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While the market may present uncertainties at the moment, fundraising efforts are surely continuing. Luckily, Verbit has seen great success in fundraising, raising more than $600 million over the company’s lifecycle and securing our Series E round late last year.
It’s not a given that investors from around the world will be able to understand your vision. We’ve been fortunate that they’ve seen our potential and understand our mission — so here’s what it takes to fundraise successfully as a private company and how you, too, can navigate investor relations to ultimately find the right people to back you.
Related: 5 Tips for Navigating the Entrepreneur/Investor Relationship
Serve as the “Chief Storytelling Officer”
In fundraising, it’s all about storytelling. It’s about really demonstrating the founder-market fit.
In my previous role as a lawyer, I identified a need and I became dedicated to seeing through my vision to build the solution. If the CEO is also the founder of your company, then it is most likely that they’ll be your “chief storyteller” as well. As the founder of Verbit, I’ve needed to master how to best tell the Verbit story. I needed to be able to articulate and explain our unique story and values, but more than that, precisely how an investor would reap success by aligning with us.
We have investors in Asia, Europe, the U.S. and Israel. Part of our success can be attributed to being able to convince these investors from every continent on the planet — who come from different cultures — why we’re worth it. When you can cater the pitch to them specifically, you’re much more likely to be successful and align the interests of everyone for shareholder value.
It starts with storytelling. However, when you get to the point of a real opportunity, it’s not just the storytelling aspect. You need to make the investors fall in love with not just the story, but also you.
Know how to navigate investor organizations
For successful fundraising, it’s all about speaking to the right people — those who can make the decisions. If you’re a B2B company, speak to the B2B partner. Find out who they invested in previously that’s similar to you and what their interests are.
You’ll also have better chances of getting through to consideration when the decision-makers hear the pitch from you directly. To make an impact and also make sure no time is wasted, you must enter into talks with the actual decision-maker at the firm. Say no to finders or associates.
Once you’re in the room — or on Zoom — with them, aim to build a partnership around an understanding of what makes them excited. Speak to a partner who you can build a mutual understanding and relationship with and discover if the funds and offer are relevant. Then, you just need to make sure the terms are good and fair. Establishing this shared vision and alignment is critical.
Understand how to approach inbound investor leads
If investors reach out to you, that’s great — but take the time to find out why they’re asking. There are five key questions we typically ask and reference, which allows us to vet inbound requests and make sure those who are reaching out are serious.
Here’s our cheat sheet:
- How did you hear about [company name], and why does [our industry] interest you?
- What is the check size you usually invest and what are the growth rates you’re looking for?
- What does the investment process from your end typically look like?
- Who would be the partner sponsor that will support the deal? (i.e. If a junior employee or associate is doing the reach out, then find out who the decision maker is. Make sure the decision maker is in the room or in the Zoom meeting.)
Answers to these questions provide a lot of valuable information for you to see if there’s a real fit. Remember, they need to choose to invest in you, but you also need to feel good about them. Additionally, even if the timing doesn’t work out for an investment, there’s also great value in continuing to build relationships with individuals at the firm anyway.
Having relationships in place ahead of time will allow you to create real momentum and will result in making your working relationships incredibly strong ones when the time comes.
Consider your term sheets
Then, when it comes to the terms, having informal talks that drive the discussion and negotiations can be helpful. You want to know what the likelihood is that the deal will be approved. I’ve heard many stories of signed term sheets and parties that backed off. I also hear it more and more often.
If you sign a term sheet, will it get done? What’s the probability of final close? Validate that by asking about the process and understanding what’s needed by an investment committee. At the end of the day, investments provide options. It’s not always best to take the highest valuation.
Investors need to make assessments on both your tech and your story. You need to access whether they bring you not just the funding, but the right team to help you and guide you to your goals. Make sure they believe in you.
Ultimately, a company looking for fundraising must demonstrate the market size, how capable their founder is, the company’s technological moat, its proven business model and profitable revenue growth. Access to this information will arm partners with the information they need to invest in you.