Raising money is often a top concern for founders.
If you weren’t able to join the over 60 attendees at the Stage2Startups Investors & Founders Discussion held at Sullivan & Worcester on November 26, we are dedicating this week’s blog to sharing the observations and tips offered by the panelists. The panelists included:
Eleanor Haas, a member of Astia Angels and the NY director of the Keiretsu Forum, a global angel network.
Stanley Buchesky, who founded and manages the Edtech Fund, an education-oriented fund.
Precious Williams (aka #killerpitchmaster), who funded her training consultancy, Perfect Pitches By Precious, by winning (sales) pitch competitions.
Weerada Sucharitkul, who received government funding from France to help develop filmdoo.com, a Netflix for international language films, and is currently pivoting to an education platform leveraging films and AI as a way to teach language.
Gopal Swamy, a fintech founder in the banking space who was previously part of a mobile software team funded by venture capitalists and who is currently funding his new “stealth” company through friends and family.
As a two-time entrepreneur who has raised funds from “friends, family and fans” twice, Betty Wong served as moderator and shared some of her experiences. Mitch Stein, an IP lawyer from Sullivan & Worcester, LLP, shared some legal considerations every founder should keep in mind.
Here are our seven key takeaways from the discussion:
- Focus on the return on investment to the investor, not on the social good, even if you have a social good affiliated with your startup. Being a nonprofit is a legal construct, not a business strategy, so every startup looking for investors should clearly demonstrate the monetary return. (Note that in New York State, there are B-corporations which have double bottom-line goals – social impact as well as profitability.)
- Sell your team and your solution to a problem, not the product. Ideas are plentiful while execution is key. The whole story is not the technology or whatever your product might be, but also the team responsible for achieving market success – whether that is production, customer service or delivery.
- Make sure you’re clear on the market need for your solution and who is served. You have to demonstrate that the problem you are solving is important to a large audience and not just yourself. Include what you will do to promote the business to your target audience, including allocating enough funds for marketing.
- Building and protecting your brand is the first priority for any company. Protect your intellectual property, but don’t overspend on patent applications in favor of being first to market. Sometimes you need to talk about your idea to shake out the potential problems and to attract team members and investors. While nondisclosure agreements often aren’t signed by investors, it does makes sense to have your team, vendors and advisors sign them.
- Find the right potential investors for your business. Investors have specific interests and preferences and, in some cases, competing portfolio companies. Make sure you know who is investing in your sector as well as which companies so you know if the investor you are pitching has invested in your competitor. You can use Google, read business publications like Business Insider, Tech Daily, TechCrunch, Crunchbase, Angelist and Gust, and work with your local librarian to find investors in each category. You can also find potential investors through the founders they have already invested in or through mutual friends,and by attending events and conferences. Do not rely on one source!
- Be creative in finding funding sources. Most entrepreneurs start their company with their own funds, but there are other sources of funding. If you have actual orders in hand, you can consider bank loans or factoring. Weerada suggested looking into government funding and traveling to places like Puerto Rico where accelerators offer funding and free rent and services. Gopal talked about having team members with personal contacts, observing how one founder brought in his prior VC contacts, who then became investors. Precious mentioned funding her business by participating in “pitch competitions.” Crowdfunding, the means to generate funds through many small investors, was used by one founder to help her startup. Friends, family, fans, angels, and early stage venture capitalists are also potential funding sources though it is harder to convince investors unless they can see the potential product or results of your prototyping and/or initial testing. Always organize your contracts, shareholder agreements, and orders for easy access during investor due diligence since in the investors’ eyes this reflects on the ability of the team to execute effectively
- A great elevator pitch is “punchy”, short, and to the point. A good pitch is a compelling story. People are attracted to the emotional aspects of your story matched with great execution. Panelists and audience agreed that creating a compelling and informative “elevator pitch” is hard to do and requires constant practice to reach perfection.
This post-Thanksgiving week, we wish you good luck on perfecting your pitch for holiday networking and future capital-raising! You can find additional information about funding in our Resources – Funding Information section.
Copyright© 2019 Emelie Smith Calbick and Betty Wong