Last year had been an excruciating year for the team at Pod. We’ve closed our pre-seed round end of last year (You can tell how long I have been keeping this post as draft) and let me tell you, I can finally breathe properly again. *sigh of relief* Haaaaaaaaaahhhhh….. *the cat next to me just passed out* rude!
I insisted on not publishing this till we closed the round, but don’t worry I’ve been adding some parts as we went through this journey so that nothing interesting get left out. I’d like to share some lessons from the fundraising experience my team and I went through and hopefully, it can benefit you guys out there who are thinking of raising or wondering when will this suffering end? as you raise money.
This is our first time asking money from people and let me tell you, it was a life changing experience. It’s like getting a Botox done; one moment you’re smiling uncontrollably and another minute your face froze.
One minute we’re so close to raising the entire amount from 2 group of angel investors (not the kind of angels you’re thinking about. They are a group of human beings with the heart of angels) alongside one VC; another minute one group drops out putting us short of half of the amount we intended to raise. #miniheartattack
Product development had to go on while we were raising money and we have developers working on the app already so must find some tabung (coin box) to dig to pay them. We were bootstrapping for a little over a year and for the first time in my life I actually felt the burden of other people’s livelihood on my shoulders! #actualheartattack+ministroke
I think this is where you need to make sure you have enough support financially and emotionally to push through. And if you think you (like me) have a great idea and think that people will throw money at you, sorry to have to be the one breaking this to you; it’s not that easy.
- Pray really REALLY hard
Fundraising is not just a challenging activity for the body but also the mind and soul (I definitely stole this line somewhere). This is when poopoo hits the fan. It will claim you for all your worth. Your energy, your time, your sanity, your youth, your blood, sweat and tears. So, pray to God you’ll at least be able to make it through with the same zealousness that got you started on the journey in the first place. A lot of factors play into decision to invest by the investors and some are really beyond your control. So keep working hard and pray on.
2. Add 6 more months
Unless you are Elizabeth Holmes, who can raise couple of millions one shot from high profile investors (if you are private message me please), do set a target closing date and buffer 6 more months to it. For instance you intend to close by August, make sure your runway (money in the bank) can sustain your for at least till February the following year. Due diligence take time and some investors may confirm last minute so it’s good to have a closing date and to be prepared for delays.
3. Prepare your hooks
No, not the ones from Ikea. Your startup hooks or the secret sauce or the killer USPs or the Ace card or the bunny paw (I don’t know if people actually call it that). Basically what makes you great. It could be the team makeup, the technology, the partnership and access to market, etc. What are the hooks that will reel the investors in. Get ready a couple of them and use different ones for different investors. Some investors may come from a potential acquisition perspective so use the hook that can show how you can integrate well with their audience or existing business. Some may come from socially responsible angle, so use your impact hook. Never brushstroke all investors with the same, rehearsed pitch. Tailor the message to the specific person.
4. Identify your Piper of Hamelin
Another valuable lesson is to identify who is the anchor investor or the “Piper of Hamelin” that can reel in and convince others to join. It can be an influential figure, a prominent VC, established founders or someone who has tag along investors network right up their Armani sleeves. We closed the round with 6 angels and a VC. Before narrowing down the 6, my team and I went to pitch to near 20 different people and/or organisations. It took a lot of our time when I could have spent the bulk amount of my time convincing this one individual who can help convince 5 others to join him. Investors follow, so spend most of your effort courting and convincing the anchor person and he/she will be pitching to others about you. Trust me, their words carry a big leverage.
5. Motivate your team
Fundraising isn’t just stressful for the founders but also the rest of the team. If you can’t raise money then their jobs are at risks ergo you can’t pay them ergo they need to search for new jobs ergo it is scary. Remind everyone that although times are hard, you (the founders) are going to do everything within your will to make sure everyone makes it to the other side. So make sure you communicate to them on the progress and whether you’re on track or not with closing the round.
I think honesty helps to get people to continue to support you during this challenging time if they believe you are doing all this to make sure everyone gets to provide for their respective families. If things turn South (which thankfully didn’t for us), at least they’re already in the loop early for contingency plans.
6. Choose your investors (if possible)
Not every startup has the luxury of picking their investors. Sometimes you have one and only one investors knocking on your door so how to choose then? If that’s the case, you can’t. It’s a management call, you’ve gotta decide based on who is it at the door and whether you can afford NOT to take their money.
But if you have the choice, make sure choose the ones who can provide you more than just money. For Pod, because we exist in a regulated industry; having investors in the same space definitely helps. Most startups need help to meet the first client/customer, dealing with service providers, sourcing our for materials, hiring talents, streamlining processes, etc; so find investors who can help with those things.
I have so many more things to include but maybe it will turn to #deathbyblogpost. So I suggest if you have any questions, drop me a note/comment below so I can share something more relevant or specific to you. To those who are raising money, GOOD LUCK!!! (and my bank account number is 1234-sendmesomemoney-thankyou)