While a great deck and pitch are imperative, they’re just the tip of the fundraising iceberg—especially in today’s market, where investors do more diligence before writing a check. Since securing a “yes” from investors from an excellent first pitch is unlikely, founders need a 360° fundraising strategy to convert pitches into capital. So, after securing a first meeting and nailing your pitch, here’s how we coach our portfolio founders through the two critical “closers” of a successful fundraising strategy: consistent follow-ups and a robust data room at the ready. 

Follow up, follow up, follow up

Fundraising is a time-consuming necessity for founders, so being prepped and ready is paramount. Immediately after a pitch, have your first follow-up email queued to send, thanking them for their time and providing access to your data room. Quick responses throughout the fundraising process signal that you are serious about your raise, proactive about potential concerns, and respectful of their time.

At every stage of the raise, your follow-ups should be consistent and professional, acting as an extension of your pitch. Here’s how to wield follow-ups to maximize fundraising efforts:

  1. Address concerns directly and quickly. Typically, what separates founders from a “yes” is how quickly they alleviate their potential investor’s concerns. If they voice concerns during the initial pitch, use your first follow-up email to address them directly. Don’t mistake an investor’s concerns for an outright rejection. Instead, take it as an invitation to address their concerns head-on.
  2. Clarify where you stand. The fundraising advice we always give to founders is, “The second best thing to a ‘yes’ is a quick ‘no.’” So, in your follow-up emails, ask for updates on your status in their pipeline, including the expected timeline and next steps. Equipped with this information, you can better tailor your approach to each investor’s investment process and prioritize your time accordingly.
  3. Build excitement between rounds. The reality for startup founders is that you are always either actively or imminently raising. So, it’s wise to provide strategic updates to your current and potential investors to prime them for your next raise. Create excitement between rounds by providing quarterly updates on your progress, celebrating important milestones and new hires, and boosting any prominent media features. Then, tap this primed audience to announce an upcoming round and share the exciting milestones, such as securing notable investors and closing the round.

Build a robust data room in advance

Every investor operates from a unique investment thesis, which prioritizes different elements of your business accordingly. A robust data room is the most efficient way to quell as many investor concerns as quickly as possible, freeing you up to make more intros, book more meetings, and nail more pitches. Failing to prepare these materials in advance will delay your response to investor concerns, potentially jeopardizing funding.

Your data room has to be secure and accessible by only designated people, such as your potential investors. An impressive data room will show investors that you’ve put time, energy, and thought into how you’re running your business today and how you plan to run your business in the future, including but not limited to:

  1. Pitch Deck: Include a copy of the deck from your initial meeting for investors to review.
  2. Business Plan/Operational Model: A detailed description of the company’s strategy, target markets, competition, monetization model, and projections for the next 3-5 years.
  3. Financial Information: Historical financial statements (Profit & Loss, Balance Sheet, Cash Flow), financial projections, capitalization table (the more information the better, including ownership percentages, shares, options, and warrants), and a list of all investors and terms from previous raises.
  4. Legal and Compliance: Formation documents (Articles of Incorporation, Bylaws, etc.), voting agreements, first refusal and co-sale agreements, stock purchase, shareholder agreements, and any outstanding or potential legal issues.
  5. Governance and Corporate Structure: Information about board members, board meeting minutes, and details on any subsidiaries or joint ventures.
  6. Term Sheet: If you don’t have an executed or theoretical term sheet to include, let potential investors know the general terms and funding mechanism of the raise.
  7. Market Research: Supporting documents from your research on your target audience, market size, competitive analysis with features and pricing, and trends.
  8. Customer Information: Key customer metrics (customer acquisition cost, lifetime value, cohort analysis, and churn rate), key customer insights (case studies, testimonials, or success stories), customer contracts and agreements, and anonymized user behavior data, if any.
  9. Sales and Marketing: A detailed overview of your marketing strategy, sales pipelines, metrics and processes, and sample materials (one-pagers, decks, fliers, etc.).
  10. Team Information: Biographies and CVs of key team members, current organizational chart, details on advisors and their roles, and future hiring plans.
  11. Technology Information: For hardware, include a spec list with pricing, vendors, and/or factories. For software, include system architecture diagrams, and details about the technology stack, such as API documentation, infrastructure, security measures, third-party integrations, and any “special sauce,” like ML or AI.
  12. Product Information: A high-level product roadmap showing past milestones and future plans, including product descriptions, specifications, tutorials, and demos.
  13. Intellectual Property: Details and copies of patents, trademarks, copyrights, and other intellectual property rights, including IP-related agreements or disputes.

