Let me tell you upfront and frankly: funding is the most difficult thing you are going to encounter in your startup journey. At least for me personally it was the most difficult and crushing experience. Not that you face so many rejections while pitching from one investor to the next, but the sheer upper hand the other person has on this pitch makes it excruciating.
I was once called to pitch at 7:00 am in January in the winters of Delhi. I started at 5:00 am from Ghaziabad to meet the investor in Gurgaon. When I reached thankfully the investor’s driver was there to pick me up, while the investor was having his sumptuous breakfast at his house. When I finally reached his house, the investor greeted me with “you reached so early to get funded…hmmm…nice”. It’s a later story thankfully we didn’t raise money from him. I believe as an individual I am less influenced by my ego. That adds while you are in fundraising as your ego will be bruised multiple times. We are extremely lucky that our lead investor is one of the best people in the startup ecosystem not only as an investor/mentor but also as a human being. I really respect investors who can say no to you upfront and mention why they are doing so.
Remember there is 1 truth in fundraising, you just need 1 person to believe in you, your team and your vision. The rest 99 who say no might be repenting it 7 years down the line. Prepare your mind as you don’t want everybody to say “Yes”. While pitching seek out the believer, who is ready to believe in the problem you are solving. Only 1% will believe in you. So you are there to seek him out, rather than getting every investor to say yes to you.
Here are a few tips to keep in mind while you search for that elusive first investor-
1. The Lead Investor
Make a list of potential lead investors. Check out all articles on Iamwire, Yourstory, inc42 and other startup media. Few lead investors which I can mention are Rajul Garg, Rajan Anandan, Alok Mittal, Amit Ranjan, Dr Aniruddha Malpani. You can find other lead investors by tracking down startup media stories.
2. Participating Investors
These are investors who participate in your round but do not lead. Depending upon the amount of funding you are raising and how much the lead investor can commit by himself the rest of the round has to filled by participating investors. Your lead investor can connect to few participating investors. Keep on meeting the participating investors but don’t expect them to make a decision unless you have the lead investor. Also, keep in mind your first priority is to get the lead investor. Unless you have him, your funding process in not moving forward no matter how many meetings you have with participating investors.
3. Cold mail doesn’t work
A good lead investor receives 100s of cold mail per week for investment purposes by startup founders. Make sure either your cold mail is too good or you will end up in the trash. List down all the startups the lead investors have invested in. Make a list of founders and see who you know or can get a contact with. If you don’t know anybody that means you are poorly networked which is very ill suited for your startup. Stop living in your silos and go out. I am forever grateful to Santosh Panda, founder, Explara who said to me 3 years ago “If you can’t find a co-founder then quit your startup idea.” Thanks to him I met my amazing co-founders Satyadeep and Sowrabh at a BLRDROID Android event in Bangalore 1 week later. Same is true for every entrepreneur who says he can’t network, then he should quit his startup.
4. Fundraising takes a lot of time
From first meeting to our lead investor giving us term-sheet it took 6 months. And we had known him for over 1 year before. During those 6 months, our team met him 5–6 times. I can’t believe that I actually had the persistence it required and got it done. Great investors take time and they have to be confident that you will walk your talk. So they observe your consistency and commitment for over months or years before they decide to invest in you. But once they invest in you they will put their 100% to make sure you are a success. I realized through my experience the sooner an investor commits the lesser help he is likely to provide when things go south.
5. Don’t Quit
Raising funds is a full-time job. Ideally, it helps in a team of 3 to 4 founders, where one founder can focus on fundraising and the rest take care of the product, sales, and marketing.
6. Don’t take it personally
The way in which an investor says no to you is a measure of his character and not yours. Some might make fun of you or deter you that you don’t have the capability to do it. It shows how good a human they are. Its better if such investors say no because their investing in you will mean getting into a forever nagging relationship.
7. Don’t compromise
Even if you don’t have funds to run operations for the next month don’t take money from just anyone. Investor-founder relationship is like marriage. You are bound together till lifetime of your startup and even afterwards. So be careful who you choose. I have observed founders who raised funding desperately and then the relationship turned sour leading to the eventual closure of the startup.
8. Don’t spray and pray
You can study preferences of each investor and investing patterns and then draft custom emails for them. But you shouldn’t also shoot the same mail to all investors. Good Investors, just by reading your mail, can tell how much time you spent on drafting communication for them.
9. Regularly update the top 10 investors who have shown interest in you
Your chances improve drastically if you can grow without investment and are able to show the investors how his funds and expertise/network can help in accelerating the growth. For this monthly or bi-monthly updates via mailers/meetings can significantly help in increasing the investor’s interest to the point till he believes that it is the right time to put money in your business.