How to raise venture capital for a tech startup
There are several ways to fund your business, but raising venture capital for a tech startup is one of the best ways to accelerate growth and gain industry guidance. According to CB Insights, “nearly 67% of startups stall at some point in the VC process and fail to exit or raise follow-on funding.”
That said, raising capital can be a major challenge and can take up to six months to secure, and even longer to be notified of a rejection. We outlined in this article important steps to take when your business is looking to raise venture capital for a tech startup.
Identify your needs
The majority of businesses only raise venture capital after having traction. Let’s say the word traction in business refers to a startup’s way of breaking the path to progress into measurable growth. And that can come through customers, financially, or through a diverse sort of proven momentum in a startup’s market relation.
Start by creating a detailed business plan, to know how much investments your business will need and why. To identify your business goals, use the SMART method, and ensure they’re practical.
As you create your business plan, you’ll be able to fill in the gaps regarding your business goals, target market, target audience, competitive landscape, product definitions, and financial projections. These are all crucial aspects that investors look for when analyzing your pitch and deciding your potential success rate.
Search online to locate potential investors
Once you have a better idea of what your business stands for and how to make it profitable, it’s time to research potential investors. With detailed research, you will have a good idea of who’s looking to invest, what they’re interested in investing in, what pitches they typically hear, and so on.
Think like an investor and make the deal attractive to the investor.
Put yourself in the investor’s shoes, consider what you have to offer, and ask yourself if you would invest in your own business. Several great resources can help you find more information about active investors globally and locally.
Crunchbase: A source for investors and investees on a global scale, filter by location, industry, number of employees, total funding amount, and last funding date. Furthermore, Investor Hunt‘s paid version with a database of over 40,000 investors and 200,000 data points that will allow you to procure their email addresses. British Venture Capital Association (BVCA) also provides a directory of venture capital firms operating in the UK.
Besides online investor databases, you can also do a quick google search to get you started.
Forming relationships with venture capital investors, angels and industry peers will help you gain insight into who is looking to invest right now and who isn’t. Besides investment opportunities, networking helps you form a community of like-minded entrepreneurs. So, where can you meet these investors and peers to form and build these relationships?
TechHub, the global community for tech entrepreneurs & startups, run over 1000 events per year that help entrepreneurs make new connections with peers and investors alike. SuperReturn International is a perfect place to meet senior LPs and GPs while working with local regulators and venue and event partners to give you safe and secure networking and learning opportunity. Startup Day is the place for startuppers, investors, executives, world-class experts, and media to meet. There are many more events and networking opportunities taking place online that you can join.
Hire an advisor for expert insights
If you feel you need more help after networking or searching on your own, an advisor can offer you advice on where to look for capital and how to structure your pitch. Advisors can also introduce you to their network of VCs and angel investors who may be interested in hearing your idea.
It is also important that you develop the skills necessary to prepare for your pitch and appear confident in your pitch and ongoing negotiations.
In general, advisors can help you negotiate the terms of your deal, which is extremely important if you’re raising capital for the first time. Perform due diligence to improve the terms and conditions of your deal, and prepare a business plan, pitch, and term sheet.
Create a winning pitch deck
Stories help the listener place themselves in the shoes of the people you are targeting. As an example, the Airbnb pitch used to be “Book rooms with locals, rather than hotels”. The pitch should share the value proposition and vision. Your pitch needs to tell the story and explain the problem you’re trying to solve. Be specific with numbers and use your market research here to explain the target audience and market size.
Raising venture capital for a tech startup can be just what you need to launch your business into the market and achieve your goals and dreams. Take the time to prepare, network, seek advice, and craft the perfect pitch to give yourself the best shot at success.