30. April 2012–
Berlin is turning into startup wonderland these days. The city is visibly filling up with more and more business school graduates, many of whom are easily willing to bypass consulting companies for the sake of starting their own. But the path between an original idea (worthy or not of perseverance) and the acquisition of funding to create it- is long and arduous. In January, I joined the fleets of Berlin founders seeking financing from investors local and abroad. Here are some of my observations.
One co-founder's perspective on fundraising, from the ground up
I personally had never been confronted with the realities of fundraising until I found myself in the midst of it. No one in my family or university had prepared me for it, and maybe that's the obvious detriment ushering all of us into this stage. Either way, you begin. And with no scarcity of encouragement. What did everyone tell my co-founder and me? That we'd get funding in no time!
We began the process by listing all the relevant people we knew
Every one from close family members to major funds like Sunstone and Index. I felt confident that most of people I reached out to would answer, give feedback or introduce us to the people we needed. This didn't end up happening! One major part of these contacts didn't even bother to reply, the other part offered and never followed up, and only one small part reacted immediately and really helped.
And then you start getting funding traction, and things feel exciting
Once you start getting replies and setting up meetings, fundraising begins to feel exciting. Sort of like being on the verge of an epic win, gaming style. You get around, you have a busy schedule, important meetings with even more important people. You need to constantly be on top of things, be ready to pitch any time (even at 4 am, when you're out clubbing and can barely walk a straight line). You have to do research, build up convincing stories about your startup's origins and of course go to all sorts of conferences, because that's where you'll find angels and investors for potential collaborations.
Soon in, you feel like a sales and networking machine
If your fundraising is anything like mine, your life will feel more like a roller coaster ride as the days go by- with its extremes, the highs and lows and occasional adrenalin rushes. Some conversations will go well and you'll think the process is winding down. Other conversations will feel only so-so and you'll feel set back and discouraged. Over the course of my four months of constant pitch fever, I learned a couple specific- largely social or psychological- points that I'd like to share with you.
Eight ways to keep your sanity while fundraising
1. Don't necessarily listen to the enthusiasm of others. People will always tell you how great you are, especially if you have already accomplished something (even if it's not really worth writing home about). Stay realistic and don't ever be too full of yourself. Humility is important, and confidence outside of people's compliments is endurance.
2. Don't get self-conscious if someone criticizes your concept. It's never the end of the world. Take all criticism into account, but don't let it drag you down. Being rejected by one investor doesn't mean you're a failure. You might have to pitch in front of many investors and get told off in a very subtle way, until you find someone who will believe in your idea and stick with you. Look for that person! And always keep flexible.
3. Don't believe in hypes. Once a hype is created, it doesn't mean you're getting any closer to actually closing the deals with investors. It's a small step in a long process. Don't relax or feel too confident until the contracts are signed. But don't hesitate to share your company's pitch with media outlets pre-funding, either. The journalists who actually like you are interested in profiling you without a funding leak.
4. Don't rely on anyone and don't think others have your best interest at heart. After all, it's business. Even if you party with potential investors and feel like they are turing into supporters and friends - no one said they will give you money quite as willingly as they will buy you drinks, take you out to lunches or coach you.
5. Put your character first. Investors will tell you that for the most part they are investing in the team and in talent, while the product itself is rather secondary. From my experience, it's true. Make sure your team is happy and keep everyone involved and updated as much as possible. Be charismatic, hard working, and organized. It's easy to forget that you still have to work on the product next to fundraising. Learn to multitask.
6. Be prepared for a drought. You will not close a round within one month and most likely not even within three months. Fundraising can take up to six months and this is what people consider "normal." Stay focused and be patient. You will have to put a lot of effort into trying to get everyone on board - but even then, some might decide against you at the very last minute. Don't lose faith and don't give up.
7. It's an art, not a struggle. If you seem too needy or too pushy, you most likely won't succeed. Remember, fundraising is a game - a lot like flirting. The less you show interest the more likely you are to get attention.
8. Stay true to yourself and learn to live with little to no money. All in all, fundraising means finding the right balance between honesty, good story-telling, confidence and game. These are just the essential ingredients, but the recipe is different for each and every one of us.
Happy pitching! Game on.
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