Save More, Raise More: How To Run A Lean Startup Fundraising Campaign

Savvy entrepreneurs should know how to run a lean startup fundraising campaign. Such campaigns come with various hidden costs. If you’re not on top of them, you’ll end up with less money than you bargained for. When planning your strategy, work out how to minimize the costs.

Hiring a fundraising consultant, broker-dealer, and legal counsel is an unavoidable expense. You’ll need their expertise to guide you through the process. They’ll help you create a list of potential investors to approach and design customized pitch decks for maximum impact.

How to retain professional assistance will depend on your company’s needs and budget allocation. Accordingly, you can choose to hire them on an hourly basis or per project or task. Then again, some entrepreneurs prefer long-term contracts with them and pay a retainer fee.

You’ll also factor in the due diligence costs that the company must bear in case the fundraising is successful. Also, account for overheads like travel, food, accommodation, hotel room fares, and more. Adding up all the costs can reduce the final capital you’ll have in hand.

So, how to run a lean startup fundraising campaign so you save more while raising more? Read ahead to find out.

Shop Around for Broker-Dealers Who Offer You Package Deals

Several firms now offer you end-to-end startup or early-stage fundraising services. They have a full panel of professionals who can handle the entire gamut of tasks. Scout for firms operating within your vertical and compare their fee structure.

Negotiating with the firm is a good first step to discussing your funding needs and their complexities. Depending on your budget and intended capital, discuss terms like a flat fee or an hourly contract. You’ll need help with drawing up contracts and regulatory filings.

Check if the firm has legal counsel on board who can help you ensure regulatory compliance and meet tax liabilities. You may also need help with conducting due diligence. If you’re hesitant about investing this cost, know that it is preferable to hire professionals for assistance.

You can designate the funding process to the experts, which frees up your time and bandwidth to run the company. Don’t risk the company’s growth losing momentum because you shifted focus toward raising capital. This process can take months, and a young startup cannot lose traction.

You can carefully plan and streamline the entire campaign to minimize costs.

Be Mindful of the Costs When Using Bankers and Platforms

If you need expert assistance in running the funding campaign, be mindful of the costs before diving in. For instance, investment bankers are a good option if you intend to raise substantial funding. Their fees depend on the deal’s complexity, your business vertical, and the assistance you need.

Typically, the fee structure is a percentage of the capital you raise and covers the costs of structuring the campaign. You’ll also pay them for facilitating the deal, though this charge is more of a success fee payable when the deal closes.

Investment bankers may also charge you a fixed retainer over and above the success fee. You’ll cover this charge upfront in addition to the overheads they may incur, such as travel and due diligence expenses. Commit to this expense only if their assistance delivers enough value to make sense.

You can also tap funding platforms like Crowdfunder, GoFundMe, Indiegogo, Patreon, Fundable, and StartEngine, to name a few. These sites have costs like a listing fee for the digital real estate they provide and charge a transaction fee. This fee covers processing charges for the investment.

The platform also takes a pre-determined percentage of the investment amount you raise. Depending on the site where you sign up, you may also have to pay a subscription fee. This charge can be yearly or monthly and is payable for accessing their investor network and other assistance.

Being aware of the possible costs helps you prepare for them. You can also evaluate if the service and capital raised is worth the costs. It’s a good starting point when figuring out how to run a lean startup fundraising campaign.

Delegate the Campaign Strategy to a Single Individual

The most basic rule is assigning the campaign to a single individual proficient enough to run it successfully. This person can be someone who knows the company well and has the relevant data to add to the pitch. Keep in mind that data adds authenticated data adds credibility and impact.

It is never advisable to have multiple people handling the funding project. This can lead to confusion and the possibility of misinformation reaching investors. Delegate the task to one of the co-founders or a team member who can work closely with the broker.

If you prefer to take on the task yourself, ensure that the company will continue running smoothly in your absence. Prepare for the possibility of traveling to meet investors personally. Although your consultant can help you design a great pitch deck, you should leverage the various online tools.

Free pitch deck templates are also available, which you can tweak and customize according to the company’s best selling points. You may also have to tailor the pitch for specific investors. Using these tools will help you cut back on billable hours.

Leverage Your Network

A robust network is an entrepreneur’s best asset; you’ll leverage this advantage when you need capital. Contact the people in your network who can connect you with potential investors. These people can include mentors, colleagues, founders, and industry professionals.

Connecting with friends gives you the advantage of not paying a finder’s fee. They will also give you valuable insights into how to run a lean startup fundraising campaign. Having made the final decision that your company needs funding, look up all the events being organized.

Wrangle invitations and make it a point to attend meet-and-greets, mixers, conferences, and any other events. Remember to set aside a budget for the entry fee, beverages, and clothes. Focus on good grooming and confident body language to make the ultimate impression.

Keep in mind that investors are interested in the founders more than the company and its metrics. They want to know if they have what it takes to run a successful company. Investors back ideas and the people who develop them.

The core selling points are business acumen, enthusiasm, confidence, and perseverance. Before the event, research the guest list and gain some background information. This data will help you target the right people and connect with them.

