I still remember vividly, talking with a startup founder while waiting for the elevator after our meeting. The founder said that he had been recently spending all of his time raising capital. "Founder is to call capital for team burning " he added. That seemingly harmless joke was a "red flag" to me. Because it shows something that is easily misinterpreted: the main task of the founder is to raise capital, and the remaining important tasks like operation or product development are for teammates to do.
I cannot agree more with Michael Seibel- Managing Director of Y Combinator in an interview with Wharton Fintech Podcast recently mentioned:
"Fundraising is not the goal and closing big funding round is definitely not an indication of success. In reality, money is an afterthought and you should take 5% of your “CPU cycle” on raising. Successful founders are spending most of their time on tasks that are not as fun to talk about, like users, product, hiring, and shipping code"
In fact, when meeting with many founders of startups in Vietnam, I feel sorry when I see they are spending too much time on raising capital. Normally raise funds from starting the roadshow for a new fundraising round to the end (close the round: until you see the investor's money in the company bank account), it takes an average of about 6 months. Calling capital in peacetime takes a lot of time, calling capital during Covid-19's chaotic time would take even longer.
During the Covid-19 period, when business is struggling, cash flow is depleted, putting startups in a bad position when it comes to raising capital, especially, when investors are restricted from traveling to come to Vietnam to meet the founders. These named difficulties make it much more time-consuming for startups to raise capital. Therefore, Vietnamese startups need to have more effective different ways now, to be able to proceed with investment flows faster, so that founders can have more time to focus on more important tasks for startup's growth.
Based on my experience and observations of more than 80 startups invested by Genesia Ventures in general, and 7 Vietnamese startups in particular that I have been supporting to raise capital in this Covid-19 period, I would like to share via this blog, 3 Fundraising Hacks, which are factually proven to be highly effective for startups. Hopefully, it can be useful for other startup founders to take reference and, apply flexibly in their startup fundraising activities.
The Power of Frequently Asked Question (FAQ)
Founders, probably more than anyone else, feel tired, and a bit "boring" when in the meetings with investors, are asked repeatedly the same questions. I fully sympathize with the founders about this. I respect their time, when they sacrificed their precious time that should have been sitting with the product team or meeting important customers, instead then they took the time to meet with me. So more than ever, I want that meeting time to be used as efficiently and effectively as possible.
Before every first meeting with the startup, I will usually receive a Pitch Deck to read in advance and prepare important questions to ask the founders in the meeting. But I understand that these questions that I prepare also might possibly be questions, that the founder has been asked many times by other investors. Therefore, it would be very helpful if the founder synthesizes those questions into a FAQ file, then send in advance with Pitch Deck. Therefore, the first meeting can truly become extremely quality with the content discussed between the two sides will not just reach the level of "Know each other" but will be at the level of "Understanding each other" deeply. Especially, in the case of Vietnamese founders having to talk to foreign investors when the foreign language barrier also becomes a big challenge, the detailed preparation in advance of the FAQ will help both sides have a good foundation to understand each other basically before officially going to the meeting, which leads the meeting to be more effective eventually. Moreover, the investors' questions are more in-depth and sometimes become valuable suggestions for founders. The more profound, effective, and impressive the first meeting is, the higher probability of having the next follow-up meeting, and the faster the VC's decision-making priority that you might benefit from.
I noticed that often we have to go through a few meetings, then the founders will give investors access to the Data Room (the details and important documents related to startups), we can finally see the FAQ file. But I do believe that the FAQ would be much more effective if it were sent to the investor before the first meeting attached with the Pitch Deck.
I still remember last year when I first received the Pitch Deck along with FAQ from a foreign startup founder in Vietnam. That FAQ document was very thorough, detailed, and easy to understand. At that time, my colleague and I had to say: Excellent !!. It made a very good first impression about that founder. Actually, the FAQ shows a lot of things, not only helps investors increase the basic understanding of startups before the first meeting, but also shows the mindset of the founder and team, lies in the way they optimize time, in order to increase efficiency in fundraising activities. This is a very necessary founder's mindset, that can be applied in all areas of daily operations, not just in raising capital.
Video Pitch: Make Investors impressed with your startup
Recently, one of our portfolios has successfully raised in the effective and fast way, in my opinion, partly thanks to a good "hack". It was the recorded Video Pitch. I was very surprised when the founder sent us a Video Pitch used for fundraising. It seems to be very time-consuming to have that video pitch. But in fact, not at all. The founder actually only used the Zoom meeting to record his entire pitch, while showing slides of the fundraising document and the founder's face, he was presenting very detailed. That entire video was about 30 minutes. Again, the founder's time-optimizing mindset spoke itself in this distinct innovative pitch.
