1. I know for a fact that my offerings has value in the market but how do you see this as a potential? 2. How to find and approach the right investor? 3. What else can be done to make our profile interesting for investors? 4. Since, we are a start-up, we are trying to raise capital for sales, marketing and operational related expenses, do you think of us having any chance of generating some fund? 5. How do I calculate valuation considering that we have just started getting the traction with only few customers? 6. Where else should we be pitching? 7. What collateral should we have ready? Help from expert would be very much appreciated.
This is a very complex question.
I have personally gone through funding, I've used angellist and other platforms for this purpose. The reason for needing funds is not a concern for you at this time. Your concern is approach. Focus on that.
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I have some books listed there that I recommend, I particularly did benefit a lot from the Presentations one that is there on the right in my blog.
Your goal is to craft an image that engages with a certain type of Persona, similar to what you should do when crafting a marketing strategy to sell your product. Then make that pitch, angel profile, landing page, pitch deck... All speak to that persona only. All you have to do is convince one person, but if you trysts focus on pleasing everyone you'll end up with nobody. That's often true because investors go for the people running the business not the MVP or idea alone. Even a great idea if not presented correctly will lose opportunity.
To give you more detailed insight and guidance give me a call. This is not easy but it is a lot of fun!
Hey buddy more than happy to help. I work as director of the brokerage for Angel Investment Network i've raised money personally for over 125 start-ups. We spend our whole life pitching start-ups, I have an evernote file the length of a playing field of investor feedback and we track metrics on all the pitch decks we send.
Here are my pieces of advice for what they are worth:
(I've put an answer under each of your questions).
1. I know for a fact that my offerings has value in the market but how do you see this as a potential?
I looked up your business - for any other readers here is the context.
Sales and Marketing Intelligence Solution
DataCusp is knowledge based outsourcing endeavor aimed at providing database solutions and research services to its clients across industries and domains.
Okay first thing I would say is, a product can be exceptionally complex but the explanation can be simple. You must jargon bust it will really hurt you.
You have about 3 minutes with a pitch deck to get an investors attention, on Angel List i'm guessing you have even less. Having to decipher what something actually does because of convolution can really hurt your chances of getting funded. Your job is to spend hours trying to get that message as tight and simple as possible, so an investor has that 'ah ha' moment. We sometimes spend 2-3 hours per mailshot to our database to articulate the problem as simply as possible.
I think there is a fear that simple, without acronyms = a bad business or a simple business. This simply isn't true, it just means a skilled communicator.
Watch this Ted Talk by Gemma Godfrey (sums it up pretty well).
I actually went to your website and it is still unclear to me exactly what you do.
I think the message should focus on 'the value' you add to the client e.g. cost, speed, reliability.
2. How to find and approach the right investor?
I think investors with domain experience will get your business faster than a 'non specific' angel. Angel List is a fantastic platform, also try Linkedin. Key to Linkedin is to keep the message very brief. I receive 10-20 Linkedin pitches a day and honestly they need to get to the point really quickly or else I just get lost in my daily work load.
3. What else can be done to make our profile interesting for investors?
You need to quickly address proof points
- potential clients
- sales pipeline
- testimonials from happy customers
- how quickly you can generate reports
- what cost saving
Your project isn't 'sexy' B2C, so over emphasis on the product will bore people. An interested investor can rummage into the product later, at the moment you are focusing on a hook.
4. Since, we are a start-up, we are trying to raise capital for sales, marketing and operational related expenses, do you think of us having any chance of generating some fund?
Certainly, however, sales & marketing is always treated with suspicion. Huge budgets are blown on 'sales & marketing' especially if the channels remain unproven. You will need to back up exactly where this capital will be deployed most effectively. VC's rarely invest unless these channels are proven because they just want to focus on cash in and spinning the CPA (cost per acquisition) vs LTV (Life Time Value) of the customer wheel.
At the moment, if I was being firm and professional. I would say you may get investment, but I would say you would struggle, the proposition isn't grabbing me. I am not suggesting this is a floor with the business but just a case of tightening the messages.
5. How do I calculate valuation considering that we have just started getting the traction with only few customers?
Valuation is what the market will pay for it. This takes into account laws of:
- Supply and Demand (how many investors are fighting for how much equity)
Please avoid discounted cash flows etc from accountants, they always over value businesses. The way most investors in the US will look at it, is route to upside. E.g. how can you hit your 10x and how hard will that be and can you go beyond that.
6. Where else should we be pitching?
7. What collateral should we have ready?
Collateral? I imagine this would be a simple equity for cash swap? I don't think collateral would be necessary unless you are looking to service convertible loan notes?
If you would like any more info please feel free to get in touch.