Over the last few years when I was consulting and executing fundraising rounds for entrepreneurs, I have had the opportunity to learn some lessons along the way.
These are lessons which I hope can help startup founders to raise better and to be prepared before meeting with any investors for the first time.
Lesson #1: Credibility & Trust is the Name of the Game
If you cannot prove that you are the BEST person to run the company, the investors will immediately make a decision to pass up the deal.
You have to show and prove that your own real-life experience, your skills and the amount of time you have spent building up your startup makes you someone whom others can trust their money with.
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Lesson #2: The Internal Affairs Are In Order
Prior to deciding whether your company is an investable deal, due diligence will be conducted to determine which deal is worth looking at and which deal is OK to forego.
To a trained eye, all the documents which you presented will tell a story. On top of that, due diligence will always require the latest audited financial statements and/or the up-to-date management accounts.
There is always a reason behind the numbers why it reflected so. An expert can decipher the numbers to match the information given and to use them as a base to gauge some levels of truths in what you say that business is; to forecast for potential/growth, and of course to make sound investment decision.
Should you be hiding information on purpose, the numbers would show. It is just a matter of time.
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Lesson #3: Make it Easy To Understand
You have to make everything easy to understand. For example….
- What is the business about? (Best to have straightforward problem-solution statements)
- How do you make money? (Give an assurance that this business will be a “No Doubt, Sure Make Money” model)
- Why do you need to fundraise? (Best to make it a no-brainer that the investor’s investment is almost secured & has promising returns should everything go according to plan)
Complication happens when the storyline is not so straight to the point. It then raises a lot of questionable points. This happens when the storyline is ‘nothing special’; does not paint a good picture for growth; too optimistic or naive in the projections, etc.
Each opportunity that causes doubt will reduce the trust-currency from the listening ears.
When the founder is deemed to be uncertain or lack confidence, incompetent to carry out his/her role as CEO, or faces a high risk of failing, investors will give lesser priority to consider the project.
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There are too many projects seeking for funding; too few good projects deserve funding; and even fewer projects that will actually deliver the promised rate of return on investment (or a decent one at the very least).
From the desk of,
Cynthia Chiam
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