Mini-toolbox for raising pre-seed and seed rounds for startups all over the world.
Osita James Uche
Leading Startup Attorney @BlackCrest LP I TEDx Speaker I Startup Coach | Chevening Scholar '22 I Human
In Peter Thiel's Zero to One, he described happy startups as being the ones who earn a monopoly by solving a unique problem. What he may have left out however is that every great startup from Google, to Facebook, to Netflix, to Airbnb, each had sufficient funding.
No startup can succeed without funding. Whether or not the funding comes from VCs, the founders or their family and friends.?This of course is not to say that with funding alone, we can build value. That is not correct but with funding, the right idea, a great market opportunity and the right team, you can build something valuable that will make a difference in the world.?
In today's newsletter, I will explore the different tools early-stage entrepreneurs should consider when fundraising. I will also list some of the most comprehensive databases of Angel Investors and VCs with their respective industry focus.?
Building is already hard enough, getting people interested in your industry who can fund you should also not be.
There is one key thing you have to do as an early-stage founder when you start fundraising. You need to ask yourself;
Are we ready for funding??
How to get to the answer is dependent on several things.
Your growth rate
You need to figure out if you are growing fast enough to consider funding to increase your user base and manage downtime.?
Your talent needs?
Has your startup gotten to a stage where the founders alone can no longer handle customer requests, fix bugs and manage partnerships??
You have done your proof of concept?
If you have validated through an MVP that your solution solves a major problem for thousands of customers it may be time to consider improving the prototype to cater to a wider market with funding.
You need to be honest with yourself. Don't use your gut feeling to decide when it's time to fundraise. Also, don't fundraise because the founders are working full-time and are low on cash.
To acquaint you with the process of fundraising for startups here are some key terms to keep in mind as you read
Round: A particular fundraising event a company goes through.??
Priced round: An equity investment based on an assessment of your company’s valuation.?
Bootstrapping: This means funding your company’s growth yourself.
Venture capital firm: A type of organization that makes private equity investments in startups. They are also called VCs.?
Angel investor: An individual who gives money to a startup in exchange for equity or convertible debt.?
There are different types of funding rounds. They are as follows;
We will however only be dealing with the Pre-seed and Seed round in this newsletter.?
There is some good news. According to DocSend's 2019 report, the minimum pre-seed in the US was $500,000. But before you get too excited, Forbes in 2020 shows that less than 1% of startups get venture capital. The stats in emerging markets are even lower.
The terms are discussed below;
Pre-seed?
This is the funding early-stage startups get from family and friends and angel investors when they are still at the idea stage or early prototype stage of their product. VCs sometimes invest in pre-seed but they have many requirements to hedge their risk of investing at the early stage.
I recall speaking to some angels a while back. They listened to our pitch, loved the product but wanted more traction. We explained that the type of traction they wanted couldn't be achieved with our current funding but insisted that to hedge the risk they had to be sure we could pull it off.?
"Get used to Angels and VCs being sceptical. They don't know your model and the team well enough to decide whether you are worth investing in. Focus instead on building something so valuable that VCs and Skeptics will jump to invest for fear of missing out on the next big thing."
Where to find pre-seed investors?
There are many places to find pre-seed investors, many thanks to the community approach to building that silicon valley has engendered to the rest of the world. The most popular ones are;
Here is a list of pre-seed Angels you might also find useful.
Seed?
This is the investment made by an Angel or a VC when the startup has built a functional MVP and started serving the first set of customers. The startups may or may not have started making revenue at that point.?
Where to find seed investors
Seed investors are also not hard to find from a Google perspective, but finding the investors that are a fit for your stage and your vertical can be tricky. Some of the ways to make fundraising for your seed round easier is to do the following;
" At Surepayy we were recently introduced to V8 Capital by a mutual acquaintance. Without that warm introduction, they probably wouldn't have replied any of our emails."
Some popular seed investors include;
Here is a comprehensive list.
Note that many of these investors generally won't invest in anyone not introduced to them unless you have traction too significant to be ignored. Traction can range from a 300% growth rate month on month for 12 months, transactions in billions in your local currency and active customers representing over 50% of your entire user base.?
领英推荐
Fundraising Tools?
Investor pipeline management?
I have compiled tools that can help any founder manage investor relations and track investor correspondence across several platforms.
No 1
Google Sheets - for managing investor relations and tracking correspondence.
No 2
Company email - For sending VCs and Angels Cold emails.?
"According to YC's Michael Seibel; ' Never send a VC cold email with your personal email."?
No 3
Google Docs - for drafting warm introduction templates.
It is easy to use and easily accessible from any device you log in to your Gmail account.
No 4
DocSend - for managing Pitch Deck viewing by investors, partners and Angels.
It is paid but super-useful for knowing which investors actually read your email and checked your pitch deck. It even includes details around how much time the VC or Angel spent reviewing it.
Financials
Financial Modelling Templates
Investor Relations Resources?
Startup Resources?
Startup Resources Nigeria
Startup Resources Global
Investment & Accelerator listing?platforms
Recommended people to follow on Twitter for fundraising news and tips.
On a final note, don't apply randomly to every single VC or angel with funds to spare. Be strategic. Create a meticulous list of investors based on your needs and current market. Ensure they have invested or show interest in investing in your vertical and market.?
At the heart of all startups is the undying vision of humanity to solve problems and leave the world much better than we met it. Don't give up on solving problems to chase raise announcements. Actively build, solve pressing problems and success will eventually come.
If you are a founder and you are reading this I want you to know that you are my hero.?
There is a lot to do, but it's best to take things one at a time. Live each day one at a time. And don't forget to breathe. That funding will come. That traction is all yours for the taking. But don't think or worry. Like Nike would always say; just do it.
I look forward to writing to you again soon.
If you have any questions or enquiries on what I have written feel free to send me an email at [email protected] .?
Keep building,
Osita.
P.S : If you are a VC reading this perhaps think twice before dismissing the next founders you meet. Building is hard and building without sufficient funding is even harder. Diamonds in the rough never come fully formed. Giving founders a chance to pitch even when they don't look unicorn worthy might make all the difference in your portfolio.
Mobile Developer | CEO at Scrolly Ltd | I write pitch decks!
1 年This is very important. I should save it
I empower kids with Digital skills | Cofounder @mthafrica | EdTech Advocate | Chevening Scholar | M.Sc Entrepreneurship, Innovation and Technology @unistrathclyde ????
2 年Very insightful. Well done Osita.
Strategy | Growth & Performance Marketing | Product Manager | Scrum Master | Certified Project Manager | Product Owner | Venture Builder | P&L Management | NUTM Scholar 2021 | Fellow, Oxford University Foundry YELP 2022
2 年Good work Osita Well done