Fundraising for Your Startup? Ask Yourself These Questions

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At Galvanize, we’re putting a whole new spin on Study Hall with monthly, members-only sessions. At every Study Hall, industry all-stars present on one of three topics – Growth, Funding, or Product –– and collaborate with Galvanizers to spur innovation, solve problems, and harness the power of our dynamic startup community.

Our San Francisco campus had the honor of hosting a Fundraising Study Hall with Niko Bonatsos, Managing Director at General Catalyst and Entrepreneur at heart. Niko’s investment strategy is finding first-time technology founders with strong product instincts, a robust appetite for learning, and a desire to create consumer-focused innovations with the potential to benefit millions of users.

Niko began the Study Hall session by breaking down the fundraising process. He said being in Silicon Valley gives companies a huge advantage because there are already so many VCs in with hundreds of funds who need to spend capital. Fortunately, there’s a culture in The Bay Area of investing in “risky” early stage companies, which serves as an advantage for many early stage startups trying to raise funds.

He mentioned that when you accept funding from a firm it’s like a marriage, except you can’t divorce if things don’t go as planned. So it’s very important to choose the right investors who can help you grow your company financially, are aligned with your vision, and able to provide the right support.

How do you know if the partnership with an investor is going to be a good fit? Ask yourself the following questions, and be prepared to move quickly with the right choice as some firms can expect a quick turnaround time within a week or sooner, though this is not always the case.

  • Have they invested in similar companies?
  • Are they a major influencer, and can they be on your side?
  • Can they write a check quickly?
  • What is their decision-making process like?
  • Does the investor truly care about your company or space?
  • How much time do they have to spend with you? What’s their bandwidth like?

Then a member asked, “What does the process look like from an investor’s standpoint, and what are investors looking for when critiquing a startup in making the decision to invest?”

Here are the top questions VCs ask when evaluating a company to invest in:

  • Is there potential for your company to be a billion dollar company?
  • Is this a company I want to be involved with for 5-10 years?
  • What’s the growth rate?
  • Do you have any evidence your product is a good product market fit? Or will you be using your seed round to research this?
  • Have you identified a gap in your industry, and established a plan to strategically approach it?
  • How much capital will you need to raise in the life of your company?
  • Are you disrupting an industry?
  • What is a niche market you can serve very well?

Before concluding, Niko offered members key pieces of advice to keep in mind when fundraising:

  • Be prepared to share some references and expect the VC to reach out and ask others about you and your company.
  • Be prepared to show raw data.
  • All firms have investment team members who are getting paid to get you in front of the right person, get a warm introduction to the domain expert and spend some time trying to network with them.
  • Investors are motivated by greed and fear so if possible create a sense of urgency or FOMO (fear of missing out).
  • Approach fundraising with a top of the funnel driven approach by getting intos though portfolios founders as there’s a 99% chance a VC will say yes to an intro from a portfolio founder.
  • Get insights from that portfolio and do a little bit of homework. You can’t kick out investors on your board, it’s likely they’re going to be there for a long time.
  • Remember Investors don’t want to hear from a founder who knows everything.
  • After the initial meeting the investor might ask for a meeting with a couple other partners where you’ll be expected to share data and metrics, always be ready to provide those metrics.

In close, members learned they’ll have an advantage with investors if they can prove they have a product market fit and it’s obvious that customers are getting a lot of value out of it and can’t imagine their world prior to using the product. Above all else Investors want to hear you are the most ridiculously ambitious founder who is willing to deal with the boring stuff and get shit done.

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