Raise money for a startup, it's a bit like running a marathon: it does not happen without preparation is long and arduous, and one may be tempted to give up along the way.Following the fundraising of his startup, Baptiste Boulard, cofounder of Swapcard, prepared a series of articles for Maddyness, to refer all those who want to get into the adventure. In this article, he goes behind the scenes of the race to investors.
Now that you know "Why?", "To whom?" And "What deadline?" You want to raise money and you master the art of the pitch, you can get started in finding your investors. It is here that the longest phase of your fundraiser! And believe me, this phase is very important and ask you a lot of energy and ingenuity. Advice, fundraising is like a marathon: it is useless to run, we must leave on time. Ie you need to know where to turn and where your potential investors are located.
Establish an action plan ahead of your fundraiser
To maximize our chances of success in our fundraising deadlines we impose our treasury, we established an action plan to:
- find and target our investors as soon as possible,
- follow daily changes in our fundraising.
It is important to consider your fundraiser as a sales process that you must have carefully considered upstream, not to waste time because time is against you!
To establish your own plan of action, we advise you to apply lessons learned from marketing your services to your fundraiser. To know :
- define a niche prospects (in our case business angels)
- know where they are,
- how to approach them,
- be able to seduce them.
To reduce the delays inherent in the success of your fundraising, generally between six to nine months minimum, we recommend that you build relationships with investors beforehand. This will let you know immediately who to contact and send your pitch as soon as possible. Know where your potential investors is crucial. Here are our tips to find them more easily.
Target priority of Business Angels networks
To find investors, the easiest is to first target business angel networks since they are the easiest to identify and because their selection process is very long.
A significant number of networks exist across France. These networks are often specialized in areas of activity (medical, finance, IT, cleantech ...) sometimes with regional focus.
To find them simply:
- do a Google search for "business angels network"
- go to the website of France Angels is the federation of business angel networks and watch their members,
- go to the website of the AFIC, which offers a directory of capitalists, and
- register on the platform gust.
The gust platform is a must as you will send a single file to almost all networks of French business angels.
If you're in IT, here is a list of business angels networks with whom we discussed: Invest Club IdF, FINANCE NETWORK Norm 'Angels (focus Normandy), SIRS Business Angels, ISEP Business Angels, IT Angels, Angels NEOMA (too young), Harvard Business School Angels of France (very few members), ESCP Europe Business Angels, Arts & Crafts Business Angels, INSEAD Business Angels Alumni France, Seed4Soft (IT focus), Paris Business Angels (very large network) VAL Angels Investessor ((very big network) and Angelor.
After listing the networks of interest, we advise you to call them to better understand who they are
Remember to ask them:
- their field investment
- their selection process
- number of members
- means tickets for members
- number of cases funded per year
- average amount raised per file
- presence of associated funds,
- which other networks they work
This will allow you to rank them in order of interest. We advise you to send your first pitch to networks the least interest. Why ? For it is better to start to pitch these networks and try your hand before pitcher before the other networks that are more interesting.
If the business angel networks are easily identifiable and must not be neglected, you will quickly realize their disadvantages.
- Low financing capacity
The networks of the problem is that their members generally invest relatively low tickets (about 10K per folder) in a maximum of 3 applications per year. Therefore, only the networks with many members can invest record amounts of around 300K. Fortunately some networks have established investment funds that enable them to double their investment capabilities, but these networks are still a minority.
- Strong selection of records
These networks are easily identifiable so have a big deal flow. But for a start, which says deal flow says strong selection of files and sometimes major drawbacks in terms of reactivity. While some networks are very well structured, some networks may not have the ability to examine all records and it may be that your record goes out the window.
For example, we had to wait four months from the submission of our record in Paris Business Angels to get a pitch date Other networks ... never responded because we had either suspended operations or were not consulting their account gust.
To avoid this, we advise you to regularly review the status of your case and do not be afraid to call the network to get things done.
- See long laborious process
Elevator pitch
The steps of selecting a network are often tedious. Once your sent folder, you will be prompted whether or not to make an elevator pitch (between 3 and 15 minutes) with some members (10 to 30 people) who will judge the quality of your presentation. After what pitch you will know if you are selected for the investigation phase.
Trial phase
The statement will be made by one or more members who have volunteered to work on your case. It is here that new delusions may occur.
If some people will do the work diligently and be pleasant and intelligent, the other people will be little time to give you either will not be competent to understand the intricacies of your services and business model (especially if you wear a real innovation) and may make you lose time. Unfortunately you do not have the chance to choose your instructors.
