This week we focused on capital raising and growth plans. We invited local investors to join us to share their investor perspectives and supplement our discussions with real life investor/entrepreneur simulations. Kristina Chang, President of Westlake International Group; Craig Lee, angel investor; Nina Saberi, President of Castille Ventures; Andy White, Managing Partner of Keshif Ventures and Nancy Hong, Managing Director of RiverVest Venture Partners shared their do’s and dont’s and answered our Founders’ questions about seed and early stage investments.
Since we’re always working on storytelling and the art of the pitch, our Founders wanted to know what excites an investor when they hear a company pitch. Generally, investors want an entrepreneur to take them on a journey through how the world is currently, then share their visions of how the world could be by solving x problem. When an investor sees that the Founder is passionate and calculated, they can overcome the nagging thoughts of risk and failure.
Some common mistakes seen in seed stage companies include taking the wrong money, shooting too low when raising and taking risks instead of mitigating risks. Avoiding these rookie mistakes takes some strategizing prior to meeting with investors.
Do the due diligence on prospective investors and their funds. Ask around. LinkedIn is a great resource for this. Talk to previous colleagues. Get coffee with the CEOs of their portfolio companies. Hit up their co investors. Find out who they are before you take their money. You could hurt the probability of future investments if you take investment from someone with a bad reputation early on.
If you’re going after a fund, you’ll still need to do the due diligence. Funds are usually set for 10 years. By the 3rd year, most of the fund has been deployed. The best way to learn about a fund is to ask the different partners. Find out about their last investment. Ask how much of the fund is left and how much they’re holding on to for follow on funding. How many of their investments were new and how much was reinvested into their current portfolio companies?
Raise capital to meet milestones. Raising insufficient or excessive amounts of capital can make or break a company early on. Ask for the amount of money that will help you mitigate risks as you go from round to round. To do this you’ll have to set goals and track your outcomes. Think ahead. If you need $1M to do a study that will de risk your business, don’t settle for $750,000 and skip the study. Build it into your plan so that you can tell investors exactly what you plan to do with the capital you raise.
Focus on the female founder aspect usually comes full circle during investor meeting simulations. Even the most well meaning people ask questions that show their implicit biases. We equip our founders with strategies to exit uncomfortable situations professionally. Remember that you don’t have to answer a question that makes you feel uncomfortable. You can choose to dig in and ask why a question is relevant or choose to be less direct and circumvent the question by inserting the key takeaways that you prepared before the meeting.
Be prepared. Know who you’re meeting. Ask questions. Tell a great story. And be authentic, not perfect.