I joined the Startup Istanbul team this week for a session on fundraising tips. The full 1 hour discussion is here, in case you’d like to hear the discussion addition to these notes and tips. Ozan captured the outline of the call on his twitter feed. I thought I would expand on the pain point of connecting with the investor and the fundraising process itself.
First and foremost, investors want to hear from you. Period. We all love meeting great new companies. That said, here are a few tips that may help make magic happen:
Tip 1: Do your homework. It’s best to avoid a cold email an investor, but if you have to, be sure to do your research first. This means looking at the size investment, stage and sectors they’ve historically invested into and what’s written on their website, and then tailoring your email to showcase how and why you believe your company could be a good fit. You can learn a lot about an investor from Crunchbase (and it’s free! :). You’ll need to go through this exercise whether you’re cold emailing or are getting an introduction. Also, I proposed a structure you can use here for your pitch deck once you get the meeting.
Tip 2: How do I get in touch with an angel or VC if I don’t know anyone? Introductions matter. If you’re really just starting out and are building your network, you have to start somewhere. But where? Some suggestions if you’re entirely new to the ecosystem: University contacts. Classmates that started companies, work at startups or are in incubators, accelerators, etc. Professors of computer science, entrepreneurship or business (I’ve given talks at schools before), next up are incubators and accelerators themselves. If you can get onto the ladder via an accelerator program, they frequently host demo days and are well connected to the investor community. I’ve attended countless demo days over the years. Another great way into a VC is via their portfolio company! If you know someone inside one of their companies, it’s possible to get in touch that way (this is one way I’ll get in touch with VCs I don’t know, via a common portfolio company). Reverse engineering connections via LinkedIn is also a great way to find a connection — use email for the actual connection though, not LinkedIn. Your response rate will be much better.
Tip 3: Valuation. You can build in a little short term flexibility on valuations — I would recommend using a convertible note or SAFE note right now — you can set a valuation cap, without setting a valuation while the market is uncertain. Be careful though — you still need to think about total dilution once the note converts to equity. I suggested in the interview that dilution ranges from 10%-30% for any given round, and you still need to keep that in mind when raising money and setting caps. Another benefit of using a note is that the documentation is much simpler. As in a few pages vs a shareholders agreement and articles of association. Both are easily 20+ pages each. More pages = more legal fees. Which takes me to Tip 4.
Tip 4: Use standard deal documentation where possible. There are several online resources with standard documents — save yourself the time and money, and use these templates. Here is what Seedcamp recommends.
Tip 5 (technically a question): Are VCs investing? You bet. The current crisis has meant that consumption patterns have shifted, and very rapidly. At GR, we’ve seen customer adoption curves that should have taken two years happen in two months for some of our portfolio companies. There is a huge shift to digitalization and remote access happening right now — if your company benefits from, or enables this transition, you’re going to find investors are very open to your business.
Good luck out there!