Thanks to bootstrapping and private equity investors, your startup has been steadily growing, and your business is starting to gain traction among your target audience. With a growing customer base, you’re ready to expand operations and raising Series A funding is the next step ahead.
How can you increase your chances for securing external funding for your startup? Here are 5 effective tips that every entrepreneur needs to know about raising Series A.
1. Look for the right investors
If you’re looking for venture capital (VC) investments, it’s important to identify firms that invest in your market. For instance, a media startup pitching their business to a firm that mostly invests in the pharmaceutical industry is simply a waste of time. Consider using the 30-20-10 rule, where you start by making a list of 30 investors you want to get to know, out of which 10 may want to meet you and 2 might want to invest in your startup. As you do your research, look for VC firms that are already investing in similar startups. Once you have a list of potential investors, reach out to as many of them as you can, spend time talking to each potential investors and partner with those who are genuinely excited about your business idea.
2. Join an accelerator or incubator program
If you’re not ready to pitch to VC firms yet, apply to join an accelerator or incubator. Some of these include the Wells Fargo startup accelerator, Iterative, Antler, and JFDI Accelerate. These startup programs typically run for a duration of 3 weeks to 9 months, and help provide mentorship, advice, training, and other resources to equip entrepreneurs like you with the right knowledge and connections. Accelerator programs let you network with investors, corporations and other startup founders, which is important if you want to build relationships with like-minded professionals. The programs culminate in a pitch day where winning pitches receive a funding of about S$30,000 (or more) from the accelerators or corporations they work with in return for a 6% to 9% equity stake in your small business.
3. Plan for the coming months
To successfully raise series A, you'll need to have a long-term vision for your business. It's also important to be aware of fundraising seasons. For example, December is not the right time to pitch your startup or spend time raising funds as many investors will be on holiday. Conversations with investors should begin with a lead time of 1 to 3 months, and you should get the business plan, proposal, pitch deck, and deal terms in place before reaching out to potential investors. Be ready to present the proof of concept, product-market fit, and scalability of your business as well as have responses for any questions that investors might ask. Lastly, remember to practice articulating your startup pitch to hook potential investors within 30 seconds.
4. Create a compelling narrative
Everyone loves a good story, and a compelling narrative is what can get investors interested in hearing more about your startup story. Behind every brand is a story that resonates with the investors as well as the target audience. For instance, beyond just providing accommodation listings in exchange for a fee, Airbnb crafted a brand story around the simple idea of ‘belonging’, where its platform enabled users to ‘Belong Anywhere’. In the same vein, think of ways to let your investors and target audience be a part of your brand story.
Craft a compelling narrative and tell a story about your brand, company, and your experience in the industry. How can your startup create solutions to problems in the real world, disrupt the industry or fill a gap in the market? What does it look like when your customers successfully use your product? Lay out your vision of the future that your company can create, not just for yourself and the potential investors, but also for the customers.
5. Build fundraising momentum
One mistake that many new startups make when trying to raise Series A funding is pitching to investors linearly, starting with one investor and then moving on to the next one if the previous one doesn’t work out. Since building relationships with investors takes time, consider setting up meetings or calls with several investors in parallel so you can start conversations as early as possible and keep your options open. If one investment partnership doesn't work out, you can focus your attention to the others at hand. While talking to investors, you can also think about other ways of fundraising, such as crowdfunding on platforms like Kickstarter or Indiegogo.
As you speak with new investors, keep conversations with existing connections open by sharing monthly updates such as small wins and growth-related statistics. Once you’ve gained the interest of a few investors and you’re close to your fundraising goal, create a sense of urgency by letting them know that you're closing the investment round in the coming weeks. This helps create a timeline to solidify genuine investors while weeding out the ones that may not be as serious for the time-being.
Closing the deal is not the only target
Fundraising is only the first step towards growing your business. While you may prefer getting a larger amount of funding from a VC investor as compared to angel investors or private equity, you should also understand the financing options available to you, such as securing the best SME loans in Singapore or using the right SME credit cards for small business owners, in case you need additional funding in the near future.