Fundraising for your startup is a crucial part of your role as founder. No matter how innovative your idea, you’ll need capital to make your business a commercial success.
But it’s also an area that founders seem to struggle with the most. Understanding how to navigate the shifting investor landscape isn’t easy, particularly if this is your first venture.
Wouldn’t it be great to get some advice from someone who’s done it all before?
Let us introduce you to Hayat Amin, ex-Chief Strategy Officer at Grantify and currently Fractional CFO to some of the fastest growing companies in Europe and US.
When Should I Start Fundraising?
If you’re an innovative company, you need to be engaged in fundraising from the very beginning of your journey.
In fact, it’s a process you should be prepared to engage with for the long run according to Hayat, who advises: “You will never stop fundraising – up to the point at which you either launch an IPO, or you are organically commercially successful.”
Hayat goes a step further to explain that not only should you be thinking about fundraising from the outset, but that your success could well be linked to a far-sighted exit strategy:
“In my experience, companies who are most successful are those with an exit plan.
“Having an exit plan in place helps you understand which direction as a company you need to go. There are lots of different avenues you can explore but having an exit strategy will guide you.
“In fact, your exit is part of what investors are buying into.”
How Do I Define My Funding Needs?
There’s a delicate balance to be struck; between seeking to raise adequate capital that shows the seriousness of your commitment, or asking for too much, and demonstrating poor financial judgement. Hayat’s advice is twofold:
“Firstly, your funding needs should be defined by your product roadmap. What functionalities and features are you going to deliver? With that understanding, you can begin to scope out development and other associated costs. Nothing is as important as having a useful and exciting product.”
Hayat also points out that having a Go-To-Market (GTM) strategy is key to understanding how much investment you need.
“Secondly, your product roadmap should align clearly to the next stage, your GTM strategy. Do you understand where your customers are and how to reach them? If so, you should be able to work out how much it will cost to acquire them.”
Understanding the Investor Landscape
It’s no secret that global investment levels have dropped dramatically since 2021, due to the impact of the Covid-19 pandemic, rising interest rates and serious geopolitical instability. But it’s not all bad. Some analysts are quietly optimistic about 2024 – Morgan Stanley predicts caution in the first half of the year could give way to a stronger rest of 2024, with falling inflation set to bolster growth.
Hayat’s view? Despite tough economic headwinds, startups should remain confident when engaging investors: “Try not to get into a ‘scarcity’ mindset, letting your fear that investment isn’t forthcoming take over. Investors can sense that nervousness.
“Instead, try to frame a meeting with an investor with the idea that you are presenting them with an unmissable opportunity. Yes, deal flow has reduced, but VCs are as motivated as ever to find exciting new opportunities.”
Maintaining that level of confidence in fundraising isn’t easy, but for Hayat, let your faith in your product and innovation lead: “Everything comes back to having a valid problem that needs to be solved. Money is available to people with solutions to real problems, which can be scaled.”
Connecting with Investors
Meeting the right investors isn’t an exact science, but let your efforts be led by thoughtful interactions. Hayat says:
“Cold outreach is your enemy. Most investors prefer to operate in a network of trusted introductions. If you want to be an entrepreneur, you need to develop the ability to make genuine connections, and work on finding the right people to make those introductions for you.”
To do that, you’ll need to attend investor networking events and get comfortable talking about your business.
Spend time interacting with people in your industry on Linkedin and other social platforms, and develop a profile as an expert in your field. If you spend time doing this, not only will you make invaluable contacts, you’ll be ready to inspire an investor’s confidence when the time comes.
If you do secure that all-important investor meeting, be ready to engage them in terms you know they’ll respond to. Investors want to be excited about your innovation, but they also want to know how you’ll make it a commercial success.
Hayat says:
“Paint the picture in the language that an investor can understand. Be audacious, but be detailed. Instead of aiming for a total revenue of £50M, explain how you’ll hit £50 million in year five – for example, by reducing your cost of acquisition by 25% each year, through activating your GTM go to market strategy, and calculating how the lifetime value of your customer will increase.
“This is a vivid picture that every investor will understand, and be impressed by.”
Grants Versus VC Investment
Grant funding and venture capital are two different fundraising strategies, with different requirements and outcomes.
Grants offer substantial amounts of funding with no need for match funding or equity release, and are great options for early stage projects.
Venture capital offers high value investment, but is typically better suited to businesses with existing traction and the potential for rapid growth.
Securing a grant might be right if you are still in the research and development phase of your project. In fact, a large grant can help you get up and running, and help to prepare you to seek VC funding down the line.
Hayat’s advice: “Securing a grant offers important validation to investors that your idea is innovative. With a grant in place, you should be focusing on the next stage – commercial success and accelerated growth. That’s when you’re ready for VC funding.”
Your Fundraising Support Team
You don’t need to navigate the complexities of startup fundraising alone. Working with a fundraising partner will help you accelerate your growth , make intelligent decisions, align your language with what investors and funders want to hear, and understand which strategy is right for you.
If you’re still at the innovation stage of your project, you should talk to one of Grantify’s funding experts to find out what grants you could be eligible for.
If you have already secured funding and are ready to take things to the next level and raise VC funds, talk to Hayat for expert advice.