Companies in our batch program have gone on to raise over $160M after graduation. Here are four key things we teach in the program to help founders successfully fundraise:
#1 Understanding Investors
When you fundraise, it's important to know the roles of an investment firm and how the hierarchy works. Your goal is to convince a partner who becomes your internal champion.
Start with the highest level you can reach; if that is the associate, work up the ladder. (Remember, associates have no decision-making power. Their work mostly revolves around research and bringing deals to the partners.)
Once you have an internal champion, you'll need to do what you can to help them convince the other partners.
#2 Creating An Effective Pitch
Think of your pitch like the hooks of a song. You don’t need to explain every detail, but you need to explain enough to intrigue the investor. The job of the pitch is not to get money; the job of the pitch is to get to a conversation.
We created this video on how to create an effective pitch:
#3 Creating Investor FOMO
Fundraising is all about supply and demand. The best way to optimise a fundraise is to have lots of investors that want you at the same time. We recommend founders fundraise in a parallel process - that means you talk to as many investors as possible at the same time. The trick here is to optimise for the most amount of investor activity in the shortest amount of time.
This way, you create urgency because (1) there's less information flow throughout the investor network and (2) there's pressure from other investors to speed up their decision-making. All investors talk to each other, which doesn’t really work in the founders’ favour. By creating urgency, the window for investors to talk to each other becomes significantly smaller.
When you fundraise serially (where you only talk to one investor at a time), investors control the timing as there's less urgency. Remember, you’re trying to create pressure to get investors to say yes (or no), and fundraising serially is ineffective.
#4 Staying Organised
Being unprepared is one of the most common mistakes in fundraising. You (often) only have one shot at impressing an investor. When you don’t do the necessary preparation, you run the risk of coming underprepared and losing out on your one chance.
We always recommend founders stay organised by having a CRM system. Download our CRM template here.
Think of it like building a good sales process, where you’ll need to…
- Create a hit list - A list of investors you’ve contacted before, and would like to talk to.
- Qualify investors - Like any sales process, you want to start with and spend most of your energy on the investors who you want to invest and are most likely to invest. Every investor has different interests and perspectives, and it’s important to do your research, figure out if your company is a good fit and prioritise accordingly.
- Update as you go along - As you talk to more investors, you’ll learn more about what they invest in, check sizes, etc. Update their information in your CRM.
We hope this thread is helpful! If you think this could be helpful to your founder friends, share it with them. We teach all of this in Iterative's core program and more - if you're a founder and working on something, please apply here: https://bit.ly/43Bi9sl Our application deadline for the next batch is 19 June 2023.