You should also have an elevator pitch ready and communicate your passion for the company. Ask for contact information and industry-specific questions, and pay careful attention to the conversation. Display a genuine interest in the speaker.

Even though you’re trying to keep costs down, invest in top-quality assets for your campaign. Get professionally designed business cards to give to investors when you meet them. Excellent material and crisp printing will create the right impression.

Keep in mind that storytelling is everything in fundraising. For a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend Peter Thiel (see it here), which I recently covered. Thiel was the first angel investor in Facebook, with a $500K check that turned into more than $1 billion in cash.

Remember to unlock the pitch deck template that founders worldwide are using to raise millions below.

Use Digital Tools to Enhance the Fundraising Strategy

Several online tools are now available to help you with your capital-raising strategy. For instance, investor search tools, collaboration software, and pitch deck designing tools. Consider scheduling online Zoom meetings with investors to pitch your deck and discuss your ideas.

This approach allows you to save on travel and accommodation costs but, more importantly, on commuting time. Also, leverage secure data rooms to share sensitive documents. These rooms let you monitor who has access and can view the materials.

You can also rescind access if needed and restrict activities like copying, sharing, and downloading without authorization. In the data room, you’ll store all the materials investors might need to complete their due diligence.

These materials can include the concise and long pitch deck, business plan, team resumes, legal contracts, and marketing plan. Also, add the articles of corporation, financial statements, and legal licenses and contracts. Information about the IP assets the company owns can also feature here.

The biggest advantage of the online, cloud-based data room is that you can update the data as the company evolves. Understand that fundraising is not only an ongoing process, but a single round can take months to complete.

Updating the materials ensures that you send the latest information. But, without spending time reaching out to and sending individual emails to all prospective investors. You can find free data rooms online but if your company is bigger and has more complex data, consider subscribing to one.

Unsure of what information to add to the data room. Check out this video in which I have explained what investors look for in entrepreneurs before interesting. You’re sure to find it helpful.

Including the Cap Table to the Data Room

Don’t forget to include your cap table in the data room. Investors want to see the spreadsheet that reveals the ownership details of the company. For instance, option pools given to employees, convertible notes, warrants, and stock distribution among the founding team.

This information allows investors to evaluate ownership dilution and estimate potential exits and their time frames. A robust cap table demonstrates the founder’s business acumen and the company’s health. It tells investors everything they need to know about whether you’re a viable investment.

If you need help creating the cap table, use the downloadable templates available online. These tools can go a long way when you’re working out how to run a lean startup fundraising campaign. They not only help you save time but also make the materials easy for investors to access.

Get Subscriptions for Online Tools

As mentioned above, raising capital is an ongoing effort, and you’ll need to continue running funding rounds as the company grows. This means you’ll consistently use the tools and resources, so signing up for a subscription could be advisable.

Typically, yearly subscriptions for a data room, pitch deck building templates, financial models, and presentations work out cheaper. That’s what you should go for. Also, sign up for a great user-friendly investor relationship management software.

When you’re thinking about how to run a lean startup fundraising campaign, this platform will help you monitor investor interactions. You’ll maintain a record of the contacts and prospects throughout the deal pipeline. At a glance, you’ll get a comprehensive report detailing your fundraising success story.

These investor management platforms provide real-time data analytics and reports to help you understand the scope of ongoing deal pipelines. You’ll also get information about the campaign status and its projected outcomes.

Using online tools and resources helps you save on the most valuable expense of all–time. The time you save can be used more productively for other tasks, including running the company and ensuring its stability.

Work Out How to Share Due Diligence Costs

One of the most expensive facets of your fundraising campaign is due diligence. If the campaign is successful, the company raising capital bears the costs. However, if it is unsuccessful, the potential investor must bear the expense.

Due diligence costs typically depend on the complexity, scope, and time taken to complete the process. This is why, it is advisable to draw up an agreement to establish a tripartite deal. This contract is between the target company, the investor, and the firm doing the due diligence.

The terms in the contract will clearly specify the parties responsible for paying their charges. A firm offering end-to-end services will include several professionals on its panel. For instance, a financial expert to evaluate the company’s financial health, taxation compliance, books, and statements.

A legal expert on board examines regulatory compliance, legal documents, IP ownership, and other contracts. The firm will also have operational analysts to examine the company’s functioning and management. Negotiate with the firm for economical pricing.

How to Run a Lean Startup Fundraising Campaign–Monitor Your Expenses Closely

The more money you spend on raising capital, the less money you’ll have in the bank at the end of the campaign. Don’t let that happen. Budget wisely in advance and maintain a spreadsheet to watch your expenses. This strategy will help you track and economize on every unnecessary expense.

Monitoring your costs will help you stay within the budget, and you’ll make the right decisions when allocating money. You’ll ensure that raising capital involves the minimum of expense leaving you with more money to spend on scaling the company.

Most importantly, you’ll achieve your goals from the campaign and ensure growth until the next funding round.

You may find our free library of business templates interesting as well. There, you will find every template you need when building and scaling your business completely for free. See it here.