Joe ScarffeIf you’ve ever tried to get startup investment then you’ll know that getting startup funding is really hard.
It’s tough enough getting hold of investors, then you’ve got to know your figures and have a killer product or service, convince those investors that your startup is worth investing in and then nail the presentation. It’s stressful just thinking about it…
Don’t fret though. We’ve been through all this and know your pain, so we’re here to help.
We’ve got everything you need to know about startup investment, including our own experiences of raising $1.2M and the pitch deck we used.
So if you want to learn about cold pitching, the difference between VCs and Angels, when your startup should raise investment, and the due diligence process, then keep reading.
The Complete Guide to Fundraising for your Startup
What types of startup investors are there?
- What is an angel investor?
- What is a VC or Venture Capitalist?
- What is crowdfunding
- Startup loans and grants
- The Perfect Investor
How do you find startup investors?
- Where to find an angel investor for your startup
- Where to find VCs / venture capital
- Tool: The investor mega-list
Pitching for startup investment: How to do it right
- How to connect with startup investors
- What content should I have in my pitch?
- Pitching to investors: Top tips to grab investment
- Pitch deck design – How it can help you raise investment
- Does cold pitching to investors actually work?
- How long does the funding process take?
Startup Legals: What do I need to know?
What types of startup investment is there?
To make the most of startup investment opportunities you need to know what types of investors you need to reach out to, and how they’ll be involved in the growth of your business. There are a few different kinds of investors that you’ll need to get your head around. Not every investor will be suitable for your startup at this time. Learn the basic differences so you know who to reach out to.
Angel investors
Angel investors are saviors sent from on high. Ok, it’s not quite as celestial as that. Unfortunately not a supernatural being, an angel investor is a wealthy individual who invests their own money into startups.
Angel investors are primarily suited to investing in seed round startups. This is because they don’t tend to invest quite as much capital as large VCs do.
Much like their namesake, they have a reputation for being elusive. But, don’t worry, tracking them down and pinning down a meeting needn’t be as difficult as you think. Read more about angel investors in this article.
VCs
If you’re starting out fundraising for the first time you may have heard the term VC thrown around quite a bit. VC stands for venture capitalist, and the good news is that they’re much easier to find than angel investors. However, this doesn’t mean they’re easy to get investment from or that they’ll be suitable for your startup.
VCs are companies rather than one individual acting alone. They invest in companies in exchange for equity.
VCs sometimes invest in seed round startups, but more commonly you’ll find them backing more established startups such as series A, B or C. VCs get inundated with pitches from entrepreneurs, so it can be quite hard to get their attention.
Crowdfunding
If you don’t have an exit plan or promises of massive returns for investors then angels and VCs aren’t your only option. Lots of startups look to crowdfunding to get the funding they need to take their idea forward.
Crowdfunding has given startups a fantastic alternative to the traditional methods of raising capital. Put simply, you ask the public to donate to your campaign, and if everyone chips in a little bit, you’ll raise the amount you need to secure the future of your startup. One fantastic benefit of this method compared to angel or VC investment is that you don’t have to give up any equity.
But, crowdfunding is not free money, and it’s definitely not the easy option. If you choose this route you’re going to need a well-planned campaign, which means investing some money into marketing.
>> Crowdfunding: Everything you need to know
Loans/ grants
Getting a loan or grant to fund your startup is another investment option to consider. There are multiple types of loans and grants, so again you need to get clued up and work out which one is best for your current situation. Not all loans are suitable for startup investment.
Loans let you borrow money and pay it back over time with interest. This could be a good option if you need help to cover the upfront costs of starting your business. Not a great idea if your startup is well established and you need a large amount of investment. Banks are the obvious place to go for loans, but don’t forget about government loans too, which can often be at a lower rate of interest.
Keep your eyes peeled for institutions that offer startup grants. The government will usually have some kind of scheme in place to help new businesses as they help boost the economy. The great thing about a grant is that you don’t have to pay the money back, and you don’t give away any equity.
>> Startup Loans and Grants: What You Need to Know
How do you find startup investors?
Finding angel investors to pitch to is a hard task. The right one for you and your startup won’t be easy to come by. You can try leveraging your existing network to find investors – you never know who your friends are connected to. Use existing investor networks such as AngelList and Crunchbase. Networking in real life is key to – go to conferences and events and get your name about.
Finding investors can be really tricky. You don’t want to spam everyone and burn potential connections but building relationships takes a long time.
How to find angel investors
Leveraging your network is the best place to start. Having a friend or business acquaintance get you a warm introduction nearly always goes down better than dropping someone a cold email. A decision to invest often comes down to trust, and having a third party confirm you’re legit can only help your cause.
