Don’t do these mistakes when raising capital

mistakes were made, lessons were learnt

Hey there,

This is the first in a more regular email/newsletter I'm going to send out focused on helping founders how to build from zero to one and become investable. Glad you're here - let’s get to it.

I have done a few tech startups in my life. Raised money from investors. Launched products. Hired people. Built profitable business. I also failed startups, more than I care to admit. Looking back, raising money was one the hardest part of building a startup. Not because it is difficult - it is - but because I thought it is a distraction from building a great startup. Fundraising was out of my comfort zone because, I realised later, I didn’t understand how it works. Here’s some of the things I wish I knew beforehand:

1. Planning takes at least 3-6 months - you think you only need a few meetings with a few investors, talking them through your plans, and you’re done. No, not really.

2. Be pragmatic - how much money for how much equity and for what exactly. The whole fundraising process should start exactly from this, as all the efforts are aligned to the goal of getting a term sheet and closing.

3. Selling yourself too low - how much is the startup worth? Figure out your number and benchmark it to what the market is willing to pay for it.

4. Spray and pray - aka pitching all investors you could think of. Don’t do this - fundraising is a sales process, you need to segment and qualify the leads before selling to them.

5. Too early for funding - going in too early may affect your chances. Understand the stage of your startup and how does it fit to the investors interest.

6. Be committed to it - building a startup is a full time job, just like professional investors do this for a living. If founders are not committed 100% to the startup, why would investors be comfortable giving their money?

7. Do your homework - research, research, research. Who is doing the same, who did the same, who may be doing the same, who has a similar product but in a different industry, what are some best practices, why others are failing, why you may fail.

8. Be transparent - answer all investors questions honestly and as detailed as possible. Otherwise, all weaknesses or whatever you avoid will turn out at the due diligence - better be prepared to tackle them upfront. Oh, and never lie!

9. Take care of yourself - pace yourself, building a startup is a marathon, not a sprint, investors understand that. They’ll be quick to judge that not taking care of you means you will do the same with your startup.

10. Talk to the right people - set up the right expectations by learning from others who have done it. Going at it alone is hard as it is - investing a minimal amount for a professional reality check and guidance along your progress can ultimately save you a lot of time, efforts and money. It is what we do at Project Arrow, of course - but there’s many similar directions you can explore regardless, getting advice about your fundraising will boost your chances. Athletes hire coaches for winning, right?

Swipe this advice list and go beyond what they mean - it doesn't matter if you're still at the beginning or you already started your fundraising process. We’ll dig through them, with more examples and practical stuff in a workshop next Monday evening. You can sign up for it here.

PS. If you want to forward this email to a startup founder (or someone on your team) they can subscribe right here for the next email.