Momentum is key when pushing a startup financing round. No matter which stage you are at, it can be real work and take strategy. Here’s how to build momentum in a financing round to get the funds and close the round.
1. Get Your Data in Order
Be prepared. Be ready to answer questions and overcome objections so you don’t leave investors room to go think about it.
Know your key data that you will be raising on. Pick one metric and rock it. If you are thinking how to build momentum in a financing round you can always send follow-ups covering the progress around that metric.
Know your competitors’ data too. How much have they just raised, at what valuations? How do their metrics shape up against yours?
2. Polish That Pitch Deck
Even if you are at a Series E round, you want to have a strong pitch deck. Make an effort. Recognize trends change. Visually, and in what investors want to see and put the most weight on.
Storytelling is everything which is something that you will need to master. Being able to capture the essence of what you are doing in 15 to 20 slides is the key. For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) where the most critical slides are highlighted. Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400M (see it here).
3. Research, Research, Research
In real estate, they say success is all about location, location, location. In startups and fundraising, when it comes to how to build momentum in a financing round it’s all about research, research, research.
Even in the best scenarios, you can run into an overwhelming number of no’s when trying conducting a financing round. Even in the best of time, it can be very time-consuming.
Get more efficient and enjoy a far better return on your time by really, really getting to know the potential investors out there. You’ll want to focus on fit more than anything else. So, you need to know which investors’ portfolios you are going to be a good fit for.
Of those, you’d like on your team and on your board, which are eagerly funding startups like yours, at this stage?
4. Know Your Partners
Just like with real estate brokerages, stockbrokers, and plumbers, it’s really the individual partner that you’ll be working with that matters when it comes to Venture Capital. Do your research on them. Look them up. Talk to other founders who have worked with them.
If you are trying to figure out how to build momentum in a financing round a good approach could be to have the relationships built way before you need them. That way when you are ready for financing you call them all at the same time. This approach helps to build confidence and to also increase urgency.
5. Start Way Early
Now you’ve got your prep work done, get started raising. Begin early. As mentioned above, this may be months or a year ahead. This will depend on the round and the relationships you have already built. The best relationships can take years to build.
The earlier you start means the more slack you have, and room to improve your game. You can present and negotiate from a comfortable position, with more negotiating power.
6. Take Commitments
You start building momentum by taking commitments. You don’t have to get the money in the bank yet. Yet, you can gain a good amount of traction and make your round more appealing to others if you already have commitments.
For example, if you are just raising a $250k pre-seed round and you get three $50,000 commitments you are already over halfway there. There will be more of a sense of scarcity and urgency for the others you approach. Or ‘FOMO’ (Fear Of Missing Out’).
7. Start Low, Raise High
It’s a lot harder to raise when the odds look slim that you’ll hit your number. Investors are more motivated to jump in if they look like the round is going to be a success.
So, consider beginning with a smaller ask. Then once you begin filling up, you can extend it, but still, look like a good portion of the round is subscribed to.
For example; asking for $1M, then once you hit $750, announce you’ll be going for $2M. Then you’ll already be close to halfway subscribed to the larger raise.
8. Offer Discounts
You may choose to offer discounts to early participants in the financing round. Tread carefully. It could be just what you need to get those first investors in.
Though, it will set expectations of discounts for follow up rounds too. Later investors may try to negotiate better terms. Only consider it if you really need the money to survive and are rapidly running out of runway.
9. Secure & Announce Your Lead Investor
No one wants to lead a financing round, everyone wants to follow. Which is obviously very ironic for a space which prides itself on innovation and new things. It’s just the way it is. Secure that lead investor, and more will fall into place and join the herd.
Announce other investors too. As well as meetings. Just don’t be misleading. It’s a far bigger deal than you think to misrepresent pledged investments and exits.
10. Pack in the Meetings
Pack your investor meetings tight. Meetings don’t mean you are going to get a check. Sometimes it doesn’t matter. It’s good for positioning. Jam in meetings if you are going to one area. Like San Franciso.
Then announce you’ve got one hour slot left during your trip other investors can fight for. You’ll seem in demand. It can help you be more efficient too.
11. Power Updates
This is critical when thinking about how to build momentum in a financing round. Keeping up momentum is all about power updates. It is for startup fundraising in general.
In addition to the above be including data on growth, sales, new clients and of course your one key metric. Email can be ideal, though make sure you are connecting with everyone in a medium they’ll get.
Send out countdown messages. How much opportunity is left for them to grab? When are you shutting it down and closing the round? Keep up the time pressure. Some investors just need a little nudge.
Follow the steps above and you will be well on your way to figuring out how to build momentum in a financing round.