How startup CEOs can improve their fundraising skills

How startup CEOs can improve their fundraising skills

I recently came across this very good piece by Christoph Janz, managing partner at Point Nine Capital in Berlin.

His post reveals the biggest pain points early-stage tech startups face when fundraising, based on a survey of 110 founders:

  • Founders are being left in the dark most of the time as there is no clear YES or NO, and constructive feedback is rarely provided either
  • Fundraising can be a painful process across all stages
  • VCs back out of signed, non-binding term sheets more often than might be expected

While it’s great to see that the VC industry recognises some of these fundraising challenges, startup CEOs also have an important role to play in removing some of those pain points themselves.

Here are a few things startups CEOs can do to overcome these fundraising hurdles

(Note: This relates specifically to venture capital. Angel investors might have different investment motivations)

  • Be prepared! It can’t be repeated often enough: startup CEOs need to do their homework to research and screen every potential investor upfront. If there is an obvious mismatch, save yourself and the investor time and resources by focusing on VCs that offer a better match. Although it might be exciting to talk to a famous VC or one that is later stage, your time can be better spent with those who are more relevant and interested in your startup’s current stage of growth.
  • Know what you want, and need! Some startup CEOs can be smooth talkers, highlighting the positives while glossing over any facts that could represent a deal breaker. While it is vitally important to point out your strengths, needs and the upside for the investor, it is equally important to share your challenges right away. The investor will find discover your startup’s issues or challenges in due diligence anyway, but drawing attention to these facts early will help both sides quickly determine if this collaboration is mutually beneficial.
  • Be proactive and straight forward! Fundraising is similar to the sales process – YOU need to close it. Startup CEOs often allow VCs to lead the conversation because they are afraid to fuck it up or hear a NO. Instead, communicate in a direct manner, bring the negotiation to a conclusion and strive to close the ‘sale’. Additionally, have your information like the investment deck ready, up to date and send it along with the initial contact, introduction or follow up after a meeting or conversation.

In a nutshell, the key to better fundraising is to streamline all communications (calls, meetings, email), set clear action points and timelines, keep pushing for responses and always be closing.