Fundraising is often portrayed as a straightforward process where founders pitch their idea to potential investors, who then either greenlight or reject the proposal. However, this oversimplification fails to capture the complexities and nuances involved in securing funding.
To gain a deeper understanding of the fundraising landscape, we spoke with three founders at TechCrunch Disrupt last week: Amanda DoAmaral, co-founder and CEO of Fiveable; Arman Hezarkhani, founder of Parthean; and Sarah Du, co-founder of Alloy Automation. Each of these entrepreneurs has navigated the highs and lows of fundraising over the past 18 months, offering valuable insights into what works and what doesn’t.
Researching Investors: A Crucial Step in the Fundraising Process
DoAmaral emphasized the importance of conducting thorough research on potential investors before reaching out. She noted that some investors may take meetings solely due to a warm introduction, only to reveal that they have no intention of investing.
"My co-founder and I got in a car and drove down to Tennessee thinking we’re gonna get this check," DoAmaral recalled. "And this guy didn’t even trust me to like, be an attendee at this event. They’re not writing the check."
By researching potential investors beforehand, founders can avoid wasting time on uninterested parties and focus on building meaningful relationships with those who are genuinely invested in their company’s success.
Due Diligence: A Key Component of Fundraising
Du highlighted the importance of performing due diligence on potential backers. This involves not only identifying whether they might actually invest but also assessing whether they will be a good fit for your company’s culture and values.
"Researching investors is crucial, but it’s equally important to understand their investment thesis and how it aligns with your company’s goals," Du explained.
By conducting thorough due diligence, founders can ensure that they’re working with partners who share their vision and are committed to helping them achieve success.
The Iterative Nature of Fundraising
Fundraising is often portrayed as a linear process, but in reality, it’s an iterative experience. Founders must continually refine their pitch, adjust their strategy, and adapt to changing market conditions.
"This isn’t just about raising money; it’s about building relationships with investors and learning from them," Hezarkhani noted. "It’s an opportunity to get feedback on your business and make adjustments accordingly."
By embracing the iterative nature of fundraising, founders can turn what might otherwise be a painful experience into a valuable learning opportunity.
The Rewards of Fundraising
While securing funding can be a long and challenging process, it also offers a range of benefits. Once you’ve landed your first venture dollars, you’ll gain valuable insights into your business and yourself.
"We’re kind of going in recognizing that it’s going to be difficult but it’s also an opportunity to speak to largely incredibly intelligent people who have seen many companies similar to yours," Hezarkhani said. "That’s been really fulfilling."
Key Takeaways
- Conduct thorough research on potential investors: Avoid wasting time on uninterested parties by researching their investment thesis and how it aligns with your company’s goals.
- Perform due diligence on potential backers: Assess whether they will be a good fit for your company’s culture and values.
- Embrace the iterative nature of fundraising: Continually refine your pitch, adjust your strategy, and adapt to changing market conditions.
- Focus on building relationships with investors: Learn from them and make adjustments accordingly.
By following these key takeaways, founders can turn what might otherwise be a challenging experience into a rewarding one, securing the funding they need to grow their business and achieve success.
