3 things startups should do to start fundraising on the right foot

If you’ve watched the popular fantasy drama television series Game of Thrones, you’ll be familiar with the iconic line: “Winter is coming.”

In the show, “winter” is a metaphor for tough times ahead, referring to the trials and tribulations the characters face – including the arrival of the White Walkers, a race of zombie-like creatures intent on destroying all living beings.

Bringing this metaphor out of the world of Westeros, winter has already arrived for the global tech and startup scene. In the face of a volatile macroeconomic environment, rising interest rates and talk of a recession, it’s a tough time for all businesses – especially for startups looking to fundraise.

Photo credit: Tech in Asia

However, this isn’t to say that there isn’t money in the ecosystem: Southeast Asia’s VCs have US$15 billion in “dry powder” that will need to be deployed – they’re just going to be far more cautious and careful about where to put it.

Given all this, there’s no better time than now to sharpen your fundraising chops. If you’ve got plans for fundraising in the works, this is the time to put the pieces in place to nail your pitch and make sure you’ve got a compelling story to get investors interested.

Gavin Teo, general partner at Altara Ventures / Photo credit: Altara Ventures

As part of Tech in Asia School’s Aspiring Founders program, Altara Ventures general partner Gavin Teo shared some tips on how startups can go about fundraising in the right way.

1. Know your investors

First things first – it’s important that startups understand how VC firms work. This can help founders better understand the motivations of investors and ensure that their pitches are aligned with everyone’s interests.

“The nature of venture capital is investing, but the business of venture capital is being a steward of capital that’s entrusted to us,” said Teo. “It is my job to pick the right startups, to generate exits, to create a rate of return that compensates investors [such as family offices and sovereign wealth funds] for this risk.”

Founders need to understand where a VC’s interests lie, what companies they invest in, and what role they can play in a startup’s fundraising journey as either a lead or follow-on investor.

Researching the VCs you want to approach is also critical to understanding where they are in their fund cycles and where you factor into that story. For example, if a firm has just raised a new fund, it’ll be looking for places to deploy its capital, which may be an opportunity for your startup. However, if it’s at the end of a fund’s life, the conversations are likely to be more forward-looking – for when the VC raises its next fund.

You also want to take a look at whether there are any potential conflicts of interest the other companies in their portfolios – such as investments in a competitor. Such conflicts are not necessarily a bad thing, but it’s something to consider as you begin reaching out to investors.

2. Tell the right story

When you’re pitching to investors, what you’re essentially doing is telling a story. You need to craft a compelling story around your problem, solution, and potential, so that investors are drawn in and able to understand what you’re doing.

“It’s about telling a story in the way that best helps investors understand the problem,” Teo said.

He shared the example of Rent The Runway, a US-based ecommerce platform for renting, subscribing to, or buying designer apparel and accessories. Its founders knew that typical male investors might not understand the problem they were trying to solve, and so they conducted pop-ups and used videos of customer reactions and testimonials in pitches to really sell their story. By doing so, the company convinced investors of its value proposition and raised funding.

While having a good story is not the be-all and end-all – traction is still crucial to proving that your business model actually works – the story serves as a multiplier.

While you can perhaps raise funds with a bad story and good traction, or even with poor traction and a good story, you need both in order to raise funds successfully at a high valuation.

3. Cut to the chase

When you’re building up your initial pitch deck, it may be tempting to put every little detail about your company into it. However, it’s crucial that you keep it simple and focus on what’s important.

“The key is not to walk an investor through a fully baked-out business plan in the first meeting, but to tell a very compelling story to get to the second meeting,” shared Teo,

As a founder, your first meeting with an investor may only be 45 minutes long – or less – which means you need to get the main points across as efficiently as possible. While the actual pitch decks vary from company to company and from stage to stage, Teo recommends that a deck should have at least these six core elements: problem, solution, business model, competition, founding team, and what you want to achieve from this raise.

It boils down to telling the most interesting story in the most efficient way possible, so that you can open up the door for more conversations down the line.

We’ve got your back

Fundraising is often an exhausting, tiring, and time-consuming affair, but it’s essential for a startup to supercharge its growth, giving it resources, credibility, and support to go to the next level.

It’s certainly not an easy journey. After all, pitching is just one part of the process – understanding valuations, term sheets, and finding the right investors to pitch to in the first place are an entirely different set of challenges altogether.

That’s where Tech in Asia School comes into the picture.

We’ve been covering the ins and outs of the Southeast Asian tech and startup ecosystem for over 10 years, and we’ve had the opportunity to hear from some of the region’s most successful tech leaders. As such, we’re bringing together all the resources we have to create content, community, and mentorship tailored to the most critical stages of the startup journey in order to help founders see success.

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