Startup Funding: Going Beyond the Pitch Deck
Pitch decks can be really useful for organizing the information you need to present to investors and for crafting concise, meaningful messaging. But at the end of the day, they are just tools. Successfully raising startup funding goes way beyond building an impressive Powerpoint presentation. Sure presentation is important, but the real fundamentals of startup fundraising are selling and marketing your organization. Too often though, these interpersonal dynamics that build investor confidence get pushed to the side.
So how can you maximize your opportunities for success? And what are the most common mistakes when it comes to startup funding? Here’s the download from our “Beyond the Pitch Deck” webinar with Peter Mansfield, Partner at Mansfield + Associates, and Lori Murphree, EGFS consultant and part-time CFO.
First get into the right mindset — Start with a reasonable expectation of how long the process will take. 3-4 months is realistic, if all goes smoothly and you don’t hit any snags. Meeting 100 potential investors in the course of securing funding is not unusual. You’re going to hear no a lot. So develop a thick skin, prepare for potential rejection, and learn not to take it personally.
And while you’re at it, do what it takes to get comfortable dealing with alpha personalities. You can give yourself a major head start by understanding the investors and the firms. Do your research to really learn where they’re coming from. This means going beyond companies’ websites, Crunchbase, and AngelList profiles to also reading their blogs and tweets. It also means thinking through how you fit into their portfolio and figuring out their investing sweet spot.
Lay the groundwork — Really work your network. I mean really work it. I’m talking about consultants, attorneys (especially), professional services firms, and anyone who can give you an in. Use an investor list to target your efforts. Look for investors with portfolio companies that are similar to yours. And understand what their limitations are in terms of deal size.
I’ve said it before, and I’ll say it again: set clear objectives for your raise and always tie them to milestones. What are some examples of good milestones? Product development and launch dates; target number of users; cash flow, revenue figures. VCs are starting to look at user engagement metrics as well.
Preparing for meetings — Then, before your meetings, be sure to do extensive prep. This includes setting goals and creating a project plan/timeline for things like meetings, term sheets, etc. Understand and be prepared to explain how much funding you need, what time period it will cover, and what you will accomplish with it. Designate 2-3 people to go to meetings: one who knows and can sell the big picture from a marketing perspective and another who knows the nitty gritty of implementation. As you rehearse, also prepare for common questions.
During your presentation — It’s important to be confident and to project that when you walk in the door, but it’s even more important to remember that funding revolves around an exchange of equal value. Investors are not doing you a favor by listening to your pitch or by choosing to invest. So be confident but also be curious!
Take five minutes to get to know your potential investor. Try to understand why they’re interested and find out how they would like you to pitch: for example maybe they prefer a structured Q & A session versus a more formal linear progression through your slide deck, and tailor your presentation to reflect that. If this is a first meeting, gauge their interest level and find out their investment criteria. Keep your pitch deck presentation short (max 12 slides), with succinct summaries of your main points and why your startup is a good match for this specific investor.
Leave some time for Q&A and feedback. Don’t be shy in asking about their goals, any concerns they might have and how you can ease them, and even introductions to other investors. But no matter what happens, never ever get into an argument with an investor. Believe it or not, we’ve seen this happen!
Closing the deal — Due diligence can take 1-2 months… or longer. Hire a lawyer ahead of time and bring him or her in to negotiate term sheets. Always be transparent: investors will find out if you’re hiding anything.
Follow-up quickly and stay on investors’ radar especially if you have successes to share. But don’t look desperate by following up with too many updates or check-ins. Remember it’s not just about getting money; it’s about finding the right partner (see my previous post on that).
- Not understanding investors’ motivations
- Trying to hide material information from investors — This is just shooting yourself in the foot. You’ll look unprofessional at best and untrustworthy at worst.
- Overestimating future revenue and underestimating costs — I can’t say it often enough: creating a bottom-up financial forecast with a detailed budget and spending plans by department will give you the most realistic picture.
Peter Mansfield, President of Mansfield & Associates, is a creative professional with over 25 years of experience specializing in marketing for financial services, tech startups, and corporate clients. He also has deep experience operating as a contract chief marketing officer and and building marketing infrastructure for early stage startups.
Lori Murphree brings nearly 20 years of experience in a variety of strategic and financial roles in business, investment banking, and private equity to her role as a consultant and part-time CFO for companies in tech, media, mobile, and consumer industries. She has an emphasis on management and execution of financial transactions: both in private capital raising and M&A. Her financial expertise includes business planning, financial modeling, deal structuring, company valuations and commercial reviews, market research and analysis, management and client presentations, and business development.