How founders raise startup fundraising successfully in 2024

Founders are exponentially talented in their respective fields. They either have dedicated industry knowledge or a strong technical background to solve real-world problems. However, based on past experience as an investment analyst in venture capital, founders often struggle to get enough attention from investors due to reasons that can be mitigated before or during the financing process. Here’s a comprehensive guide on how founders can successfully raise startup fundraising.

Creating a Comprehensive and Easily Understandable Pitch Deck

A pitch deck should cover the most important topics with equal weighting. A deck typically covers the following:

• Problem: Define the issue your startup is solving.
• Value Proposition: Explain the benefits your product or service provides.
• Technology: Describe the technology behind your solution.
• Business Model: Outline how you plan to make money.
• Go-to-Market Plan: Explain your strategy for reaching customers.
• Competitive Analysis: Show how you stand out from competitors.
• Team: Highlight the key members and their expertise.
• Financial Projections: Present your expected financial performance.
• Current Status and Traction: Show your progress and milestones achieved.

All slides should be self-explanatory and easy to understand, as many investors do not have a scientific or technical background, nor do they have the necessary industry experience. It’s best to test your deck with someone who has a different background. A great job is done if such a person understands your presentation without further explanation and would love to join the company.

Targeting a Relevant Market

As a rule of thumb, a $2 billion market is attractive enough for a venture capitalist. There are two variables to change the market potential of a company:

1. Address More Potential Customers: Expand your target audience by finding new customer segments.
2. Increase the Price: Adjust pricing strategies to increase the overall market size.

Having a Clear Business Strategy

Economic studies show that particularly successful companies master the main components of a strategy right from the start. These components include:

• Vision: The long-term aspiration of the company.
• Mission: The company’s purpose and primary objectives.
• Market Positioning: How the company differentiates itself in the market.

Investors will ask about these three strategy components at the first meeting. A thorough market and competition analysis, as well as your industry and business experience, provide the insights to start formulating a clear strategy. Important business decisions in R&D, marketing & sales, and operations should be closely aligned with the strategy to create sustainable unique selling propositions.

Demonstrating Sustainable Traction

Venture capitalists like calculable risk. Rapid sales growth combined with good predictability of the business significantly increases the chances of an investment. The best way to show growth and predictability is through a company’s operational and financial metrics. Key figures such as:

• Lead Velocity Rate
• Conversion Rate
• Customer Acquisition Costs
• Customer Lifetime Value

These metrics help founders make a good impression on venture capitalists.

Managing Valuation Expectations

In an ideal world without information asymmetries, startups determine their fair value, and investors receive a share according to their investment. However, in reality, many factors play a role in how a startup is valued:

• Founding Team’s Personalities and Sales Skills: Influence investors’ perceptions.
• Demand and Supply for Startup Deals: Varies by industry, affecting valuations.
• Market Trends: Shape investor sentiment and can impact valuations.

Evaluating comparable deals and asking investors about the state of the startup economy can help founders manage valuation expectations. Ultimately, founders need to balance speed, growth, and appropriate investor ownership.

Running a Structured Financing Process

The fundraising process resembles a sales process. It starts with the preparation of documents suitable to present the company to investors and ends with the exchange of company shares for capital. The process mainly consists of:

• Finding and Contacting Ideal Investors: Research and reach out to potential investors.
• Providing Monthly Updates: Keep investors informed about progress.
• Attending Pitching Events: Present your startup at events to attract interest.
• Defending the Business Plan: Answer questions and address concerns.
• Settling Terms with a Main Investor: Negotiate and finalize the deal.

Conclusion

At Startupmetrics, we love working with passionate entrepreneurs. We support them with our know-how gained from previous fundraising projects to increase their likelihood of getting funded at a fair valuation.