Startup Diaries — V
You don’t need to pitch to every investor
Startups are the dreams achieved in the really hard way. It takes a lot from an entrepreneur. I can say that as I’m onto the same journey. What a startup needs at first, a vision, a good product or idea, really good team and financial support.
Product, team & customer are three important pillars of any company. One of my colleague and startup fellow told me that when in a startup you can only have two things right at a time. If you have really good team and a product, you will struggle finding right customers and vice versa. A startup and an entrepreneur needs the most is the funding. Funding is considered to be a critical part of your startup journey which boosts your morale mentally and financially to take the right decisions to utilize the resource you have to build the great business.
I was wondering why funding is so critical and important to your startup. In any business the ultimate truth is customer and the value you create for your customer. But how do you create a value, the best guess is with the product you sell. And the product you sell need to be designed, developed, manufactured, packaged, delivered and serviced. If you do all these things right you can create value out of the product for the customer and eventually can make good business. In all these phases, the funding is required when you reach to develop and manufacturing stage and that is the stage where you need to have enough clarity on all the next stages defined and we typically call it a business plan where we play with the numbers to make sure how much money we’ll be spending to earn some amount of money by selling the services/product and in what time you’ll make profitable business.
Here comes the investor, investors are all of different types and all different investors come at different stage of your startup life cycle. Typical categories are Angel Investor, Venture Capitalist, Institutional Investor, HNIs (AKA Angels) and when the company reaches IPO, it’s public who invests in your business. It is being said that the first round of the funding for a startup is very critical and toughest.
The typical approach is to reach out to every investors in your ecosystem and pitch your startup idea to them. If they like it and finds it interesting enough to invest, they invest otherwise as in the majority of the cases they will say “NO”. This is response you’ll get habituated when you’re running a startup. Investors makes or breaks a startup you build and so it has to be dealt cautiously in all the situations. Where you find typical investors, best approach is to search on Angel.co, LinkedIn, popular startup stories websites, startup events, regional startup communities. Who are these people? Investors are business people or serial successful entrepreneurs and High net worth intellectuals. They belong to a fixed domain where they have spend all their lives in building and running a business. When looking for funding you need to prepare a checklist that you are looking from an investor. In an early stage of startup, only a person who invests money and wait for to get it doubled at the time of exit is not the right investor. A person who doesn’t understand your space you’re in or have no idea about your startup is not the right fit. A person who understands your space but who’s looking for quick and 10x exit ASAP is also not the right person. A good investor for an early stage startup is the one who first understand the product, the space, the market scenario, competition and most importantly who believes in you to run the show. Most of the early stage investors invests in an entrepreneur more than a business plan and numbers. So the investor who believes in an entrepreneur and provides him a backbone support with all his experience and network connects to reach out to places is the perfect fit for the investor.
What exactly happens when you running a startup and actively looking for funds? You start exploring angel.co, LinkedIn, your network and surrounding ecosystem to find your perfect match. Search for all the people on the LinkedIn with “Investor” as a headline of a profile, study a little about the person and put a message to him/her about your startup and ask to share email-id, share your deck with the person on email, have a call and hear the feedback. Similar is the process for the angel.co, but angel.co do provide syndicates where investors who are looking for startups can search your profile and can bring some more investors to invest in a startup. One more approach is to get to the startup events in the city happening for startups to find funding from institutional investors. When we are seeking funds, we tend to not leave any stone upturned and try to reach out to as many as possible, share our idea and return with the big “NO”. It’s obvious from entrepreneur’s point of view when your startup is at stake and all your hard work is at stake, you would want to try everything you can. But is this the right approach?
Is it right to pitch to each and every investor?
I would say no. It is not at all right idea to reach out to each and every investor you connect to. There is a reason behind it. You’re running a startup, leaving all your comfort zone and putting your career at stake and work on the dream idea of your life. Now your idea is big enough to have funding necessary and without that you can not move ahead. Typical investment cycle runs for 3 to 6 months or 1 year and you can find the right match. Now what to do in this one year, as every investor will entertain you only if you have something to showcase, either a prototype, a MVP and now a days most importantly customers. If you have product, technology in place as well as MVP but you don’t have customers investors will not put their hard earned money in your startup. But you very well know that without putting in money, you won’t be able to make full finished product which customers will buy and pay for it. You can run pilots with customers but pilots in most cases won’t earn you money.
It is a deadly loop typically in a cash intensive startup at early stage, where investors invests in a startup who has got initial stable customer base where customers are happily using your product/service at least for sometime. But the customers always pay for fully finished product and to make a product what a startup needs is a funding but which can be availed only if you have customers.
Typically when you pitch your idea to every investors and institutional investors you meet, they share their opinions which may or may not be relevant to you, as you probably have studied more about the customer base and customer’s expectations and you definitely know that funding is the only option you have right now. In this hustle of getting the funding at the right time from a right person, you end up meeting wrong people, they perhaps waste your time, corrupts your brain by their two penny comments, and the most weird thing I faced in my recent interaction is they make fun out of your product and rather than looking for the scope and uniqueness of the product, they share their unlearned views and start being judgemental. This will definitely not harm your startup as it’s good they leave you with big NO but they certainly put some stress on your mind and corrupts your mind to act confidently. I have seen people, who really understand your product, listen to you peacefully before making any judgements and shares right views as well as show the right path in case they feel you’re going wrong. But majority of the people always waste your time and yes this happens and as a startup founder you must not listen to each and every person you meet. It is also very important to value your time and efforts and if you are confident about your plans and execution, you don’t need any certificate from anyone to run your own business. In that case, whatever you gain or loose, it’s on you only and nobody else.
From the past few months of my interaction with almost 100+ investors I met, this is what I learned. I am still looking for funds to go ahead but I have learned that if I have customers and if I can get them on board without funding but with the product I have, investors will come to you and you don’t need to go to them to listen to their comments and achieve their certificate of you can do business or make product or not.
After writing this, now I definitely know what I need to do and where I need to focus. Two things to remember for sure, don’t share your plans with too many people, it’s too risky even without NDA, and you can’t do NDA with all. People will like your idea, appreciate your work and then they themselves will start working on it as they know the potential.
Be Aware, Be Informed and Act Smartly for your all funding needs.
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