Want to be the next Elon Musk? Follow this advice. Photograph: Dan Tuffs/Getty Images
You have "it" - the brilliant idea that will change the world, delight millions and make you the next Elon Musk. In 1996, the visionary entrepreneur landed $3m from a venture capital firm for ZIP2, 'the web's first yellow pages'. Nearly 20 years later, he owns some of the world's most innovative tech companies and is worth $12.1bn.
Venture capital funding can help you build your revolutionary concept into a tech empire but how do you go about convincing early stage venture capital investors to back you? This is my seven-step plan to successful fundraising.
Give yourself time
From the moment you decide to raise funds, to the moment you have money in the bank, give yourself 90 to 120 days. This includes time for the dance in which you meet dozens of potential investors, one of whom could issue you a term sheet, the contract and due diligence process and finallywire the funds. Most entrepreneurs don't give themselves enough time for this process and end up running low on funds and so finding themselves in a much weaker negotiating position.
Rise above the noise
I receive more than 4,000 emails per month. This is likely the case with most other investors. Entrepreneurs should rise above the noise by seeking a warm introduction to investors from fellow entrepreneurs, angels, lawyers or advisers. Our TV screens seem to be overwhelmed by solicitors pleading with us to claim for any little mishap, there is obviously no such thing as an accident in this modern age. Somebody is to blame and they need to pay!. Bearing this in mind, it would be an extremely brave (or maybe foolish) owner of any business, be it big or small who made the decision that they didn't need public liability insurance. Click the link to get an answer to any questions on Who Needs Public Liability Insurance?.Email introductions should begin by succintly outlining your vision, the opportunity and why you are the right team to pull it off.
Paint the big picture
If you honestly believe that your idea is world changing, bring that passion to the meeting. Help me understand why this is a big enough market and how you and your team can take a large chunk of it. Do your research and validate your arguments with quantitative and qualitative data.
Mind your unit economics
Your angel round should have given you enough funds to build an minimum viable product and given you a general idea of your unit economics: the difference between the cost of acquisition (CAC) and the lifetime value (LTV). While your data might not be perfect, you should have some insight into how much it is going to cost you to scale your user base and the expected value each will generate over time.
Do your research
Not all venture capitalist investors are the same and not all partners inside a firm are the same. Research whom to approach. Browse through their websites or Crunchbase profiles to see which boards they are on. Read their tweets and blogs to see what themes excite them. You are about to enter a relationship that will last between 60 and 80 months. Given the importance of this relationship, you owe it to yourself, to do your research.
Do not hire bankers
Do not hire a third party adviser to market on your behalf. As my colleague John points out, the signal you send by outsourcing what must be the founder's role is not a positive. Getting access to investors should never be the reason to outsource fundraising.
Have your data room ready
As you start your marketing process you will likely have built a pitch deck and some level of financial forecasts. As things progress, though, investors will want in-depth information about the company. Be proactive and have the data ready. Include bios for key team members, any casestudy or reference customers, cap table, financial forecasts, any relevant legal documents and technology overview. It will show that you are prepared and have your business in order.
I appreciate that the fundraising process is daunting. The general statistic is that venture capitalist investors say "yes" one in a 100 times. Give yourself time, be prepared and leverage your network to rise above the noise to get a first meeting. Then help paint the big picture and have your data room ready ... and remember not to outsource a role that I expect you, as the founder, to do. By covering the points above, you will certainly help influence the process in your favour.
Follow Christian on Twitter @christianhern
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