An initial pitch can only cover so much and dive so deep, so providing supplemental materials shows you’re a prepared, strong operator who has done their homework on the business you’re trying to build. Think of your data room as not only a repository of your financial and operational documents but as a place to illustrate the full breadth of your vision. Include supporting documents that speak to your future vision for the business, such as future product development, future sales or marketing initiatives, and other strategies that you couldn’t cover in your initial pitch deck. 

Early-stage investments are a bet on the founding team’s long game. As you court potential investors, part of your job is to build their trust and conviction that you understand the problem you’ve set out to solve and are the right person to build its solution. So, as you implement these follow-up strategies and build your robust data room, treat each piece of outreach or supplemental materials as an extension of your pitch: professional, optimistic, and well-crafted. 

And if you’re an exceptional early-stage tech founder building something big, we want to hear. from you! Learn more about Outlander VC’s investment strategy and connect with our investors now.

Outlander VC invests at the earliest stages, which means that most of our portfolio companies are pre-revenue and pre-product businesses. All of these early-stage startups follow a similar trajectory: First, founders must turn their idea into a reality by building a Minimum Viable Product (MVP). Then, it’s mission-critical to get that MVP into your potential customers’ hands to test and validate. Based on this feedback, it’s time to iterate until you’ve built a product your customers are willing to pay for, and viola: revenue! 

Effectively developing your MVP into a full-fledged product requires a lot of prioritization. Rome was not built in a day, and your solution won’t be either. After advising countless early-stage founders through this process, I’ve distilled this process into three distinct phases: designing, building, and iterating. Here are the most important considerations and most common founder pitfalls for each stage: 

Phase 1: Designing

  1. First and foremost, understand the objective of your MVP. Think of your MVP as an experiment: its purpose is to validate your hypotheses and gauge market interest. As such, your MVP should be the stripped-down version of your envisioned product, containing only the core features and functionalities required to solve a specific problem. By focusing on the essentials, you can quickly and cost-effectively test your product idea before sinking significant time and money into product development.
  2. Quantify what “success” looks like before you build. To prove your solution is viable, define clear and measurable objectives for its initial iteration. The data you collect from your MVP will validate whether your product solves a real problem for your target market. These objectives should ladder up to your North Star Metric and will serve as your initial KPIs. Keep in mind that you will use this data to demonstrate the feasibility, viability, and early traction of your product concept to attract investors or potential partners. 
  3. With MVPs, simplicity is key, and done is better than perfect. In fact, your initial product should be somewhat terrible because it was built as quickly and efficiently as possible to get it into the hands of someone to give you feedback. You do not want to spend a year or two in development only to get it in customers’ hands and realize you’ve spent a long time building the wrong product. 

Phase 2: Launching

  1. Attract initial users. After you’ve built your MVP, it’s time to get beta customers to test your product and provide feedback. Move quickly to get your MVP into the hands of potential customers. Consider offering trial versions or beta programs to attract early adopters and gather feedback. 
  2. More users = more data. Be wary of spending too much time in stealth mode. Limited beta user access testing also limits the amount of data you can collect. I often hear early-stage founders say things like, “I have ten people on a trial right now, but I have a hundred waitlisted!” Why are those hundred people not on a trial, too? More people testing your product earlier gives you better data to build faster. 

Phase 3: Iterating

  1. Data-driven development is the key to growth. Establish continuous feedback loops with your users to collect insights and validate assumptions. However, do not lose the forest for the trees, and don’t act on every request. Instead, quantify the aggregate feedback from users and compare it to your analytics and metrics around user engagement, retention, and conversion rates. Leverage these data-driven insights to determine the best ways to enhance your product. When in doubt, always prioritize new feature developments by their impact on your North Star Metric.
  2. Balance scalability and stability. User needs will evolve with your product, so you’ll need to prioritize development efforts accordingly. As your user base grows, focus on optimizing your infrastructure and ensuring your product can handle increased demand while maintaining stability and performance. 

Early-stage product development is critical for turning your vision into a successful business. But the transition from MVP to full product will not happen all at once! Instead, you will gradually evolve your MVP into a full-fledged solution based on market feedback, scalability requirements, and business goals. And by following the steps outlined above, founders can effectively validate their assumptions, gather user feedback, and iterate toward building a robust product. 

Remember, the key is to get your product into the hands of users as quickly as possible, gather feedback, and leverage data to fuel growth and, ultimately, achieve your startup’s North Star Metric.

© Outlander VC. 2022.