting a business is hard, but raising venture capital can be even harder. In today's economic climate, attracting investors can be challenging for even the most promising startups. However, with the right strategy and approach, you can overcome these obstacles and successfully raise the funds you need to launch or grow your business.

Everyone loves a good success story, and Sasha is no stranger to that. He's experienced the challenges of fundraising for startups multiple times - but he also understands how rewarding it can be.

Let's jump in as he shares his top tips on raising venture capital for your own startup dreams.

Opening Sentence and Slide

The opening sentence and slide of your pitch are crucial. This is where you either capture investors' attention or lose it entirely.

To make a strong first impression, your opening should be ambitious and believable but not something that raises objections or arguments.

For example, let's say you're pitching a new software product. Instead of saying something generic like "We've built a revolutionary software product that will disrupt the market," try something more specific and exciting like "We've built the only software product that can reduce your company's energy consumption by 30% within six months."

This specific and ambitious claim will grab investors' attention and make them want to learn more.

He stresses the importance of investing time in perfecting this sentence, noting that he sometimes spends up to three months getting it just right.

A powerful opening can keep investors engaged throughout the rest of your pitch.

Telling the Right Story and Showing the Right Proof Points

Next, make sure you tell the right story and show the right proof points. Take the time to research each potential investor and tailor your pitch accordingly. What are their areas of interest? What types of companies have they invested in before? What do they value most in a startup?

By customizing your pitch to each investor, you show that you have done your homework and demonstrate how your product or service aligns with their investment goals.

When you're able to personalize the pitch, you're more likely to get a response.

Another important tip is to compile a document with all the questions you hope investors won't ask, and have your friends battle-test it. Pitch to people who aren't the right fit as investors, but who will take a meeting, and incorporate any feedback you get. This way, when you meet with more investors, you'll be prepared for any questions or objections they might throw at you.

Be Prepared to Answer Tough Questions

During your pitch, investors will likely ask you tough questions about your business model, competitors, and financial projections. It's essential to be prepared to answer these questions confidently and concisely. You should know your data inside and out and be able to provide clear explanations.

Investors want to understand the founder's thinking process and be convinced that the data supports the claims being made.

Be honest about your business's risks and challenges, but highlight your strengths and unique selling points.

Build Relationships, Not Just Transactions

Building relationships with investors should be a top priority for startup founders. Don't view fundraising as only a transactional process. Instead, focus on building connections that last beyond the initial investment. Cultivate relationships with investors even if they are not immediately interested in investing. You never know when they might become interested or refer you to another investor.

Investors want to work with founders who are open to feedback and willing to build relationships.

Be transparent and build trust with your investors by keeping them updated on your progress and seeking their input and advice.

Keep Your Eye on the Long-Term Goal

Finally, it's essential to remain focused on the long-term goal of your business, even during the fundraising process. Don't get discouraged if you receive rejections or if the process takes longer than expected. Raising venture capital is challenging, but it's not impossible. Stay persistent, and don't give up on your vision.

It's important to stay focused on the end goal and not let the fundraising process detract from your vision. Keep pushing forward.

Raising venture capital is daunting for startup founders, but it is not impossible if you develop the right strategy and approach.

For example, if you're a mission-driven company, you should look for investors who share your values and vision. They will reduce friction and ensure a strong long-term partnership.

Remember, having the wrong people on your cap table is way more painful than having a slightly lower valuation or ownership. So, focus on finding the right investors who can provide financial support, strategic guidance, and mentorship.

Keep these tips in mind as you prepare to launch your business and begin your fundraising journey.

🧩 Rooting for you! 

(Read the first part of this series here)