Fundraising

What do school bakesales, political contributions and venture capital have in common? They are all forms of fundraising.

The term explains itself: you are raising funds…with the idea to do something impressive and ideally with some level of “return”.

It is natural in the life of a company to seek external sources of investment. Many people are willing to put money into the project with the aim to get more money out than their original check. 

On Wall Street this is best seen as the IPO’s. Companies are selling themselves on the public market where anyone own a piece of the pie, and have a stake in their future. But before a company makes it into onto a stock exchange, they have to start somewhere.

In the world of early-stage startups, it can range from a few thousand dollars gathered from family and friends to negotiating millions of euros with venture capital firms in exchange for equity in the company. The expectations vary as much as the amounts and the return on the investments usually are at the extreme ends of the spectrum: boom or bust. 

At Beelinguapp, we recently went through a round of fundraising. Over 5 months we had over 200 conversations with nearly 100 people from around the world to discuss our opportunity for investment. We benefitted from committed angel investors — individuals who write small checks early on — which helped validate our proposal to professional investment groups. In the end, the company raised a little over $1 million on what we believe are fair terms for everyone involved in the deal. 

The size of our round isn’t notable when compared to what other companies are raising (especially compared to the US market), but in the process we learned a few things that are still applicable when raising larger amounts. something that we intend to do in the future. 

1. Do your homework on you

   1. Craft a story that is easy to tell and compelling for someone to hear

      1. Dan Harmon’s 8-step story structure is a great exercise

   2. Create a database of potential questions and have answers ready

   3. Have a pitch deck and metrics deck (with raw data) ready for sharing

   4. Write out 3 blurbs (1 sentence, 1-paragraph, 1-page) for easy reference

   5. Practice everything into oblivion

2. Stay organized

   1. You can’t stop running the business while you fundraising, which means you have to be good at juggling balls in the air.

   2. Have a CRM-style-spreadsheet with every person you meet and keep it up to date with each meeting.

   3. Be disciplined in trying to get to decision gates (yes / commitment / next conversation OR sorry / no / pass)

      1. Our cadence: Outreach > First Meeting > Followup Email > Second Meeting > More followup > Due Diligence (a lot of meetings) > signed term sheet

3. Do your research on everyone else

   1. You need to know what you are doing to convince others that you can actually do it. The team spent the early weeks were spent educating ourselves on venture finance so that we could speak confidently when discussing terms of the deal. Venture Deals” is a great starting place (some notes)

   2. Know who you are getting into bed with. Before every meeting, the team had a bulleted background of the other people in each meeting. It helped us ask questions and communicate why we were interested in them. More importantly, it qualified the conversations so that we were not pursuing dead ends or being scammed.

   3. First, we identified who our ideal investor was (expert advisors with niche skills and experience in education or media industries). That profile turned into a prioritized list of everyone who could fit that description an.

4. Have a plan and stick to it

   1. We set out to raise €500k at specific terms to be used across 3 project pillars: content generation, product development, and marketing. Once the investor aligned with our ambition — to be a premier media company at the intersection of education and entertainment — we could articulate where their money was going in the immediate future.

   2. Knowing what WE wanted to do kept us focused and not deterred by the ideas of investors.

5. It is a numbers game

   1. The conversion from conversation to commitment to check in your bank account is low so you will have to reach out to a lot of people.

   2. Talking to people is the first step in moving a conversation forward; if fundraising is a marathon, there will be a lot of steps.

   3. Mark Sutter said, “Investors invest in lines, not dots.” A single interaction is a dot, but have two meetings and you have a line. More meetings = stronger and longer line.

A lot has been written about fundraising by people who live it (aka VCs). I highly recommend all things by Brad Feld, Fred Wilson, and Mark Suster as starting places