funding for your startup

Seeking Funding for Your Startup Starts with Customer Traction and Revenue

Another Investor Pitch Event

On Wednesday I attended another pitch event. This one was scheduled by Idea to IPO and the entrepreneurs were pitching to a single investor, Andrew Romans of Rubicon Ventures.

This post is a summary of the most important ideas Andrew imparted to the assembled audience of entrepreneurs who pitched as well as entrepreneurs in the audience who did not.

The Best Outcome is a Follow Up Meeting

The purpose of the pitch event is twofold: 1) investors have a chance to review business ideas, and 2) entrepreneurs have a chance to see what investors want to see, so that when it’s their turn to pitch, they make best use of the investors time as well as their own.

The Best Way to Get a VC’s Attention

Andrew said two things that to me are the most interesting things he said during the entire evening. Both relate to how an entrepreneur gets noticed by a potential investor.

Lawyers See More Deals than Investors

Everyone pitches investors. Andrew’s advise is to pitch lawyers who provide services to startups. If a law firm believes you have a money making idea, they’re sign you up as a client and defer their fees until you get funded.

Only the big firms can afford to do this as you may never get funded in which case they never get paid. But if you find a firm who thinks your idea is good enough that they’ll do this for you, they’ll mention you to the investors they know.

Andrew said very directly and very clearly he’s always more interested in deals that lawyers he knows and trusts bring to his attention, as those lawyers have already done due diligence and vetted the idea.

Talk to the CEO’s in Their Portfolio

If you have a strong desire to work with Venture Capital firm X (and for purposes of this article, let’s assume you want to work with Rubicon Ventures), look up their investment portfolio on their website, find out who the CEO’s of those companies are, and call them to ask for advise on working with the firm. Andrew recommend being direct and asking if they’re easy to work with or if they’re difficult and should be avoided.

The CEO will very likely ask what your business idea is, and if he or she finds it interesting they will likely want to meet. If the two of you click, they can be your introduction to the investor. Andrew said he takes a closer look at deals brought to his attention by one of his CEOs as he only invests in CEOs he believes are competent and trustworthy.

The Potential for Hyper Growth is an Imperative

The venture fund is looking for a payout of 10 times the initial investment. This means you’ve got to have the potential to grow both large and fast. He specifically mentioned a venture capital fund in Silicon Valley that would have lost money were it not for the fact that one of their portfolio companies was Google.

While VC’s hope you’ll be another Google, they don’t expect it. But they do require sufficient growth so they can cash out within a reasonable time frame.

To Get Investment, You Need Traction

Andrew was very clear that your basic business model must be viable. You must have a way to generate revenue and profits within a reasonable time frame.

If your business has zero traction, you’re not likely to ever get investor attention or funding.

Here’s the Self Serving Part of This Post

I help early stage startup entrepreneurs get traction. I do this by teaching them how to grow their online presence through a process called Inbound Marketing.

I also do this on the cheap via an online school and community named Inbound Marketing University.

If your early stage startup needs greater visibility, more leads, and more business, check us out. We can help.

Download the eBook: The 7 Fundamentals of Being Found Online

 

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