Raising venture capital for your tech startup? Unfortunately, raising funds requires much more than just a great product. Aside from checking off the boxes of a standard pitch, founders need to find a way to really connect with potential investors.
"Over the past 30 years, venture capital has become a dominant force in the financing of innovative American companies. From Google to Intel to FedEx, companies supported by venture capital have profoundly changed the U.S. economy," report Ilya A. Strebulaev and Will Gornall in Stanford Business.
Before tech startup founders even consider pitching to investors, there are a number of key considerations to be made. In this article, we'll share a few helpful tips as you prepare to raise VC.
Tips for Raising Venture Capital for Your Tech Startup
1. Establish Clear Goals + Objectives
The most successful tech founders are visionaries, and know when they’re building something extraordinary. While the value of the startup may seem obvious to them, extraordinary ideas and products must be backed by clear goals and objectives. When defining financing goals and objectives, it's important to ask yourself the following questions:
- What do you want to accomplish with this funding?
- How will this funding allow you to accelerate growth and drive innovation?
- How much financing does your tech startup need to be successful?
By setting realistic, revenue-focused goals and objectives, teams can stay organized, energized, and focused on the big picture. Meanwhile, clear goals and objectives allow investors to really understand what your intentions are.
2. Get to Know Potential Investors
The tech industry's top venture capitalists hear dozens of pitches a week, so it's especially important to find any opportunity to stand out from the competition. Do some research to determine the following:
- What are the goals and objectives of the venture capitalist?
- How does their background align with the goals and objectives of your tech startup?
By analyzing these key questions, tech startups can tailor their pitches to make investors feel more connected to and passionate about the investment opportunity.
3. Connect With Peers
To gain even more perspective and insight into VC investment, consider connecting with peers who have "been there, done that." Use this as an opportunity to learn from other entrepreneurs. What did they do to successfully land their first investment? How did they configure their pitch deck to guarantee maximum engagement? What key takeaways do they have for you when preparing your pitch?
Building these kinds of relationships can be a challenge. The world's top tech startup founders leverage the power of tech-oriented coworking spaces to unlock powerful networking opportunities. More than a desk, RocketSpace supports tech startups and entrepreneurs with a solid network of industry leaders and startup resources to help them raise top investment.
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4. Understand Your Finances
"It goes without saying that cash is the lifeblood of your business," reports Salman Khoia in Entrepreneur.
Founders who understand their expenses know where to invest their time and money. By digging into potential financial constraints and challenges, founders are able to make more accurate projections and extend investment runway. Having this knowledge also helps prepare founders to answer potential questions or concerns an investor might have.
5. Prepare Your Pitch
It’s important to have a solid business plan, however, investors don't have the time to read lengthy documents. It's important to send more digestible documents that explain the broad goals and objectives of your tech startup. These documents include:
1) A Five Slide Pitch Deck: A pitch deck is your business plan translated into concise, yet informative slides. By communicating more with less in a limited time, investors can determine quickly if they want to invest.
2) Up-to-date Financial Documents: By preparing the right financial documents, investors can get an accurate vision of the health and potential of a startup. These documents include:
- Revenue Projections: An estimate of how much revenue will be generated in the next few years will support your proposed goals.
- Operational Expenses: Outline your current staffing, marketing, and operational expenditures, then determine how they could change. An explanation and analysis of these types of operational expenses not only inform the investor, but help them assess current marketing strategies or staffing decisions made by the startup.
- Cash Flow: Explaining cash flow is similar to showing a view of a business checking account. This helps investors assess any risk associated with your expenses, and understand how profitable a startup is.
When first developing a pitch, consider what an investor actually needs to know. A memorable pitch is authentic, organized, and most importantly, concise.
"In a perfect world, you give your pitch in twenty minutes," says Guy Kawasaki, chief evangelist at Canva.
The twenty-minute window, which excludes time for setup and discussion, ensure that only the most relevant and important information is shared. Remember, the goal of the pitch is to communicate the value of your tech startup. Investors want to know what they'll stand to gain by funding your startup.
Scale Your Tech Startup + Attract Top VC Investment
Failing to raise VC funding can break your tech startup. With thoughtful planning and preparation, you'll increase your chances of landing top VC funding from reliable investors. RocketSpace extends introductions to top VCs and private investment firms to catapult tech startups towards success.
In fact, our global network of technology campuses and services are specially designed to help the world's top tech startups grow. The RocketSpace tech ecosystem has inspired several success stories and helped launch over 18 unicorns including Uber, Spotify, and more.
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