Jo Ann Corkran, managing partner of Golden SeedsNovember 21, 2017
Any founder who has pitched a prospective investor knows it is impossible to overstate the difficulty of getting funding, especially in early stages. Even companies that get funding generally receive less than they ask for, and companies led by women see 45 percent less capital, on average, than those founded by men.
Some of these challenges are out of your control, but there are several factors you can focus on to improve your chances with investors. As somebody who has sat in on hundreds, if not thousands, of pitches, I see the same mistakes over and over, and they’re deal breakers each time.
There are four things you can do to tip the scales in your favor, from idea to execution.
It seems so obvious, but neglecting the value proposition is one of the biggest omissions I see in pitches. Almost every founder has good ideas. Unfortunately, the pitch doesn’t end after the idea is presented. It is critical that you have a rock-solid, well-researched, clearly articulated value proposition.
What makes your idea better, faster and cheaper than something else that’s already on the market — or at least touches on two of those three items? What is your growth proposition? Most importantly, how can you quantify these things?
Having a clear strategy around these items, and hard numbers to back them up, is the first step toward a successful pitch.
“Run rate.” “Months of funding.” These are metrics we hear a lot from founders.
Honestly, I wish I heard less about these and more about what the funding will be used to accomplish. Rather than thinking along the lines of how long a certain investment will keep you in business, think about how you’ll use it to improve your business. Maybe it will allow you to hire a team to roll out a new feature set, or ramp up sales to meet a revenue goal. These are the specifics around budget that are important.
It is also critical to make sure your budget is realistic. If a founder tells me she’s going to sign up 10,000 new users, and she budgets $1,000 to do it, I know that budget is not based in reality.
Make sure there is a real, thought out, researched link between your goals and the costs you are budgeting to reach them.
I get it; you’re the founder, and you want to own the idea. I appreciate a dedicated, skilled founder, but I want to fund a team. Hiring great people to come to a startup isn’t easy; there is less job security and potentially lower salaries, and we all know the hours early-stage startup team members tend to work.
For all these reasons, the team you have recruited makes a big difference to investors.
It says that you’re smart enough to realize the types of people you need to succeed, and you have enough charisma and resourcefulness to get them on board. Don’t hesitate to say where you’re still looking for people; knowing your needs shows you have thought things out.
For our last tip, let’s think positively: you got the funding and are working your plan. Even the best startups will miss their goals every once in a while, though. It’s just part of doing business.
When companies we invest in fail to meet their plan, there are a few things we look at to see whether it can be turned into a positive.
The first is communication. When you know you’re going to miss a goal, communicate clearly with investors and your team, as honestly and openly as possible. Early-stage investors want to be filled in on all your news. It builds trust, and don’t forget, experienced investors may have seen your problem before — they might even be able to offer a solution.
The second important thing to remember is to act as soon as possible. Don’t stick your head in the sand and hope you’ll magically get back on track. Do a thorough accounting of why you’re missing your goals, and come up with solutions. Investors are much happier to have a stake in a company that recognizes issues and learns from them than one that attempts to cover them up.
Getting funding for an early-stage startup is one of the toughest things founders do. It’s also one of the most exciting and potentially rewarding.
Following these four tips won’t guarantee you’ll be one of the small percentage of companies that get funded, but it will give you a leg up — before and after meeting with those funders.