Much of thoughtbot’s work includes supporting startups navigating business and product growth. A big piece of achieving their trajectory is navigating fundraising successfully. thoughtbot brought together a group of experts, both Founders & Investors, to share learnings that can help others navigate fundraising during this time of economic volatility.
What plays the most significant role in startups’ successful fundraising?
- The team, their expertise, background, and skill sets are critical components
- Showing traction in the market with concrete growth metrics
- A product that can scale rapidly and has an outlined path toward growth
- Thoughtfulness that highlights “Why Now?” meaning your team’s strategy around timing and preparation for fundraising
- Having collected as much feedback beforehand and doing your own research to make sure you are putting your best foot forward and telling the strongest story
What industry or market trends are impacting startups’ ability to fundraise?
- The Cost of Living Crisis is deeply impacting Consumer investment because users’ spending habits are changing and restricted. Everyone is fighting for the same users, you aren’t competing with folks in your space, you are competing with anyone wanting to get your user’s money.
- Venture Capitalists are focused on helping their existing investments thrive and survive vs. taking a new risks. VCs are doing more due diligence on the backend and take their time throughout weighing investments.
- There is still money to be invested but it depends on the fund itself and how it’s structured. Today evaluations are different than they were in 2021, we are seeing companies raising down rounds at lower evaluations, and explore more bridge rounds to extend runways for 18 - 24 months while the market stabilizes
- Investing in underlying technologies (underpin things like subscriptions, data analytics, feedback loops) may take some time but will be helpful in the economic upswing
Any tips for navigating?
- Having a plan for surviving economy’s ups and downs and making it clear in your pitch.
- Take advantage of tax incentives, tax reliefs and schemes if you are able
- Impact, purpose-driven products and teams are well primed for these incentives and are having more success raising (consumer conscious market)
What helps startups stand out from others?
- Strong storytelling (live & in resources); tell a powerful, concise story about why you are building something, including the history you have in the space, and your future mission (Why are you the right person for the job?)
- Be engaging and creative to stand out, for example, a video in the pitch deck, or an attention-grabbing metric that shows strong growth potential Understanding viewers may only click through a few slides, front load most important information, like key metrics in the front of the deck, don’t wait for the end of the presentation
- Maximum 10 - 15 slides, show the product if you have one.
- Build relationships with investors before you are looking to fundraise
How do you identify the right investors and begin a conversation?
- Do the work and that means, a lot of research. Look at their website, linkedIn, articles, and anything you can find.
- Identify investors who are interested in your space and have made investments of comparable sizes
- Go ahead and reach out but make your message unique so it shows you’ve done your research; email and LinkedIn both work well.
- If you find one good investor, ask them for introductions to others
- Talk to companies that worked with investors to get their feedback on their experience and/or the founders of companies you strive to be like.
- Find your tribe and community, and grow a network in there (where do people really care about what you care about).
What tools would you recommend for conducting research into potential investors?
- Techstars has a public database (all VCs) that has some nice filter controls on industry, raise size, etc.
- Landscape VC (https://www.landscape.vc/) has both OpenScout, a marketplace for forward thinking investors, Angel Club, a community of angel investors and VC Reviews which lets you browse thousands of reviews submitted by founders.
To hear the full discussion directly from our experts, you can view the recording here. If your team has any product, development, or design needs, or is looking for help creating the most compelling story in prep for fundraising, please reach out.