COVID-19 became a global pandemic and initially threw the venture investments of the cliff. However, the investors and startups ecosystem adjusted faster to the new way of working: pitching went online and investment thesis pivoted to new age solutions with deeptech. So how do startups (I call them Kites in a Hurricane in my book with the same title) get to the investors in the pandemic era?
Ability to raise funds from strangers is the best assessment of influencing without authority. I have attended several pitches as a potential investor and pitched alongside many founders as a venture partner. Having been on both sides of the table, I see dismayed founders who keep failing in generating investor’s interest. Its not their product or business, they are just not talking to the “right” investors.
Most founders spray emails to investors and pray for a response. Eventually someone asks them in, the founder enter the meeting room thinking all they need to do is to make them bet on the founder's credibility, aspirations of the venture, current traction/achievements and overall business plan. The “not known” is that investors are highly impacted by the communication material, the leadership style of the founders, what kind of organizational culture will be developed and whether the venture has global scale-up potential or not.
Since investors do a lot of homework before a meeting, the founders should be doing even more diligence to figure out the right investor to pitch. Investors are as human as we are and are very protective of their reputation. Hence the founder must try to ascertain the investor’s interest in the sector in which the startup operates in. Researching about the investors’ current portfolio and connecting the dots with it during the pitch is a great way to get attention.
The choice of the investor to onboard can make or break one’s dreams. When someone invests in a venture, the relationship is long term and one has to live and breathe that for time to come. So, till the time the founders don’t reach a scale of around $10k per month of revenue, I recommend they raise money from friends and family with absolute clarity on terms and these are the known “devils”.
Once you are ready to pitch to strangers for fund raise, be clear on what are you expecting: An investor who put money and you owe him regular updates, an investor who also helps you with business contacts to scale up revenues or an investor as a mentor: Startup founders, most of the times, expect all the above combinations to work with the same investors. That’s now how it happens: if you want an investor who could also help in revenues scaleup then be upfront during your pitch. Mismatch of expectations during and post the funding process can be very painful, hurting relations and reputation.
To reach to the right investor, founders must understand their investment thesis, the ability of amount to fund, influence in the ecosystem at large, ability to invest in follow-ons, fits in with what your brand and organizational culture stands for and lastly, is easy to get along. Its business-critical whom founders pick as investors and likewise for the investor.