How To Raise Money : Step 1 of 10 - Preparing for an Investor Pitch

Note: i) this post was transcribed from this video, and ii) This post is the first in a series where I go into detail on each of the 10 steps in my 10 step framework for raising investor money for a startup. To read a summary of the entire framework click here. 

Hey guys, what's up? Today I'm going to talk a bit about fundraising. I'm actually going to go through the 10 step process to raise money for a startup that I used when I was running Kindara.  I used this same method to raise a friends and family round, a bunch of angel rounds, and a venture round. I'm going to go through it super quick because I get a lot of questions about this in my coaching and I just want to lay out a framework that you guys can use to go step by step by step until you have money in the bank. So let's go.

All right, so step one is to get your story straight and your materials together. I hear about and meet so many entrepreneurs who are raising money but they haven't taken the time to do all the research and have all the answers to all the questions that they need to have to be successful. You gotta be rock solid with your information and your pitch BEFORE you start raising. And this isn't easy. 

If you're raising money and at some investor asks you a question, you should have heard that question before or done your research so that you know the answer to that question. You don't want to be in a fundraising meeting and get asked a question that you don't know the answer to because it moves you away from closing that investor on your deal. Even if you come back with, "I don't know the answer to that, but I'll get back to you" it's not as good as having the answer. If you have all the answers you'll impress and that will move you closer to the sale. 

Of course there's going to be some questions where you don't know the answer, but the core questions of your business, how big is the market? How are you going to make money? what's your customer acquisition cost? What's your team look like? Why do you think you have the experience to make this happen? Why are you the right person to make this happen? Who's the competition? All those questions. You should have really tight practiced answers to all those questions.

So how do you do that? You do your homework. You put together your pitch materials (I recommend a deck, an executive summary, a financial model of some kind, even if it's very simple and a product demo of some kind). And then you take those four things and you pitch them to people. Go pitch your friends, pitch people in your network who are smart about the market or smart about startups. Pitch. Pitch, anybody you can really and start to harvest those questions that people are going to ask because investors are going to ask you those same questions when you're pitching to them for money.

So get all your materials together, start pitching it and start putting together answers for the main questions that come through. I remember at Kindara, you know, we would have questions like what is this a birth control app or is this a pregnancy app?

And so I had to come to a honed answer to that question which turned into "this is a fertility management platform. It's bigger than just getting pregnant or avoiding pregnancy" and that was a good answer because it painted the big vision and I believed it. That's actually what I was building.

Ok so another big part of doing your homework is making sure that you believe what's in your pitch through pitching it to other people and through doing research on the Internet. You may find that there's parts of your pitch that on the inside, like at a deep level, I don't feel right to you. For example, maybe the market is actually a lot smaller than you thought it was, or maybe there's competitor that's actually a lot better at a specific thing than you thought they were. So as you do this research, you find this stuff out and you can adjust. You want to hone your pitch and change it until you feel rock solid about every aspect of your plan. 

Because when you go into pitch, the number one determiner of whether you're going to raise funding or not is whether you believe it. Whether you have certainty. There's a concept in business and in life that in any interaction, whoever has the most certainty wins. So you want to have the most certainty going into an investor meeting. How do you have the most certainty? By doing your research, practicing and adjusting your pitch until when you're walking in the door, you feel that it is tight. You believe 100 percent with all your cells and in your bones that this business is going to be what you think it can be, and with just the right investors and the right amount of money, it can become that thing you see in your head. 

A lot of people hate it when I tell them this, because this process of honing your pitch, doing research, adjusting, doing more research, adjusting can take months like this can actually cause you to make big changes that require months again of work.  You might do research and find that what you were planning to do doesn't make sense or somebody else is doing a way better than you can do it, so it's annoying.

It's annoying to go do the research, change the pitch, change the pitch, change the pitch, hone in on something, but that's what's going to make you successful. Too many people go into a fundraising process without full belief in what they're doing and it's bullshit because investors can smell if you are uncertain. 

It's like when you're having an interaction with a salesperson and you can tell they don't really care about you. They just want to sell you something. They don't care about the product. Maybe they don't use the product and when that happens it's pretty easy to sniff out. 

Investors are not stupid (for the most part), and they can sniff out if you are uncertain. So this step of doing your homework could take 90 percent of the time you allotted for your raise. For example, if you're planning to take six months to raise money, you might spend one or two or three or four months honing the pitch so that you feel certainty in your bones that it's going to kick ass, and you feel certain in your bones that what you're saying you truly believe and is an accurate representation of reality. And that can take a long time and that can be annoying.

So a lot of people skip this stage. But don't do it. It's the number one determiner of success in all the steps that follow.  

So that's step one. I talked for a long time on that, but step one is to get your materials together and I'm going to come back to this theme again and again. So step one, get materials together and get to a point of certainty about your pitch so no investor can throw you off your story and your vision.

I'll go into the other steps in future posts. Stay tuned