Attracting VC funding is one part financial data and one part successful storytelling. Muddle in some ice. Shake and serve.

As a bootstrapping startup, no doubt you’re looking to attract an angel investor to help secure your growth and realize your vision. The competition is fierce, however, so you can’t simply rest on your early successes and great ideas – if you can’t successfully convince an increasingly wary venture capital investment pool that you’re going to change the world, you’ll soon find yourself being one of the 90% of startups that fail.

The need for financial success coupled with successful marketing to build a successful startup is reflected in a 2020 Failory survey. The survey reveals that 75% of VC-backed startups will never provide a profit to investors, and 30%-40% of VC investors will actually end up losing their entire investment. On the marketing side, 22% of startups cited marketing issues as the reason for their collapse.

How do you plan to change the world? How are your executive team and your business model poised to do so? And what successes have you already achieved as a business? These are the questions that all investors will want to have exemplary answers to before they’ll consider funding your seed round.

As we enter a new year many investors will now be looking to bolster their pipeline and look for the next unicorn company. We work with plenty of portfolio companies here at Greenough Group and thought we’d share some of our best practices for success in attracting Silicon Valley startup funding.

Elements to Focus on to Attract VC Funding

You want to ensure that you research the VCs you’re approaching to ensure their industry focus and typical stage of company investing model is in line with your situation. You’ll make a much better impression if a VC already understands your business segment and how your business model fits within the market landscape.

Your Business Model

It’s not enough for your startup to have a paradigm-shattering idea, you also need to have a sound business model. While many venture capital firms may ultimately choose to have a say in how your model evolves, you need to prove upfront that you’re already thinking about how you fit into the market.

That’s not to say you need to develop a comprehensive 5-year plan – Most investors are considering hundreds of prospects at any given time and wouldn’t read it anyway. You just need enough evidence that your model is profitable, repeatable, scalable, and predictable. You should look to answer the following questions:

  • What is the size of the market and how much can be realistically captured?

  • Who are your primary competitors, what traction have they gained, and how do you compete against them in regards to the product, price, and placement?

  • Do you have fully realized products? Or minimally viable products as a proof of concept with a timeline towards competition?

  • What about your company’s product, ethos or culture gives you a competitive advantage?

  • What are the barriers to entry in your market?

  • Do you have business valuations, financial projections, and a company roadmap?

You may want to consider engaging CFO consulting services when you’re figuring out how to best appeal to investors. Rapidly emerging technologies and markets are disrupting business models just as rapidly, and a CFO is a perfect executive to identify new avenues for success while simultaneously performing a cost-benefit analysis

Bringing in a seasoned third-party executive consultant not only provides you with a completely unique perspective but the benefit of them having driven success for dozens of other startups just like yours. They can also help ensure that your startup’s accounting is in line with best practices and streamline financial processes.

Your Customers

No startup can truly soar without a thorough understanding of your potential customer base and a plan for how your product or marketing will attract them.

A helpful exercise for any startup is the creation of customer profiles – after all, you can’t successfully market without them. Who are they? What are their challenges? Their worries? How can your product or service help them better than your competitors’?

You’ll likely have multiple customer profiles to account for different demographics you are looking to appeal to. A customer profile should include the following factors – it can help to write them as if you were thinking about an individual customer within that demographic rather than the entire group:

Image Source: SuperOffice

Remember, don’t just focus on the features and price of your product or service, but the emotional factor: What compels them to buy your product or service?

 

Your Company Story

Finally, who are you? Your business is not just your product, but the people who build it and the visionaries who saw a need and came up with a novel solution to address it.

It helps if you have founders or executives with a strong track record to help back up your credentials. Regardless, you need to treat your company story like any good novel – it needs to have principal characters, a climax (where you see the company in 2-3 years), and how the story ends (potential exit strategies). The protagonist in this story is not you, however – it’s your customers. How will your business make them the heroes of their own story?

Having a compelling story to tell is a great hook, and without one your pitch is very likely to fall flat.

 

How To Prepare Your Pitch For VCs

Once all of your important thought exercises are complete, you then need to prepare a memorable and convincing pitch.

Whether you secured a meeting through a friend, a colleague, or from networking, a VC investor’s time is precious, and you need to be able to present succinctly while hitting all the important points.

Don’t focus on your product’s features – instead, start with your unique story and vision as a hook, and then focus on the size and share of the market you hope to capture along with the key metrics that illustrate this potential. You need to be extremely familiar with your 3-month, 6-month, and 12-month financial projections and be able to speak to the basis for those projections.

You’ll also need an accompanying deck that the VC can then review on their own and share with others. A study by DocSend of investor pitch deck reading habits revealed that on average an investor will only spend 3 minutes and 44 seconds reading your deck, with most of their focus on financials, team, and competition.

The standard slides an investor would want to see in an investor pitch deck include:

  1. Problem
  2. Solution
  3. Market
  4. Product
  5. Traction
  6. Team
  7. Competition
  8. Financials

Amount being raised. Lastly, if you get a “no” from your “ideal investor” – don’t lose heart. There are plenty of fish in the sea, and eventually, you’ll end up in front of the right person.

Want help compiling a strategy to attract VC investment? Greenough Group’s CFO and accounting professionals can provide your startup with strategic consulting that benefits from having worked with over 800 businesses like yours in Silicon Valley. Contact us today for a free consultation and we’ll help you get started.