After attending a panel on Venture Capital Fundraising in New York City, there are 3 Keys to Raising Venture Capital in 2019. For many startups raising capital is an essential ingredient in building a strong business. The need for capital can be crucial for product development, growth, sales, and marketing. But how do you effectively raise venture capital?
As someone who works in the startup ecosystem and someone who has founded a company learning more about how to fundraise and what Venture Capitalists look for in companies is key. It was a panel-style forum with around 200 people to see 3 panelists discuss raising money, the venture capital world and answer audience questions. Two panelists came from VC firms – Ryley Reynolds of Thrive Capital and Dan Ahrens of Insight Venture Partners. The third panelist was co-founder and Chief Technical Officer (CTO), Zach Silverman of Leaflink a business-to-business (B2b – just means they connect businesses together not consumers) marketplace, customer relationship management tool (CRM) and order management solution for the cannabis industry.
The event covered a large swath of topics from what do investors look for in companies, to how to best pitch to VCs, and how much money to raise and at what valuation. That was all very insightful, but what really stood out were 3 keys to raising venture capital in 2019.
- Having a clear vision and clear milestones to achieve that vision
- Preparation – how well do you know your numbers, market, and company
- Choosing the right partners
The 3 Keys to Raising Venture Capital
Have a clear vision and clear milestones
You must have a vision no matter how big or small of what the business is to become and how it will change the status quo. Beyond that, you must be able to not only tell the grand vision but also break down the small steps in between. Breaking down the small steps in between will enable you to make decisions around which investors to work with, how much money to raise, and what resources do I need. If you focus solely on the grandiose vision you are likely to put in place a shaky foundation that will not be able to support the master plan.
Investors look for the grand vision, but also the small milestones – why do you need the money, what are you going to do with it, when will I get my return, and do you actually have a plan. Employees and partners want this too. What does the next phase of the company look like as we work towards the big vision?
Second is preparation.
Having a vision and clear milestones are all good and well but do you know your stuff. Do you understand the problem you are looking to solve? Why now is the time to solve it? Why are you the right team? Being prepared when it comes to understanding these questions and truly having data to support your vision and milestones is crucial.
Investors want to ensure that you have the data to back up your position, but also to know that you are aware of your weak spots. No one is perfect, no plan is perfect, and no company is perfect. Being able to say here is our plan vision to support it and the data PLUS here is what we could see as potential challenges and problems that we may face. Here is how we are going to overcome those and this is specifically where we will need help. Proper preparation allows you to objectively identify risks in your business plan that Venture Capitalists will see with or without you recognizing them first.
Choosing the Right Investors
Beyond having a compelling value proposition during an investor pitch you must also do your research on VCs. Who are the right partners that have the skills, connections, and experience your company needs at this stage? Conduct research on VCs that have invested in companies similar to yours that have built successful companies. Do your own due diligence on the VCs and build your target list of investors.
Having loads of money doesn’t mean you have the right resources or team to implement your winning vision. Plenty of lottery winners end up worse than when they started because having loads of cash doesn’t mean you are in a position to maintain and grow wealth. You have to have the skills and team to support you. As a startup raising money from investors is great, but it is not always the highest offer you should take. It should be the highest quality offer taking into account the factors beyond just dollars and cents.
In conclusion, there are a lot of tactical tips and tons of advice. If you just follow the 3 keys for raising venture capital you’ll be in a great position to fund your startup in 2019.
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When I used to work in VC, the number of clueless (aka not knowing their numbers) founders was astounding. Great point you’re making there!
Thanks Victor. That’s a crucial point for founders to know their numbers. Any other big things you witnessed from your VC days?
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