At the Innovate 78 Spot Series: Startup Funding event last week, a panel of four presenters discussed raising funds from the perspective of the founder and investor.
Al Bsharah, managing partner of Interlock Capital and panel moderator, opened by demonstrating how important networking is when raising capital. You will need to find the right startup funding, but you will also need to find the right person to talk to at the company to talk to. Who do you know in your network who can introduce you to them?
Fundraising as a Process
“Consider raising capital as a dating relationship,” said Bsharah. “You’re not going to get married on the first date. It’s a process. It can be a 5-10 year+ relationship.” Nathan Firth, founder of NewRocket, said it was important to consider what stage your business is in, and self-fund as long as you can. That way you build a path to profitability, which is attractive to investors.
“The process of fundraising, if you’re going to do it right… it’s going to take longer than you think,” said Carly Stockdale, co-founder of BestLife Holdings. She suggested doing a high amount of research on startup funding partners and then front-loading your campaign with investors who aren’t your prime candidates. It helps if you get a competitive term sheet or other investors in the pool before you reach your prime candidates, which you should stack about 50-70% of your way through your fundraising campaign.
Tips for the Pitch
“We like to see founders who have a dialed in pitch [according to the business] stage you’re at,” said Dillion Ferdinandi, investor in Slack Fund. “How much are you looking to raise and how are you planning to spend it?” Additionally, in the current economic climate, founders should show a path to profitability in their pitch, said Stockdale.
When giving your pitch, Bsharah said, “Show me, don’t tell me. We have a customer who is paying this much, this is what they are getting, and this is the value they are receiving. Make it as real as you can.” Bsharah expects people to provide access to the product/service, access to customer feedback, and references for the founder.
Often, when investors are funding companies in an early stage, they are investing in the founder more than the company. Stockdale said that she looks for certain traits in a founder, especially “commitment and a demonstrated history of grit and getting things done.”
Eliminate the ‘Maybe’
The entire panel agreed that an important part of the process of startup funding is to eliminate the “maybe.” “Leave the conversation with a next step. ‘I will circle back on Friday. Can you see yourself investing in us, and if yes, what other information do you need?’” said Stockdale. If the answer is no, get feedback on why. Those data points will help you as you continue fundraising.
Tips for the Investor
On the investor side, Stockdale said it is important to understand why you’re investing, and Ferdinandi advised having a strategy about how much you want to invest over a certain number of years. Bsharah said he would have advised his younger self to find a way to start investing sooner in his life.
“It is a long game,” he said. “A lot of the companies will go to zero, and a lot of them won’t return anything for a decade or more.”
Innovate78 is a partnership between the cities of Carlsbad, Escondido, Oceanside, San Marcos and Vista to support the businesses of North County. Events hosted by San Diego North Economic Development Council with media partner, Neal Bloom and Fresh Brewed Tech.
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About the Author
Caitlyn Canby loves to discover and share people’s stories. She has her bachelor’s degree in Communications, Print Journalism with over 8 years of journalism experience. An Escondido native, she just moved back from Catalina Island to North County with her husband and two children to the town of Fallbrook. Caitlyn enjoys collaborating on projects as Marketing and Events Coordinator at SDNEDC, traveling, and exploring new restaurants, venues, experiences, and cultures.