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Startup Fundraising: The Missing Piece No One Talks About

Yesterday, I read two pretty awesome posts on fundraising and finding partners for startups. One was by entrepreneur turned VC/knowledge evangelist Mark Suster (How to Develop Your Fund Raising Strategy), and the other by the CEC’s very own Kevin Willer (Selling Your Idea). These posts would have been much more timely back when we were raising Power2Switch’s Series A, but fortunately for me, I had access to mentors such as Kevin (live and in the flesh in the Excelerate incubator space), Steve Farsht, Troy Henikoff, Sam Yagan, Joe Abraham, and a list of folks helping that would fill this entire post (thank you all!).

The two posts — like a lot of other posts about fundraising — cover developing a compelling business case while convincing people to work with you and give you money. The one element of fundraising that doesn’t get as much coverage is the entrepreneur’s attitude. (Naturally, it’s the one element that the entrepreneur actually has control over.) So, I thought I’d share some thoughts on the attitudes that helped ensure we successfully raised $1.3MM:

  1. Maintain a POSITIVE attitude: One of my go-to statements throughout the fundraising process was: ‘It always works out.’ It was my way of verbalizing a positive belief that even if an investor wasn’t interested in giving us money, it wasn’t because we necessarily had a bad business idea. And that the next pitch would go better. This positive attitude gave us more than just the boost we needed those weeks when the customer sign-up numbers weren’t showing the kind of ‘traction’ the investors wanted to see. Our positivity in such periods, I believe, confirmed in the minds of the investors that we would be able to keep our collective chin up when Power2Switch has some tough days (because every business has tough days).
  2. Keep LEARNING: We pitched several investors throughout the months of September and November of 2011. It was grueling, time-consuming, and emotionally (yes, emotionally) draining. But even up until our last pitch, we listened and learned from all the feedback we received. Whenever we heard the same feedback from more than two potential investors, we were quick to adjust and let them know we’d incorporated the feedback into our pitch deck. And it helped.
  3. Stay OPEN: Phil Nevels, Power2Switch’s co-founder and COO, is one of the smartest chaps I know (Booth School of Business and Princeton grad), and I’ve been told I’m not too much of a slouch myself (the school of Life…  along with Booth and Warwick University). Our spreadsheet modeling skills are pretty good, but we had metrics in our projections that were rather esoteric (very few people think in kilowatts/hour) and needed to be changed. And change them we did. We could have easily been headstrong and tried to make them see things our way, but changing things made it easier to communicate the value in our business — in terms that they understood. (You know, the guys with all the money.) Investors appreciated that — even though we are experts in our industry — we were open to suggestions on how to ‘sell our story
  4. Be CONFIDENT in your idea (and be TENACIOUS in bringing it to life): No one will believe in your business as much as you do. Never forget this. You will get questions from investors that give you reason to doubt your own vision or idea. But this should not be a surprise; investors are out to mitigate risk and your idea (whether you think so or not) is a risky investment. I’ll repeat this: investors are risk-mitigators. The only way to mitigate the risks inherent in your idea is to provide answers to all the questions investors have. It’s about removing the information gap that exists. A typical exchange with an investor:

Investor email: Have you heard of Competitor, Inc.?

You: No, we haven’t

I: They’ve just raised $2MM and signed several partnerships — how can you not know these guys? Do you have clarity on the competitive landscape?

You: We’ll do some research and get back to you

A day goes by.

You: Thanks for sharing information on Competitor, Inc. Find attached the competitive analysis spreadsheet with several other competitors included. Clearly, this is a hot space but here is how we are different and why we will win. Looking forward to hearing from you.

You allay the investors’ fears and learn more about your own space in the process. And you carry on with implementing (unless you really cannot win and you’ve lost confidence in your idea).

Don’t get me wrong, attitude alone won’t get you funded, but it will go a long way in ensuring you develop strong relationships. And relationships are what you need to sell your promising business idea to the willing ears of the right investors.

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