Securing funding amidst the pandemic presents formidable challenges for founders. To address this, our team has orchestrated exclusive fireside chats with seasoned investors, offering invaluable insights into fundraising during these unprecedented times.
In the first half of 2021, I hosted 7 successful digital investor chat events with my team. Drawing from these sessions, I have summarised ten important questions that early-stage founders should think about before embarking on their venture capital fundraising odyssey.
Is the market truly ready for your solution?
It is crucial for all startups to have a deep understanding of the current market dynamics. Despite having highly disruptive products or services with tremendous potential, the market may not always be ready for such technologies.
Matthew Scherba, Investment Director at Tern Plc, emphasized the challenges of introducing new technologies to a market that requires education. He highlighted that even with the best technology, educating the market can be arduous and expensive, often taking longer and requiring more resources than anticipated.
Matthew shared examples from the current tech industry, such as large-scale energy projects that necessitate government and regulatory approval. The time and effort involved in acquiring these approvals are unpredictable.
Do you have a comprehensive understanding of your competitors?
“It’s very common to believe that your product or service is unique, but most likely there are other companies trying to solve the same problem as you”, explained Leon Ge, the Principal & Head of Asia Initiatives at Partech Partners, a leading global venture capital firm with $2bn AUM and a record of +200 investments in 5 years.
In addition to deeply knowing your own product, it is essential to identify the weaknesses and strengths of your competition. It helps you recognize the areas in which you must improve. And you can be more prepared to discuss your competitors when pitching to venture capitalists. Thorough research and evaluation of the industry will demonstrate your analytical thinking and impress potential investors.
Can you effectively communicate your story and inspire others?
As a founder, it is crucial to possess strong interpersonal skills and the capacity to inspire others to believe in your ideas. Being a strategic leader entails motivating individuals to rally behind your vision. Therefore, as an entrepreneur, your ability to connect with others and create compelling narratives is vital.
Sofia Dolfe, Principal at Index Ventures, believes that founders should develop good storytelling skills. The ability to influence investors to stand by you during both prosperous and challenging times, attract talented individuals to join your team, and captivate customers to develop an affinity for your product is paramount. Sofia emphasizes that inspiring and selling a dream and vision, particularly when faced with obstacles, is often undervalued.
Is your business model scalable?
Investors often seek startups with scalable business models that can grow rapidly and globally. It is founders' responsibility to assess the scalability of your product or service and demonstrate how it can achieve substantial growth within your target market.
Are you aware of innovative solutions in emerging markets?
Entrepreneurs must possess a receptive mindset that embraces new opportunities. This necessitates a willingness to learn from innovative solutions emerging worldwide. Tatsuro Shimada, an angel investor, emphasizes the importance of founders staying attuned to developments in Africa and Latin America. These markets, despite their challenges, have become vibrant centers of creativity and innovation.
As an entrepreneur himself, Tatsuro has traversed the globe, witnessing remarkable ideas and exceptional individuals who are leveraging technology for societal benefit. He highlights that forward-thinking entrepreneurs in these regions are achieving remarkable feats with limited resources.
What is the impact of your business?
In today's global business landscape, startups that offer innovative and value-driven products have caught the attention of investors. Rebecka Löthman, Investment Director at Industrifonden, emphasizes that venture capitalists are increasingly seeking business opportunities that can make a positive societal impact. With a successful track record of investing in transformative business models in the deep tech/ML space, Rebecka observes a growing trend among investors who are committed to supporting products and services that drive positive change.
It is time for founders to consider how your startup can create value both financially and societally.
Are you even ready for venture capital investment?
Many investors emphasize the importance of founders thoroughly assessing their funding needs before seeking capital from venture capitalists (VCs). Founders must evaluate whether raising money is truly necessary at their current stage. It is crucial to determine the exact amount of capital required. Engaging with VCs entails significant expectations and responsibilities, so it is essential for the team, product, and startup to be prepared for the long-term commitment that comes with it.
Have you started building global relationships?
Startups based in smaller cities can secure funding outside of traditional tech hubs like Berlin, London, or Stockholm. The distance should not be a deterrent, especially considering the growing acceptance of online meetings during the pandemic. Exploiting the global connections can open doors to untapped communities.
According to Michael Rager, Manager Director of Growth Equity at DTCP, attracting international VCs is achievable through networking and building relationships beyond local boundaries. He suggests actively networking, engaging with individuals outside your local region, and nurturing relationships. Distance is no longer a barrier, so explore the opportunities available globally.
