How To Raise Capital Well

Let’s face it. Fundraising is no one’s favorite cup of tea. Marc A Pitman, fundraising guru and author of Ask Without Fear!: A Simple Guide to Connecting Donors with What Matters to Them Most, perhaps said it best: “Fundraising is an extreme sport!”

And he is right. Fundraising is not for the faint of heart or the lazy. It’s an uphill battle that requires skill, passion, finesse, and preparation—but one that is worth every bit of the effort. Here is a list of proactive steps that I believe you can use to help ensure fundraising success. As fundraising expert and entrepreneur Alejandro Cremades said in his book The Art of Startup Fundraising: “Ideas are meaningless without a masterful execution.”

Do Your Research

I cannot stress the importance of this step enough. Fundraising is all about preparation—and that means having a plan. Cremades reiterates this need in his above-mentioned book as well, encouraging us to realize that “Business success requires business preparation. You don’t have to be a master tactician, but you do need to have a plan in place. This plan will act as a foundation for everything you want to achieve.”

And what does any great plan rely upon for a good base point? Research. Unfortunately, many  don’t invest the proper time or resources into research, or skip this step entirely, instead going after the money without considering other factors . This is a huge mistake. Instead of following the almighty dollar amount toted by a big fund , look at individuals within the firm, and then look closely at the types of investments they make. Only after this research will it be wise or appropriate to work on getting intros and beginning networking.

An added benefit to doing this due diligence is that the VCs will understand your business idea and “get it” quicker since you will know how to pitch it to their “sweet spots.” I cannot tell you how many times I’ve heard entrepreneurs frequently complain that the VCs they pitch to simply “don’t get it.” This shouldn’t be a surprise… You’re talking to the wrong people!

Deep Market Insights

Another integral factor of successful fundraising is to stand out from the crowd. A great way to do this is to create a business strategy that sets you apart. Look ahead to the next 10 years and hone your “market thinking” which is pivotal. By staying on top of—and really delving into and understanding the inner workings of market dynamics—you are making your company (and your case for would-be investors) shine as a relevant and forward-thinking entity that is heading somewhere.

VC pro, Marc Andreessen, called this process navigating “the idea maze.” And the best way you can ensure that your would-be investors find their way through (and end up at the negotiation table) is by bringing unique data and market insight—including primary research—as proverbial breadcrumbs of good faith.

Seek Input, Don’t Pitch

I’ve often said that the best time to raise funds is when you aren’t raising. It is essential to always keep asking questions and seeking guidance during this process. Ask people to challenge your assumptions until your pitch seems bulletproof. Also, stay focused on big-picture assumptions. Projections are rarely accurate. Perhaps the most important inquiry: Ask yourself, “What will it take to become a market leader?” then do everything you can to answer that with action.

Let the Dance Begin!

Once you are ready to take the leap, organize and schedule pitch meetings within a tight timeframe (like 1-2 weeks). As you begin conducting these meetings, be diligent in managing the progress and each milestone, keeping everyone in sync. Always have what I call upside surprises—such as updates : “Hey, we just landed this big contract with (insert big name company here).” Remember: Fear and greed are key drivers, especially for VCs who don’t want to miss out. You’ve heard of FOMO? Well, it’s alive and well in the VC realm, and you will do well to use that to your favor in fundraising. You’d be amazed at how VCs can move very fast if they are interested, and they know that if they don’t do it, someone else might.

Above all, keep in mind that the QUALITY of the investor is more important than the valuation. I’ll leave you with a quote from entrepreneur Paul Graham to spur you on your way to your new frontier…

“The most important thing is not to let fundraising get you down. Startups live or die on morale. If you let the difficulty of raising money destroy your morale, it will become a self-fulfilling prophecy.” ― Paul Graham, Paul Graham Essays