What does it take to close your first fundraising round?

We sat down with?Nikki and Dan?of?Stratiphy?to get the inside scoop on what it takes to close a successful Seed funding round.

IW: Dan, Nikki can you help early-stage founders by sharing your own fundraising journey??It’s so useful to hear from entrepreneurs like yourselves, who are on the other side of a successful raise.

Fundraising is a continuous process for most startups, with many bootstrapping until they receive external funding. This was no different for Stratiphy, we started the business in 2020 using our own funds and keeping everything on a shoestring, developing and marketing in-house, but we knew to get started properly we needed external funds to accelerate our progress.

Initially we found this to be a difficult process, we had a great idea but couldn’t convince people to back our business. After many rejections, and being blanked one too many times, we decided to try something different. We organised group calls with everyone who had expressed an interest in what we are developing.?

We practised our presentation until perfection, and sent out our pitch deck in advance so that people could familiarise themselves with the business, to come ready with questions. Each team member who was responsible for their area of expertise spoke with conviction about their plans and experience. Crucially, having a group of investors join the calls as opposed to individuals gave a much greater sense of organisation and we could leverage everyone's questions to foster excitement.

IW: You have raised via several different mechanisms. What are your thoughts on the pros / cons of each?

Later on we repeated this process, but also added crowdfunding to our approach. This was a big step at the time, putting our business in the public spotlight for the first time, but it turned out to be extremely rewarding and we had such an overwhelming response it gave us the confidence to think even bigger, and it meant we had 700 additional backers fighting our corner. Crowdfunding made a lot of sense for us as a strategy to raise money and acquire customers to join our waiting list. We were overwhelmed with the response as we overfunded by 200% of our initial target, closing the raise at ￡440k.?

Since then we found it was necessary to be creative to bring the right people on board at the right time. For example, we completely filled our crowdfunding quota, but still had investors who wanted to join us. So after the campaign we created a mini-convertible round so they could participate, and this has been a great way to manage competing pressures prior to our current seed raise.?

We have found that it is important to select the right type of investor who can contribute to your team and be a constructive partner, but also one that shares your vision. We have certainly found that in our network of angel investors and crowdfunding backers.?

When we feel it is the right time we may look at additional routes such as industry partners or institutional investors, however right now we are comfortable growing our close knit family to take our small venture forward and to make a big splash.?

IW. So, having successfully raised multiple times now, what would you say it takes to close your first round?

Hard work and self-belief. You always hear about the outlier stories of a self-made founder raising millions off the back of an idea, but this is not a realistic route to raise funds. Fundraising is almost always hard work. If you don’t believe in your product, or that you will create a successful business then you will never convince anyone else of that either.?

Here are our top 5 recommendations for anyone looking to raise funds:

• Product evangelists: Getting opinions from industry experts on your approach is really valuable. Having professionals in the space that vouch heavily for the solution you are building and have experienced the problem you are solving can go a long way. This is particularly helpful if you are in the stages before a public product launch which has been the case for Stratiphy.?
• Keeping on top of outward communication is crucial to keep the momentum of a raise. Investors will stalk you when they do their due diligence, so giving them something to look at that keeps you at the top of their mind is very useful when getting them over the line.?
• Public validation. Pre product launch this can be in the form of press releases, partnerships, waiting list growth and LOIs. Showcasing this as best you can.
• Pitch deck - This is more of a practical necessity but most people will spend under 3 minutes on your deck (docsend is a helpful tool for tracking visits and time spent on each page), and you often only get one shot with a lot of people. It needs to be clear and communicate the key aspects and achievements of the business in the most digestible way. We are probably on version 500 so it is safe to say this is always a work in progress and should be constantly updated to reflect your position.
• Having legal admin sorted. This can cause delays if it is not managed efficiently and your investors will have limited patience.

IW: A lot of entrepreneurs struggle with managing the fundraising process in parallel with growing their business. How have you balanced the competing demands on your time?

Raising capital is a demanding process. One way we manage our time during a raise is to prioritise tasks and set realistic weekly goals. Delegating certain tasks to other members of the team, such as pitch decks and legal documentation, frees up time to have meetings, pitch and build relationships. Many investors often value the time you take to build relationships with them, so having capacity for this is important.

Rather than trying to meet with every potential investor, hosting group presentations and Q&A meetings helps save time and avoids spending energy on meetings and pitches that are unlikely to result in investment. It’s also a great way to get our community of investors to interact and share their thoughts more openly.

People should expect a round to take anything from 3 to 6 months. Ahead of announcing a raise you want to make sure you are nurturing relationships, to make sure commitments can come in with enough time within the round itself. Mapping the time against your runway is also very important to ensure you have enough money to carry your startup to the next milestone.?

IW: There is a lot of negative sentiment in the financial press right now. Do you think it is still a good time to raise?

While we are undoubtedly facing a number of challenges right now politically and economically, the ability for the economy to adapt to a changing environment is actually important to its proper functioning.??

With this in mind, we take comfort from the fact that our product is designed primarily to help in volatile markets. We also know that investors take a long-term view when considering investing in startups, and our growth plans span the next 3-6 years.

The more mature businesses are impacted more significantly because they have high overheads and greater funding requirements. It is the lean and nimble businesses like Stratiphy that can make the most of an opportunity like this.

This is a time when building a solid, sustainable company providing real value is back in fashion, and it is those that focus on hype with little substance that will suffer. For investors this means that shares in successful companies with a long term outlook will be available at more attractive prices.?

Sentiment shows the risk appetite of VCs is lower, but individual investors and family offices are still looking at startups for opportunities outside of the public markets. An outcome of this is that the time it takes to complete a raise will be longer, but there is potential for more high quality matches to be made between startups and investors. We’ve already started to see this from the quality of investors in our community.

IW: That makes sense - and Stratiphy are raising again as well?

Yes, we just started planning our next raise and looking to initiate a dialogue with our existing investor community. It is important to us now, as it always has been, to widen our network to bring on board evangelists, experts and backers from all walks of life to make our community stronger and more successful. With this in mind we’ll open up this opportunity to new investors in the coming months, so watch this space. Or if you feel like being even more proactive get in touch: [email protected]

IW: Exciting! Where can people find out more about Stratiphy and how can people get their hands on the product?

Join our beta tester community by messaging?[email protected]?and we’ll add you to the list.

Waiting list:?www.stratiphy.io

Newsletter:?https://stratiphy.substack.com/

Linkedin:?https://www.dhirubhai.net/company/67177073

Instagram:?https://www.instagram.com/stratiphy/

Community forum:?https://community.stratiphy.io/

What is Stratiphy?

Stratiphy is our solution to helping people build bespoke investment strategies. Until now, this has only been available to high net worth clients at investment banks, or through complex solutions that require coding.?

Our?simple to use investment app helps you to analyse the entire market, and follow leading portfolio construction and risk management principles, just like the professionals do. You define the criteria that matters to you including your investing style, the risk you’re willing to take on and even ESG preferences. Then our quantitative investment algorithms will backtest the strategy to show how it would have performed. It will then generate buy and sell signals which you can follow automatically.?

Using Stratiphy you can systematically follow professional investing approaches, tailored to your own needs.