You should be making the most of opportunities to meet new people and grow your network. The more people you know, the more likely you are to cross paths with that perfect investor.
Of course, just because you’ve exhausted your personal network doesn’t mean it’s time to stop looking for an angel investor. You should be using that in combination with some of these online networks.
>> Where to find an angel for your startup
How to find VCs
Finding a VC or venture capitalist is significantly easier than finding angel investors. There’s two reasons for this:
- It’s a VCs job to actively find good startup talent, so they have websites, attend events and are generally very visible in startup ecosystems.
- Generally they have larger portfolios than angels, so you hear their name from previous investment rounds of other startups.
We manually curated a mega investment list from a number of sources. The guys at TechStars, Seedcamp and serialentreprenuers.co have all contributed with their own databases so we compiled one list to end all lists.
>> Where to find venture capital
How long does the funding process take?
When you come to fundraise yourself, you need a ballpark figure of how long it’ll take your startup to close a seed round.
Although there are stories of startups closing a round of funding in a few weeks, these are rarities and that’s why they catch the headlines. This is not the reality for most startups. In fact, it’s best not to compare yourself to other startups because everyone is different. True, some startups can close funding in a week. Others will take a year.
>> How long does the funding process take?
Pitching for investment: How to do it right
So now you’ve found some investors to pitch to. Good work my friend, but now the uphill struggle begins. You’ve got one shot to pitch so better make sure it’s a good one. Don’t ever be tempted to wing it in an investor pitch. The key to a successful pitch is preparation, preparation, preparation.
If you’ve never done it before, pitching can be a daunting experience. But, with plenty of practice and research it needn’t be.
Startup pitch content: What do you need?
Your startup investment chances live and die on how good your pitch is. Luckily, you can prepare most of your pitch in advance. This means you can nail the content you include in your pitch, giving you the best chance of success.
When you pitch, your investor is assessing your ability as an entrepreneur and founder. Can you lead a company to success? Do you have the technical, sales and business skills necessary?
– Whether your idea can scale.
– How your revenue model will work.
– How quickly they’ll get back their ROI.
– What’s your USP and how do you plan to tackle competition?
Make sure your pitch and pitch deck clearly communicates these points, and quickly.
Try researching other successful pitches and pitch decks, look at what content they included and how it was arranged for inspiration. Never use the same pitch on more than one investor – each pitch should be tailored to the individual investor.
>> Pitch deck design – What you need to know
>> Pitch deck design – How to make yours stand out
Can you cold pitch to investors?
What do you do when there’s no one in your personal network that can introduce you to a key investor? It’s always best to try and get a warm introduction to an investor. But, if you’ve exhausted all other options, it might be time to consider the dreaded cold pitch.
Now, this is an unorthodox way of seeking investment for your startup, and won’t work with traditional angel investors or VC funds. We’ve got first hand experience of this tactic working, given the right set of circumstances…
>> Does cold pitching to investors actually work?
Startup pitch presentation tips
Investors see hundreds of pitches from hopeful startup investors. Yours needs to stand out from the crowd. Not only do you need to wow the investor with a solid pitch and pitch deck, don’t forget that all eyes are also on you – your body language, presentation style, even what you’re wearing is all being scrutinised.
You need to grab an investor’s attention and make yourself investable. The way that you present yourself when pitching for startup investment is critical to your success.
>> Pitching To Investors: Top Tips To Generate Investment
>> Startup Pitches: The 20 best of all time
Investment Legals: What do I need to know?
Startup investment legals can be a real headache and really slow down the investment process, particularly if you’re inexperienced or not prepared. Get the lowdown on the different legal structures for startup investment and how can you and your investors can take advantage of investment tax incentives.
>> Startup Legal Help: 15 Essential Legal Tips for Startups
The due diligence process
If you are aiming to raise more than $1m, you’ll most likely need to go through a due diligence process. Depending on the investor, you may even need to do due diligence for $50,000. After all, a bank wouldn’t give you $100 without knowing who you are, where you live and whether you can pay it back.
Different investors will ask for different information. Angel investors may only need a proof of company incorporation or proof of identity documents. Often, angels don’t ask for any due diligence.
More structured startup investment, like venture capital funds, will normally require more information. This is so they can protect themselves from fraud.
>> Startup Due Diligence: What You Need to Know
What did you think?
We’d love to hear what you think about this startup investor resource. Or maybe you have a question about something you read.
Either way, let us know by leaving a quick comment below right now.
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Michelle Payne
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