There is no ready-made solution for startups when it comes to seeking funding, although taking the time to fully prepare before speaking to investors is an absolute necessity.
“A very obvious, but incredibly important thing to remember; do it in time. Get to know the VCs before you need the money. Show them what you can do, how the company is growing and make sure your forecasts are realistic.
“This all means that once you know you need the money, you can show investors the actual proof and provide the metrics that are essential in influencing their decision. So ensure you know what the key drivers of your business are? How long is your runway? Basically, it’s about making sure you can show that you’re in control.
“Understanding those financials is essential. Really make sure you can explain your business proposition and where you sit in the market. For example, SaaS metrics were hugely important for us when pitching to investors.
“A big thing for me was reading the book The Secrets of Sand Hill Road. I would definitely recommend that because it’s written by someone from the VC world describing what their key drivers are. What their benefits and inspirations for investing in you are. Who the limited partners are. How the structure works. What the term sheets are. All kinds of useful information that helps you look at your offering from an investor perspective
“Another big piece of advice I’d offer in terms of funding, is focusing on VCs in a specific domain. For instance, we could look at VCs that have a dedicated fund for SaaS or ecommerce, or at least have the experience in the areas in which we want to grow. This means you’re not just getting financial resources, but access to relevant networks and strategic advice.”
Jorrit also warned against getting caught out by investors who don’t necessarily want the same things that your business needs.
“Make sure your goals are aligned. I didn’t always know this in advance, but sometimes you’re talking to a VC who may be at the end of their fund life. So they invest in you, but are then looking for an exit in two years' time, whereas you ideally needed someone for the next ten.
“So only spend time on VCs where you feel there’s a definite match. Make sure you know which investors will be on your board too, always ask that question and make sure they’re a good fit.
“It’s also worth remembering, VCs often initially send out ‘analysts’ that always appear very impressed with what you do and tell you that you have an awesome product. That can lead to false hope and excitement, before realising they’re only a junior analyst that’s trying to get pitches in and fill a quota - so don’t get ahead of yourself and think that you’ve secured the funding.” (Take a look at our Capital domain)