How To Prep For Funding in 2024

Securing funding is always one of the top priorities for founders, no matter what stage you’re at.?

No matter how much you may think you’re going to finish funding and go back to head-down mode - you are wrong. Raising and investor relations is KEY for any CEO.

At Connectd we’ve raised $8.5m in seed funding.

Although different at every stage, preparing for funding requires a clear understanding of what investors are looking for at each stage and how to navigate the funding landscape effectively.?

In this newsletter, we'll cover the essential steps you need to take to prepare for seed funding in 2024.

1. What Investors Analyse at the Pre-Seed Stage v Seed Stage

Pre-seed

At this stage, you haven’t got anything but a pitch deck, maybe a team, and a whole lot of delusion.

Investors will tend to observe these three parts of your startup in this order of importance - team, revenue and data. I’ve gone into more detail regarding each of these and what they look for within them.

1?? Team:?

Investors look for founder-market fit, conviction, inspiration, pitch, and education.?

They want to see a founder/founding team before them with a level of passion and expertise that makes them believe that you can make it happen.

2?? Revenue:?

While revenue at this stage is a bonus, how you think about early revenue is crucial and a very good habit to practise before you start dealing with bigger funding rounds.

Investors love founders with great foresight and forward planning. They’re taking a huge risk on you.

And if you can make revenue from your customer type - even if it’s unscalable/non-repeatable - it shows true hustle, and an understanding of how you get cheques written in your space.

I’ve never gone to raise a pre-seed round without at least ‘some’ revenues to speak of.

3?? Data:?

Though non-existent, having a clear strategy for data collection and utilisation is key. Forbes mentions how data-driven companies are 23 times more likely to top their competitors in customer acquisition.

Seed

This is where you really double down on finding product market fit and your go-to market strategy, spending a huge portion of the funding you’ve secured on hiring the right individuals and building the right tools.?

Investors at this level will look at revenue, team and data in that order of importance - have a look at why:

1?? Revenue:?

Early signs of product-market fit are crucial. Investors want to see that you know how to monetise your product and that there's sufficient market demand.?

Startups with a clear monetisation strategy are more likely to secure seed funding.

2?? Team:?

Similar to the pre-seed stage, investors still prioritise a strong and capable team. This is the level where they want to see more specialists being brought in, so the founding team can now become much more managerial.

3?? Data:?

At this stage, investors expect a data framework to be in place. Startups that prioritise data-driven decision-making are 6% more likely to experience rapid growth.

2. Funding in the Current Economic Landscape

Understanding the current trends and insights in the funding landscape and global economy is crucial.?

A recent report from Reuters mentions how VC investment into UK startups is the worst it’s been since COVID. Only $3.8 billion was raised in the first quarter of this year, under $1 billion less than Q4 2023.

Higher interest rates this year has also affected funding for startups. Globally, VC investments fell to a near five-year low in Q1 2024 as well as the number of estimated deals.

Having this information to hand helps massively when it comes to raising, giving you a better understanding of the risk appetite of investors and the amount to aim for.

3. Pitch Deck & Investor Relations

Your pitch deck is your foot in the door.?

Make sure it highlights your team, market opportunity, traction and vision.?

According to Pitch Deck Creators , decks with 11-20 slides are 43% more likely to receive funding. Anything more and you’re asking investors to digest a lot of information, which isn’t ideal considering the hundreds of pitch decks they see on a regular basis.

Also, if you already have investors, don’t be afraid to ask them for help. However, you need to build a solid relationship for this to happen. This is why I drill down so much on managing your investor relations.?

There’s no reason why they won’t want to help you grow - it’s in their best interest!

I’ve said it before and I’ll say it again. How you interact with your investors POST investment is the biggest determiner of whether they re-invest or make introductions to other investors.

4. The Funding Process

Understanding term sheets and negotiation strategies is essential.?

Knowing how much to go for at each different stage, particularly in the early stages can be difficult to navigate.

I shared this funding ‘cheatsheet’ earlier this month , a super useful infographic from Carta’s Head of Insights, Peter Walker which covers median valuation, cash raised and dilution (or expected dilution) from angel round to Series A.

This should make you feel even more equipped when going into negotiations????

5. What to Do Once You've Secured Funding

Once you've secured funding, it's time to act.?

Focus on acquiring/scaling revenue, developing both your product and team, and quickly improving your abilities to make decisions informed by data.. At pre-seed and seed level, this is the time you scale up your customer acquisition process and your product roadmap.?

Get in those talented specialists who will help aggressively drive towards finding product-market fit through market research and product development

Outro

Securing seed funding is an exciting milestone for any startup, but don’t f*ck it up by not having a clear plan and mismanagement of your investors.?

With the right preparation and strategy, you can set your startup on the path to success for 2024 and beyond.

Good luck raising!?