TFF #012: The 4 Foundations of FundraisingFeb 09, 2023
This week's tip: the 4 foundations of fundraising.
Fundraising is a black box.
People can give you two opposite recommendations, and they can both be right.
So when raising money for your start-up, it really does “depend”.
It depends on so many variables, such as:
- An investor's background
- Your current market
- Your background
- Your network
- Your industry
- Your stage
Blanket advice from people without understanding exactly what YOU are doing can either be correct or drastically wrong.
And I see so many founders use the wrong advice at the wrong time, even when their advisor meant well.
That being said, there are 4 foundations of fundraising that I have experienced that don't act in a messy grey area.
And will always be true for your whole fundraise. Here they are:
1. This is a relationships game
The future your company is completely unknown. Investors know that they are not investing into anything substantial. It's all fluff.
But of they course they need to get conviction that you are good enough. They need to find a way to believe that you will do what you are planning to do.
Trust of you and your processes is the only way in which they can be okay with investing into you. And the only way to build trust, is to build a relationship with investors.
So relationships are key to your success.
2. The only constant is the founders
Everything that defines a company’s future success is either these three things:
- Up to chance
- Has a lack of evidence
- Fundamentally decided by the decisions of the founders
Because of this, the only tangible and constant part will be you and your team. Investors are fundamentally investing into how you build, execute and sell your product.
This is why fundraising always comes down to the founders. Not the product or idea.
3. Fundraising is more of an art (emotions) than science (logic)
Because of the above you can’t just put all your start-up into a machine and let it pop out an answer on whether you will be successful. Even ChatGPT can’t do that (yet!?).
And because of this, investing is more of an art than a science. VCs joke all the time about this to each other. How we are team pickers rather than financiers.
This is how we think, and this is how we invest.
So play more into the emotions. Tell stories. Connect.
Because investors aren’t playing logic.
They are playing feels.
4. No-can can 100% with certainty know if something will succeed
Every investment an investor does will ALWAYS has risks.
They will never know if you are going to succeed. The only thing they have is belief.
The belief of your expertise.
The belief of your execution.
The belief of your opportunity.
So you can just show the investor how you will succeed. But you also have to make them believe you will.
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