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LESSONS FOR A FOUNDER: Your Fundraising Questions Answered

last modified Dec 21, 2018 10:31 AM
Are you going to be fundraising for your startup in 2019? The landscape of startup funding can seem bewildering. So we asked experienced fundraising coach, Jonathan Leinmuller, to share his knowledge about how best to raise capital. Here’s what he had to say...

Q1. I’m looking for funding. Who should I talk to?

It’s important to research and short-list suitable investors for your startup. There is significant information online regarding who’s doing deals and most VCs have a website and information on how to submit your pitch; this is far more transparent than twenty years ago - however it also means that there’s far more competition for the VC’s time. 

I would always try to get a ‘warm’ introduction, either from a colleague or failing that an advisor; these advisors come in many forms including corporate finance boutiques, accountants and lawyers. Investigate who’s providing advice to companies in your space - they’ll always give you fifteen minutes of their time because it’s in their interest to do so - creating goodwill and all that! These advisors usually have networking events which I suggest you also attend - become good at working the room; everyone is in the same boat - shit scared - so grab a glass of wine / orange juice and jump in.

 

Q2. How long can I expect the process to take?

Between two weeks and two years, although I suggest there’s something wrong with your business model, your pitch or your personal hygiene if it’s the latter.

You need to create scarcity and urgency if you want a fast process; you need to create the impression (truthfully) that if the VC doesn’t get their chequebook out, another VC will, and that they’re going to miss out. 

One of the main things I coach entrepreneurs - and this is true for all my clients, whether they’re in the UK, in Europe or even on the West Coast - is to “ask for the order” - don’t leave the meeting unless you’ve worked through all the VC’s objections to a red or green light decision. Remember - you don’t need to convince everyone - just one VC; it’s just like dating - you only need one soul mate to make you complete.

 

Q3. How do I ensure there are multiple offers on the table at the same time?

Ahh… if you follow parts 1 and 2 above, you should hopefully end up in this position. Do not endgame this - just pitch well, know your domain inside and out, articulate why there’s only you who can deliver this world-changing opportunity, and enjoy it. Nobody wants to invest in earnest professors - so don’t “educate” your audience but be a voice of advocacy.

 

Q4. Convertible note vs equity vs crowdfunding vs ICO - what form should I choose?

This very much depends on where you are in the lifecycle of your start-up. I’d always recommend institutional equity whether that’s from angels or more traditional VCs; these guys and gals should bring value to the table, and it makes life easier when raising future rounds; however it comes at a price and that’s a chunk of your equity. 

Crowdfunding and ICO are other ways to raise, but are still seen by some (rightly or wrongly) as the way you go if you’ve failed institutionally. Additionally will these sources be supportive in tough times? Retail investors don’t have deep pockets nor necessarily bring any value to your company.

Convertibles and Venture Debt are usually used further down the funding road.

 

Q5. I’d like to raise money in the US. Where do I start?

You first need to answer the question “Why do you want to raise money in the US?”. Some US VCs are active in Europe, both with and without a physical presence; however there has to be a fundamental need for your business to be active in the US - usually because the customer base is there - otherwise what’s the value-add of the US investor? 

You need to remember that VCs have a necessity to demonstrate their value-add to their own investor base. I can’t see a US VC saying “We invested because we liked the guys and the concept” - they want to say “We invested because we liked the guys and the concept AND we were able to roll out their US operations and introduce their first 5 customers”. 

And that takes us back to the beginning and the answer to question one. It is imperative to know why you want VC A over VC B and you need to clearly articulate that to them during your pitch. Pitches are not monologues - they are bilateral discussions; an opportunity to build rapport, seek commonality of interests and ultimately… fall in love.

 

Jonathan Leinmuller is a fundraising coach to some of Europe’s leading VC’s and startups. A professional actor, Jonathan previously held senior positions in leading Private Equity Fund of Funds and Global Placement Groups. He brings over 20 years institutional fundraising experience and a unique bilateral perspective to his clients.

Visit Jonathan's website here.

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