Founders are spending more time on startup fundraising than they ever have before.
It’s an important and necessary part of the job, but it can take your focus off actually running your company. To help you, we’ve compiled these startup fundraising tips from entrepreneurs and operators who have navigated the process efficiently and successfully:
Startup Fundraising Tips
- Always be diligence-ready
- Identify the right investors
- Find what resonates and adapt
- Develop an army of advocates
- Don’t get stuck on the VC hamster wheel
1. Always be diligence-ready
The due diligence process is one of the most important parts of startup fundraising. Too often, when founders get to that point with a potential investor, they have to scramble to pull together the data they need and create a bunch of different documents. It can take a lot of time.
But it’s a crucial stack of information that speaks to the overall health and potential of your company. You should be collecting it and using it to run your business anyway, says Janelle Gorman, CFO of York IE. She calls it being diligence-ready:
“By utilizing financial analysis and data-driven KPIs in your day-to-day, you’ll be able to make better business decisions and grow more strategically. And when the next diligence process comes up, you’ll be able to strike while the iron’s hot.”
2. Identify the right investors
Who are the types of investors you want to work with? Don’t just look at firms with the right thesis that invest in your stage and in your industry, but look at the actual people. Do they have the right experience to help you where you need it most?
That’s the question that has guided Jonathan Dambrot through multiple successful funding rounds with the AI cybersecurity startup he co-founded, Cranium:
“This is a relationship business. Even if you don’t know any of the investors that you are looking to raise money from, you need to identify those investors that you think are going to be most suited.
For me, what that always meant was having operators that had either built businesses or had been in the market. We wanted that talent around us. We really searched out for people that could give us the right advice, who have been in the trenches and seen all the hard things as you’re going through raising that capital, but also then deploying that and building your business.”
3. Find what resonates and adapt
Stockpress, a file management platform for distributed teams, began its Seed fundraising process in May of 2023. But after two months, only one investor had agreed to participate.
“I think it was a lot of, maybe, mistakes on my part in how I was presenting the tool and talking about what might be important to investors,” recalls Jessica Storry, co-founder and CEO. “I wasn’t talking enough about our current customers and how happy they were, and how our new customers were actually coming a lot from our old customers.
We had clients from three or four people on the platform to 15,000. The tool wasn’t set for just a small business or just a midmarket business or just an enterprise business.
As soon as I started focusing on that, people would go, ‘You have an account that has 15,000 users in it? And they don’t have any problems?’ And I said, ‘Not that I know of.’ I had to feel out what was resonating with people, and that seemed to resonate.”
Stockpress ended up raising a $1.8 million Seed round.
4. Develop an army of advocates
There aren’t enough hours in the day to do everything your company needs. And the startup fundraising process is like having another full-time job on top of it all. How can you get everything done?
A strong network can be a force multiplier, says Kristen Craft, vice president at Fidelity Private Shares:
“Every founder has at least one example, if not multiple examples, of the role that serendipity has played in their success. ‘If I hadn’t met so and so, they wouldn’t have introduced me to the person who became my lead investor’ or ‘If I hadn’t said yes to this introduction, I wouldn’t have met the person who came on as my head of engineering’ or whatever.
The name of the game is having people who are going to sing your praises behind your back, who are going to say, ‘Who you should really talk to is this investor’ or ‘That person could be a great fit for XYZ reason,’ because, especially if you’re a solopreneur, you can’t be everywhere all the time. But you can develop almost an army of people who are advocates, evangelists, ambassadors on your behalf.”
5. Don’t get stuck on the VC hamster wheel
It can be easy for founders to get caught up in the vanity metrics that the traditional culture of venture capital celebrates: raising huge funding rounds at massive valuations from the big-name firms.
But it’s more important to control your own destiny and preserve your optionality as you build a company that customers love and employees love to work for, says Kyle York, CEO and co-founder of York IE:
“One of the main reasons people get into entrepreneurship is the independence that it creates. Don’t lose that as you scale.”
