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How to get an investor to fund you

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Why should an investor want to fund you ?
What every entrepreneur needs to know about what makes investors tick !

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How to get an investor to fund you

  1. 1. How to get an Investor to fund you ! Dr Aniruddha Malpani www.malpaniventures.com Images from the book, Startup Funding, by Nicolaj Nielsen
  2. 2. Sources of funding • Consultancy • Job • Bootstrapping • Family and friends • Customer-funding • Crowd-funding • Angels and VCs • ICOs
  3. 3. Who can you raise money from ?
  4. 4. Bootstrapping • Proves you can implement ! • Shows faith in yourself ! If you don’t invest in yourself, why do you expect investors to ? • Guerilla marketing • Your customers are your best source of funding ! • If you can get paying customers, the investors will follow !
  5. 5. Ideas, Implementation and Funding • Ideas are a dime a dozen. Don’t fall in love with your ideas – most are bad ! • Generate lots of ideas ! This improves your chances of stumbling on the right one • Don’t worry anyone will steal your ideas. Share them and ask for criticism, so you can polish them ! • Passion is necessary but not sufficient
  6. 6. Finding investors – simple, not easy • Cold email • LinkedIn • Warm introduction • Establish yourself as a thought leader – get them to come to you ! • The purpose of the first contact is to get permission to get a second meeting
  7. 7. Have realistic expectations ! • Investors are busy • Get flooded with pitches • Default response is always – No ! • You need to be persistent and patient ! • Respect them – learn to empathise
  8. 8. Common mistakes • Ask for a NDA • Use DCF for valuation • Try to bluff • Refuse to accept criticism and feedback • “ Wannabe entrepreneurs”
  9. 9. Red flags • Only an idea, with no implementation • Hockey stick curve for revenue • “ No competition” • No skin in the game • Too many buzz words, such as AI and ML
  10. 10. Due Diligence • Pre-negotiation • Due Diligence Checklist • Negotiation • Term Sheet
  11. 11. Funding • Negotiation • Valuation • Control • Our preferred option – CCPS, in tranches, based on milestones
  12. 12. Legalese • Term sheets • SHA • Focus on areas of agreement • Use standard templates • Find a startup friendly lawyer
  13. 13. Whom do I fund ? • Fall in love with the team • Non-financial reasons • LOI vs ROI • Integrity, Curiosity, Humility • Willing to teach – and to learn • Paying customers
  14. 14. Smart money vs dumb money • Not all investors are the same • Do your homework before accepting funding • Treat the money with respect – raising funds means taking on lots of responsibility
  15. 15. Pearls of wisdom • Beware of investors : – asking how much return you can give them – not respecting your time • Don’t push-sale your company, get investors to come to you • Follow up till investors give you an answer. If it’s a No , ask why they rejected you • Learn to negotiate - Don’t be too rigid and don’t be too flexible
  16. 16. Pearls of wisdom • Funding is no validation for a business – only repeat paying satisfied customers are • Vanity metrics are a trap • “No”s are not a personal rejection • Don’t compare yourself with the unicorns – they are outliers ! • Investors are optional – you can always bootstrap
  17. 17. Angels vs VCs • Angels invest personal money. Come in all shapes and sizes, because they have different motivations • When did they sign their last cheque ? Interview their founders • VC structure – GPs and LPs • Institutional imperative – decision making by investment committee
  18. 18. Bitter truths • Most startups fail • No one knows which startups will fail • It’s a numbers game • What goes up usually went down first • All companies always need more money
  19. 19. Risks • Be prepared for failure • Learn to be resilient • Can be a great journey - will teach you a lot about yourself – and about the world !
  20. 20. Lonely journey • Lots of emotional angst • Hard to convince your family that you want to chuck up a safe job ! • Need to find support • Other founders are the best source
  21. 21. The role of mentors and coaches • Mentor vs Consultants vs Investors - big difference ! • Incubators • Accelerators • Many parasites in the startup ecosystem • Advisory board
  22. 22. Key ingredient for success – Learn! • To sell • To tell stories • To lead a team • To get your hands dirty • To be patient and persistent • To work in a startup – the best way to learn a lot very quickly !
  23. 23. Books for Entrepreneurs • Financial Intelligence for Entrepreneurs by Berman • Hot Seat by Dan Shapiro • Disciplined Entrepreneurship: 24 Steps to a Successful Startup by Bill Aulet • Bootstrapping your Business by Greg Gianforte • Start-Up Guide for the Technopreneur: Financial Planning, Decision Making, and Negotiating from Incubation to Exit by David Shelters
  24. 24. Please buy this book ! www.startupfundingbook.com

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