Funding is vital for startups. Raising capital may be critical, but founders tend to have a love-hate relationship with securing investment.
The role communications plays in funding can easily be overlooked, which in turn can make the process needlessly complicated. Here we hear from three experts on what lays the foundation for effective funding round communications.
Communication foundations: knowing the market
“Fundraising is a journey of rejection and tenacity,” says Conny Dorrestijn, non-executive director of Augmentum fintech, Europe’s leading publicly listed fintech fund.
What helps on this journey is knowing where the opportunities are, what investors want, and who to approach for funding. This will also help in creating organized investor lists and honing pitches, the other two pillars of foundational funding round communications.
As far as opportunities are concerned, currently, despite the current market pullback, Dorrestijn says there are still “opportunities galore”' in fintech investment. Investors are sitting on massive amounts of dry powder, or funds available to invest.
She said there are opportunities in payments, insurtech, asset and wealth management, data insights, protection, and access, and anything on the agendas of CFOs, like in-house banking, trade finance, and auditing.
In terms of current factors important to investors now that have changed since the boom of a couple of years ago, she says one of the most important things startups should communicate is a clear path to profitability. Nailing content and go-to-market strategies will also contribute to success as well as finding the right investor and product-market fits.
She recommends that European companies should generally seek venture capital funding on the continent. Here, raisers need also note that VCs are more active than banks and corporate entities, and should generally veer away from seeking out investments from banks.
And when it comes to communicating what a startup stands for, she says: “Stick to your own vision and mission, even if times are mad.”
Communication foundations: creating an organized investor spreadsheet
Before startups can begin talking with investors, they first have to ensure they’re talking to the right ones. And to ensure this happens, they need input. Allard Luchsinger, Managing Director, Techstars, has both raised and invested millions. An investor pipeline spreadsheet, he says, is essential for raisers as it lays the foundation for communications with potential investors.
“The whole thing is about an investor list is getting to ‘no’ fast,” he says. To do this, startups need to get organized. A Google sheet is recommended to individually send to the people that will eventually make introductions, like mentors, advisors, and founders and investors startups know well.
This sheet organizes potential investors by a number of factors, including by funding round, fund size, check size, theme (what an investor invests in), and relevant portfolio companies. All things that can be done while getting to know the market. The sheet should also include a column on who can introduce startups to an investor.
When the sheet is shared, parties can give input and show-off their own knowledge and connections in this living document. This generates interest because as the document populates with names of who can make introductions, those looking at the document will not want to be left out.
In other words, an organized investor pipeline document increases the velocity of communication with those who can give startups the best introductions.
And when they find someone willing to do an introduction?
Luchsinger says founders should also write the emails they want those introducing them to send to investors. This considerably lowers the barrier to getting an introduction. Startups should also communicate how introductions turn out to those making intros.
Communication foundations: nailing the pitch
David Beckett is a leading pitch coach that has work with 1,800 startups and 30,000 professionals including Netflix, Amazon, PwC, and ING. He says being able to quickly convey a startup’s essence is essential for communicating its value, which is what investors want to know.
And the most important “pitch” is the one founders give most frequently, what he calls “the handshake pitch”. It’s 25 seconds and can be used in several situations, including after startups get meetings with potential investors.
“Great ideas need a voice,” he says. He instructs startups to break pitches into four, short sentences that answer the following questions: What do you do? What kind of customers do you have? What problems do they face? What’s unique about how you solve these problems?
The key here is speaking about the challenges customers face because this draws listeners in and opens the door for conversation. On this front, pitches should also convey passion. One of the most important things startups miss in pitches of all kinds is practicing it out loud and getting feedback.
Eliot Lyons is a content producer in Cognito’s Amsterdam office