5 Lessons on How to Raise Money for Your Startup
Fundraising is one of the most gruelling, time-consuming, humbling, ego-shattering parts of starting a business. I think that’s what makes it so exciting and rewarding when you can pull it off.
When pitching investors, I have learned that the most important factors are preparation, being genuine, and proving your passion. A company’s presentation must be dialled in, packed full of information, and easy to follow. Each slide in your deck should succinctly communicate a key message and provide a clear context for the rest of your presentation. Keeping the number of words on each slide to a minimum will help you gain traction by allowing investors to not only see the heart and passion you bring, but also understand your vision more clearly.
You need to ‘read the room’, but it’s not just about what’s going on in the room. It’s a matter of knowing who’s who in the room and what they want or expect. Start noticing who the lead investor is, and which people are the key decision-makers. Some people are numbers people and some are vision people. Are they early adopters? Or are they traditional investors only? You need to know who the presentation should be catered for as this will help you understand how to position your pitch.
Investors want to invest in companies that will grow from the investor’s added experience and connections, in addition to capital, as this mitigates their risk. When I was pitching investors and it became clear in the first few minutes their background was in a field that couldn’t help with my company, the conversations never continued. This doesn’t mean the investor has to be in the industry you are going into but there needs to be a skillset that is aligned, so they are able to write checks as well as offer help and support when needed.
Here are five lessons I have learned while raising capital for Zenkai Sports.
- You are going to suck the first time.
When Zenkai was born I learned through trial by fire and just figured things out as I went. I have always enjoyed people, public speaking and presenting -mostly because of many years spent coaching youth sports and running camps and clinics. These soft skills came in handy once I realized how difficult it is to raise funds and that I could practice applying what I already knew how to do well.
It is never fun to put yourself out there and have others not believe in or connect with your product or vision. No one likes rejection, but in order to raise money you need to pitch a ton of people, and this means you will inevitably hear a ton of no’s. It will be hard some days but the founders that succeed are those that have the ability to persevere through the ups and downs and continue to believe in themselves. As they say, obstacles are just detours in the right direction, and the people who thrive as entrepreneurs are the ones who don’t give up when met with adversity.
There are countless external factors beyond your control and it’s not easy for a small team to succeed. The upside of this is that it forces people to learn about all aspects of the business and gain valuable experience, which is very important in achieving success. However, this is also precisely why investing in startups is risky.
The message here is that your passion and exuberance for your project will come through if you wholeheartedly believe in what you’re doing, and the more you tell people about what you are doing the better chance people might want to get involved. I must have talked to hundreds upon hundreds of people about Zenkai and at the end of the day the 3 main people who invested were very close to, or in, my inner circle.
My advice looking back now is to make a list of everyone who would take your call and split them into two groups: possible investors and possible advisors. Start calling or meeting in person with all of these people and spread the word about your new business. I think you will be amazed at how supportive and well-connected your network is once you simply start asking questions and putting your intentions out there. All it takes is one person to make one call and the word spreads.
2. Bet on yourself.
One of the first things you are going to be asked when pitching is how much you have invested personally. Even if it is a small amount, I believe it is very important to write a personal check. If you have zero funds, then I suggest bringing on a partner who can write a check so at least you can answer that question with “the founding partners have invested X amount”. Most investors will want to see that you believe so much in your company you are not only willing to invest sweat equity, but also cash.
3. Build momentum.
People worry about missing out. Use that to your advantage. Explain how far you are willing to go with your project and how it will be funded and deployed in the market. Then, once you get an investor or become backed by a startup accelerator, use this to build momentum and generate more interest in your company. It’s a way to build confidence in your product or idea so people know others believe in what you’re doing too. The lead investor is crucial and once that has been attained, make sure to leverage it!
4. The market is saturated and the competition is too tough.
Never speak poorly about the competition to investors. Always remember that although being competitive means you want to beat everyone and be the best, it is also important to respect other entrepreneurs and what they have accomplished. That shouldn’t stop you from explaining why your business is better in different areas, but it must always be from a place of healthy competition, not jealousy or negativity.
Raising money for an apparel brand as I have done is not a unique challenge, as it is a very saturated business. Every minute there is another person out there starting an apparel brand. The important thing, like in any startup, is to find your niche.
Even if the space in which your new product is launching is very saturated, focus on your individual network or target customer and how the problem you are solving affects or helps that niche group. Put your unique talent and personality into the project, even if it is only a small group of people you are working towards. Channel your efforts towards making a connection with others who care about your project and want to experience it for themselves as it enhances their daily lives.
I don’t know how many people warned me about how cutthroat the apparel industry is and how much competition I will be up against. But guess what…..there is competition everywhere. What do you think people told Elon when he said he wanted to start a car company? “Hey Elon, ever hear of Ford, GM, Mercedes, BMW, Lexus, Hyundai?” Bottom line: don’t let people discourage you, especially if you have a niche community to sell to.
5. Get a strong sounding board or confidante.
You will have days when you pitch to 10 people and you receive 10 no’s. These knock-backs aren’t easy, but they are worth it. Remember that it is a marathon, not a sprint. Rejection will happen. It is a part of the human experience no matter what you are trying to build, with no exceptions. Remember that the more times you pitch, the greater the opportunity for success — and make sure you have someone you trust in your life who can pick you up when the going gets tough. You’re doing work that is emotionally, physically, and mentally challenging and it’s crucial to have a support network to lean on.
They do not have to know anything about your industry or what you are trying to do — sometimes you just need someone to listen. I had many conversations with my Boston Terrier, James, while raising money and to be honest he gave some of the best advice.
The moral of the story
At the end of the day, remember that investors are investing in you as a person as much, if not more than the actual product or service you are selling. What makes you worthy and capable of people investing their hard-earned money in you?
Most professional investors can sense when someone isn’t doing their homework and is just pulling numbers and facts out of thin air. This doesn’t mean you have to have all the answers because no one does. There is no crystal ball, so for people to want to invest in your success they will need to believe in you, see your passion, and know that you will do whatever it takes to find the answers or battle through adversity when it comes. This dedication will shine through when you pitch.
All you need to have is one person to believe in your dream and you are on your way.
