Securing funding for your startup is probably the most difficult hurdle you will deal with as a startup founder. The biggest mistake founders make is assuming that the investor decision is solely based on you and your idea. It is critical, but there is a larger issue at stake here. Are you different enough from your peers to truly stand apart from them?
Here are five ways toseparate yourself from the competition:
A warm introduction. There has been much written here on this topic so let's keep it short. You have little to no credibility at this stage. The one way to increase your credibility is to get an introduction to me from someone I respect. I will take that meeting every time. Email me cold . . . not so much, I can't afford to spend an hour with someone with a bad idea. The warm intro is my first screen.
Be thorough. As an early stage investor, I am primarily investing in you and your team and a very early concept of what the company could be. By definition, there are a lot more questions than answers. My expectation of you is that you will not have those answers. But, I do want to hear how you are thinking about the basic elements of the business. You must have answers to the following questions:
- Who is the target customer?
- How are you going to acquire these early customers?
There are many permutations of how this new company can roll out. To that end, be thorough and think about the different versions of the key aspects of your entire business model.
Have unique intellectual property. What I really want to see is some element of your product that is hard to replicate. Maybe it is an algorithm that delivers insights that no one else has done. Maybe you gathered some data and put it together in a unique way. Maybe you have licensed something from another industry and you are bringing it to a new industry. Give me something special besides your idea and the promise of millions of customers.
Numbers are awesome. Numbers change the entire tenor of our conversation from "I think and I believe" to "I am seeing." If you have a prototype, get it in front of your target customers right now. Waiting for it to be better? You are now stuck in the "I believe" state. Come back to me with 1,000 beta customers who've been using the product for six weeks and 50 percent are hooked and I'll want to hear a lot more. Your numbers move my decision from me relying on your insight, which is never a good idea unless you have previous successes. The later has a lot less risk for me.
Ask. You would be amazed at how many people pitch without ever making the ask. Not sure what I mean? You just finished your 12 page deck in which the last slide says that you are raising $500,000. Your talk track ends with you saying ". . . and we are raising five hundred thousand dollars." But you stop there. What's next? Ask for the money! It could be as simple as, "is this something you would be interested in investing in?" But you have to make the ask.
Work hard at these five areas and you should put yourself in a great position.