Maximilian Fleitmann, an Entrepreneurs' Organization (EO) member in Berlin, Germany, is CEO of BaseTemplates and Partner at Richmond View Ventures. He has raised venture capital for his startups, helped hundreds of founders to craft their pitch decks and fundraising strategies, and invested as a business angel. We asked Max how founders can ace the fundraising process. Here's what he shared:
Over the last couple of years, I have accompanied dozens of startups from the beginning of their fundraising journey through the closing of the deal. In studying these startups, I've noticed that the main difference between a founder who is good at fundraising versus a founder who has problems raising funds is the structure of their fundraising process.
Following are five tips to help structure your fundraising process properly.
1. Don't dive in unprepared
Before you begin, thoroughly assess why you are seeking an investment. Sit down and list at least five ways your startup would benefit from the funds you'll raise.
It's easy to come up with five reasons you need the money-- but will these reasons satisfy an experienced investor who will dig deeper into where his money will be distributed? Count on the fact that your potential investor will not be satisfied with answers like, "We'll invest in marketing" without exploring topics including return on investment, cost per click, or click-through rates of your current and planned ads.
I've seen too many startups try to get an investment without knowing exactly how they will use the funds to grow their business effectively.
2. Perfect your pitch deck
Many founders overestimate their design and storytelling skills while underestimating the importance of creating a magnificent pitch deck.
The first impression you leave on a potential investor will stick. In most cases, this first impression is generated by your pitch deck. Sometimes it isn't the deck but an introduction to a potential investor by another founder -- the premium version of a first impression.
However, many founders fail to understand the importance of a well-structured and well-designed pitch deck that makes potential investors want to invest in your idea instead of making them forget about you.
Your pitch deck must tell a compelling story that provides potential investors with just enough well-designed information to keep curious about getting to know you and your idea better.
3. Expand your investor funnel
The most important aspect of fundraising is to grow your investor pipeline. Think of it as a process similar to your sales pipeline.
Start by researching which investors are active in your vertical right now. Ask other founders who have already received an investment, scan angel lists or LinkedIn, and talk to accelerators and business roundtables.
After that, try to arrange warm introductions to these investors and start negotiating with as many as possible. The idea behind this approach is to use the investors' fear of missing out on a fantastic company that could bring significant returns. From this position, it's easier to get quick decisions and better deal terms because you hold an information advantage.
At some point, you will receive different term sheets almost simultaneously. That's perfect, because you'll be positioned to determine which investor best fits you and your startup and which one you prefer to work with.
4. Negotiate with confidence
You have to know precisely what you want before starting to negotiate with potential investors. You must set a clear goal. If your investor tries to force their interests, stand up for how you want the deal to be structured.
Here are four additional best practices for successful negotiations:
- Understand all terms and how they affect each other
- Understand your investor's strategy
- Remember: Investors negotiate for a living and are probably better at it than you are
- Never, ever break your word
5. You're either fundraising or you're not
I recently talked to some founders who said they were meeting with investors to check their value -- they called it "more-or-less fundraising." In my opinion, there is no "more-or-less." Either you are fundraising, or you're not. When you operate in between the two, you will never gain the advantage from a structured process or get the results you want.
Ultimately, fundraising is about selling yourself and your idea. And the best way to do that is by being authentic and well-prepared.