MELINDA ELMBORG • APRIL 06, 2021
Raising funds can be an exciting and terrifying part of your startup journey. It is your chance to raise the money your startup needs!
Still, raising funds is hard. And if it’s your first time, you may not know what to expect. How to find investors? What documents to prepare? How to deal with investor meetings? So many questions revolving in your head. 😔
But no worries! All those questions, concerns, and uncertainties… I’ve got the answers for you. 😇 This is what I’m going to share with you in this month’s newsletter, “Everything you need to fundraise a seed round”.
First thing’s first. How much can you expect to raise in a seed round? Well, it should be between $100k up to 3 million. The funds can come from both smaller VC firms and a few angels.
Now moving on to the guide, to make things simple, I have created a list of things you need to fundraise successfully.
Documents : Keep them handy before the investor hunting
Below is a list of documents that you need to prepare before each fundraising process. ⏳
“Not a big enough market” is one of the most common reasons investors don’t want to invest. This is another sheet which calculates the size of your market. It also includes the sources.
It’s important to have these documents ready before you go out meeting investors. As soon as the investors asks “Could you send your numbers?”, they need to be ready right away. You don’t want to leave them hanging for a week or two, which will make them lose interest! 😎
I have prepared all these documents in advance in my Investment Package. All you have to do is fill in your data and the documents are ready in a day rather than 4 weeks.
Now that you have all the documents in place, are you excited to find that dream investor?
There are three different kinds of introductions you can get to an investor to land that meeting:
When you and your dream investor have absolutely no contact in common, you’ll have to aim for the least favourable option -- a cold intro.
You reach out to the investor and introduce yourself directly. With this strategy, there is a risk of the investor being more suspicious towards you until you’ve proven yourself.
There you have it, those are the different ways to get introduced to investors. Now you know which strategy you want to get that dream investor onboard. “So, please Melinda, tell me how I can achieve that”, maybe you are thinking now?
I was one of those investors, so I know what makes a founder stand out in a crowded email inbox.
I have the exact fill-in-the-blank scripts that you want to send, you can find them here. This can massively increase your response rate from investors. 😊
You only need to copy and paste, fill out a few details, and hit send! Then, sit back and relax while those meetings pop up in your calendar...
Investor meetings: More important than your pitch deck to raise capital
This is the moment when you have to stand in front of investors. Now, you need to convince them that your startup is worth the time and effort.
Before we move ahead, a quick question for you. What do you think startup investment decisions are based on? Careful calculations and market analysis?
If your answer was YES, then you’ll learn something new today! 💡
Investors actually make their decisions based on their feelings. If they really like you, they’ll invest. If they don’t, you’ll have to look for money elsewhere.
This is exactly why investor meetings are so INSANELY important. It’s during these meetings where you can make them fall in love with you and your startup.
So… What is the best and fastest way to an investor’s heart?
Well, here’s my not-so-secret-anymore 😉 meeting-starter formula. You can use it to start every investor relationship on the right foot 👇
As a previous investor, I’ve been in hundreds of meetings with founders. Sometimes the answers I received were less than perfect. While I was doubting the startup and feeling troubled inside, I was acting like it was all good in front of the founder. 😟
But, I don’t want you to find yourself in that position! That’s exactly why I’ve created the step-by-step framework for answers that you need to make the investor excited to invest in your startup.
Valuation and captable: The strategy to double your startup’s valuation
The captable is the document that lists the distribution of shares between the founders and the investors.
You already know that when you raise capital, you do that in exchange for a % share of your company. The % share depends on the valuation you agree on with the investor. It is all good when you as founders own 100% of the company. But if you give away too much capital in early rounds of fundraising, you can end up in a situation where you have no more capital to give in exchange for more capital in the future.
You then become unattractive to future investors. 😟
I want to empower you as a founder with knowledge - so you can make the right decisions for the long-term success of your startup.
I’m no longer an investor - I’m on your side here.
When it comes to setting a valuation of your startup, there is one rule of thumb:
In each fundraising round you do, you want the pre-money valuation to be at least 4x the amount of capital you raise.
That way you give away a maximum 20% of capital in each round.
A survey was done with 14 Series A investors. It showed that if the founders own less than
41% of the company, they won’t invest.
You don’t want your startup to end up in that situation!
To solve this dilemma for founders like you…
I’ve created the Valuation Negotiation step-by-step process so you can defend your valuation! 🙌
So next time an investor tells you “That’s a too-high valuation”, you’ll know exactly what to answer! With my effective Valuation Negotiation process that you find in the investment package, your startup can go from being worth 1 million to 2 million! Just like that, because of a couple of arguments!
There you have it. 👆 The complete guide on how to raise your seed round! Once you’re successful, I look forward to hearing about your next round!
All the best for your fundraising!
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About the Author:
Melinda Elmborg was a Venture Capital Investor at the French VC firm Daphni. To help founders build, grow and raise capital to their startups, she switched careers to become a startup coach. In 2018, she started Startup Action.
Based on her learnings, she has developed The Startup Action Framework that guides startups from launch to exponential growth.
So far, over 400 founders have already joined one of her workshops and thousands of founders have taken advantage of her templates and guides to succeed with their startup.