First, the founder only needed to record once to produce the pitch video, which could then share with many potential investors at the same time. Second, investors could preview this pitch before making a decision whether to have a formal first meeting between the two sides or not. This "animated" Pitch video is considered better than a "paper" of PDF document, in creating better input for investor's understanding and in making a strong impression, when being able to see the enthusiastic face of the founder. And finally, this video can be repeated, can be watched over and over to give investors a better understanding of the startup. Therefore, the Video Pitch might help founders to have a higher probability of having the next meeting with investors.
Speaking of this reminds me of having watched the Investor Day of Vingroup on 14th Jan 2021. In the context of Covid-19, when the existing investors and new potential investors, due to travel restrictions, could not participate in person, Vingroup held an Investor Day virtually. There, all the leaders of Vingroup were sitting in a row, pitching about the business plans of each of Vingroup's business line: Real Estate, Education, Health, Manufacturing, ... Surely this event was not only shown online once, but Vingroup may also have recorded and sent the video to investors who could not follow the online event on that day.
We can learn from Vingroup in its creativity and flexibility in communication with investors in the Covid-19 context. It may be different in that, the pitch is not as widely publicized as a public company like Vingroup, but in the way we record the pitch video once, which can be used many times and shared to many investors potential at the same time, right in the motto: Simple- Repeatable-Shareable.
Communication Hacks with potential investors
It can be said, when it comes to building relationships with investors, perhaps many people consider that the startup-investor relationship can last " even more than a marriage", which they can go together for more than a decade. Thus building a mutually trusted relationship Before - During - After the investment, is fundamentally important in helping startups access capital in an effective way. Building this relationship is a process that takes a long time to build up. However, within the context of this blog focusing on how to hack fundraising quickly during the Covid-19 era, I would like to focus on effective communication ways with potential investors for the startup's fundraising activities.
If startups have previously had a round-up and investors have already participated, founders should "take advantage" of those existing investors to participate in the next round of fundraising. Let them first help in communicating with potential investors. Investors often have a large network with other investors, and these investors often catch-up and exchange information with each other. In addition, the potential investors, before they make a final decision, they often have a meeting with the existing investors, to ask about the investor's feedbacks and evaluations about the founding team, performance and execution ability, and the growth potential of the company. Therefore, the fact that, building good relationships with previous existing investors is extremely important in getting positive feedbacks, thereby attracting more and more potential good investors to join on the following fundraising rounds.
If startups have not had any round of fundraising before, founders can find in their network - anyone who directly or indirectly has connections with investors they want to reach out to and ask them to warmly introduce to those investors.
After being connected with potential investors, founders should continuously actively "communicate" with them, by updating related news such as business results, new business plans. ..The purpose of these, is to gradually get investors "involved in" the startup's growth progress and feel impressed by the founder's enthusiasm. Then, founders can give those investors good positive pressure to prioritize and fasten their decision-making process, by updating the investment offers received from other investors (if any), or by actively asking the investors what their concerns are so that founders can promptly answer, or regularly reminding investors of the deadline when founders want to close the fundraising round. Those are the good ways founders can engage actively with investors, cleverly create a pleasant feeling of pressure on potential investors, which will help founders quickly get their final investment decision.
Above are my sharing of 3 Fundraising Hacks to help startups raise capital fast and effectively. However, this know-how will really work for startups that are good enough and have the potential to grow and meet investor expectations. At Genesia Ventures, as a Japan-based fund, we value most the mutually trusted relationship between the two sides. Trust is something that both sides from the very first days, built from the relationship we are frank, honest, respectful, and put our faith in each other's potential. And it also needs to be maintained throughout the post-investment. Trust is very powerful. Once the founder has built great trust from investors, in the next following investment rounds, they will very quickly decide to continue follow-on investments or find ways to support fundraising from the close funds, so that startup founders will not have to spend too much time on raising capital. It can be said that TRUST is the most sustainable and effective way of "Hack" to help startups overcome the capital exhaustion during this period, and grow even further after Covid-19.
If you have tried and found any tips or hacks that make your fundraising progress more effective, please share yours! I would love to hear from you. Thank you!