Co-education
If the amount of your fundraiser exceed the funding capacity of a single network, we recommend you to perform a joint investigation phase between different networks to make the process faster and avoid multiple meetings.
Plenary meeting
The instruction meetings will you complete your business plan to be submitted to the other members of the network before a pitch (about 30 minutes) in plenary meeting. After the plenary meeting members will vote in person if they wish to participate in the financing and at what amount.
- Dark of your instructor
This is where the personality of your instructor may be crucial to your success. It is imperative that your instructor has a very good knowledge of your startup and believes in your project because it is he who, behind the scenes, will sell your projects to his comrades.
Let's face it, everyone is hesitant to invest in a startup that he knows only through a pitch and fileteasing (about 5 pages). The other members will therefore also rely on your instructor. So if your instructor is convinced that your startup is a great investment opportunity and is willing to invest a certain amount, his infatuation should convince members he knows personally. A snowball effect will occur if your instructor is recognized by his peers.
We advise you to address these power games with your instructors to put all chances on your side and identify leaders within networks.
- The high cost of operation
Warning raise funds from business angels networks has a certain cost, often little-known startups.The networks are often a percentage of the fund raising conducted among their members to finance their cost structure (about 6-10%). This can have a real impact on your business plan!
Some networks prefer not to take a percentage and asks startups pitchent to pay a small fee (about 250 euros). If philosophy is commendable, it is best to be taking a percentage of the sum owed to you, rather than buying a lottery ticket.
Go hunting for individual Business Angels
While many startups are able to raise funds from the networks, it is best to leave the beaten paths and find business angels who are not affiliated with networks.
These investors are much more difficult to meet but generally have a much greater financing capacity to network partners and can easily complete your fundraiser with a few close and deal flow reduced.Which helps your chances of raising funds.
The success of this alternative is to arrive to target and meet these people. Here are the tips we can give you the light of our experience.
Read the sections regularly fundraising announced on specialized newspapers in startups and incubators newsletter. Scroll up to 2 years back. You will often find the names of private investors. You can also create Google Alerts "fundraising".
Look at the sites of the support structures and accelerators and try to find people to head these structures to meet them. These people are interesting to meet as have knowledge of fundraising and a large network. These people will either be interested to invest in your startup, you either give advice or give you access to other potential investors will act as referent.
For example 50partners highlights on its website the list of his mentors. We all had contacted on LinkedIn asking them if they sought to invest and wish to receive our pitch. Some have shared with us their desire to invest, others do not.
We advise you to register on platforms of online investments like Angel List, Fundme, Sowefund and do research among investors and then contact, live, those of interest.
LinkedIn is a great place to find investors. We advise you to search with keywords like "investor, early stage, business angel, VC, etc", watching Found profiles and contact them with personalized message.Once you have accepted these people in their networks you will have access to their personal email to send them your pitch.
Prior to our fundraising we have already met during events VCs with whom we were connected on LinkedIn. We have come to add their contacts and those interested us.
Remember, you will have more investors in your network, the more contacts you accept you will easily and qualified contacts.
We highly suggest you subscribe to journals in private equity. A tip, do it really! For it is here that you will most likely find your investors.
Watch the ads relating to LBOs and resales, corporate takeovers and identify the outgoing management teams. Very often these people greatly enriched during the operation and will be subject to significant fiscal constraints, hence their appetite to invest to reduce their taxation.
Also try to meet with lawyers specializing in private equity for they send your pitch to their clients.
Eventually word of mouth remains an important source for finding investors. Talk to your family, friends and relatives and ask them to put you in contact with people who may invest. This may be former colleagues, former employers, uncles, distant friends, etc. Everything is good to take.
For information, our fundraising was conducted with two private investors, both entrepreneurs, which were presented to us by a friend. Be careful, luck favors the brave
It is important to address your fundraiser a structured process and track its progress from day to day.Or else you may disperse and forget the slopes. You do not realize how many people you will meet and bring to revive.
At the end of our fundraising, we had an excel file of 548 qualified investors with whom we discussed and sent our pitch.
This excel file allowed us to keep in mind the name, surname, email, document sent to each person, how we had obtained his email and at what stage of the fundraising we were: meeting, sending the pitch (long or short ), exchanged emails, investment refusal, reasons for refusal, letter of intent received, provision, etc.
We were using this file to send personalized newsletter with the good news of Swapcard. We take turns them:
- the release of new services,
- the increase in our number of users and the overcoming of our goals pitched
- events which we were partners
- synchronizations with ticketing tools
It is imperative to share your good news to show that you progress and your performance is good.
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