This is an amended version of our post from 2018, updated in July 2020. Author: Nelli Orlova, CEO @ InnMind
Do you think you’re prepared for a fundraising?
While you’re thinking about the answer let me ask you just few more questions:
✔️ do you have a business plan with well defined business model?
✔️ did you make customer development?
✔️ did you make market research and designed your marketing strategy?
If all the answers are "yes" - well, congrats, you seem to be really well prepared for negotiations with investor. You don’t need to continue reading this post then, go and focus on your fundraising instead. But if one or even more answers are No - I have to say that you’re not prepared for fundraising yet.
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What do investors think?
Yeah, I do realise that my professional opinion may be not so convincing for you, even given over 10 years of experience in this field. But I hope that the investor’s feedback will be enough persuasive and relevant. So let’s see what do they think.
In 2018-2019 InnMind, the #1 platform for startups and investors in Europe, was doing an extensive research on investors behaviour and decision-making process. And since the beginning of 2020 we continued this research in the framework of the VC market forecast 2020. We organised hundreds of interviews with the top VCs and business angels from Europe, Silicon Valley, Israel, and Asia. During these interviews investors were asked about most important criteria of the startups' evaluation, critical information they require on different stages and other elements that finally bring them to the decision to invest in a startup or not.
✔️ Over 85% of investors consider market data to be essentially important for making investment decision
✔️ Every 2 of 3 investors don’t even consider startup requests without a business plan or business model (at least the short version, clearly describing how your business model works)
✔️ Every second investor would avoid financing a startup without a marketing strategy
✔️ Over 90% of investors mentioned among the TOP startup mistakes the lack of clear and detailed business model
Do you realise now the importance of having done your homework and get well prepared before you start pitching to investors? If you do, half of the work is done! And now you probably want to know HOW to do it.
If we try to write a comprehensive guide on all the necessary steps to prepare for investments - this longread will last for many pages (By the way, leave in comments if you want us to write it and if we see the demand - we'll do it, prommise!). Instead of this let me briefly give you some useful links and outcomes below.
Startup business plan
If you seriously think that a modern, innovative, lean startup doesn't need a business plan at all, read what a well-known entrepreneur and angel investor Tim Berry has said:
I'm pretty sure that, if asked, both Ries and Blank would agree that even with a lean startup, you constantly need to think through the goals, steps, metrics, tasks and basic numbers. Just as the business is constantly subjected to measurement and learning, the plan is subjected to frequent review and revision, which brings us back to fundamental planning.
And that's true, without a detailed execution plan (which is a major part of a good business plan) you increase your chances to fail increasingly. That is why irrespectively of new trendy ideas and tools which may partly substitute business plan, the vast majority of investors still want to see a detailed business plan when they consider a startup for investments. And if you don't have one - it will mean huge risks and concerns in investor's eyes.
But writing a business plan can be a challenge. To help you in this hard task here is a Definitive guide on How to Write a Business Plan for an early stage startup with a set of advice and useful resources which was created to help startup founders to write a great business plan without too much headache.
If you've read this guide and explored many other useful info, but still deal with the headache on how to write a good business plan yourself - you may ask professional support in business plan writing from experts and service providers on InnMind platform. If you hesitate contacting them yourself, just write us in the support chat below and we will help. It will save your time and lot's of nerve cells and as a result: experienced specialists will guide you through all the steps, help you to make the research and put your data in a right direction, review your business plan and give a handful advice.
Someone has said:
"If you don't have enough skills and time - spend money to buy the skills and time of others. But if you have now money - spend your own time and skills for this task".
So it's up to you to decide ;)
Startup marketing strategy and plan
Tons of useful information about how to design a marketing strategy and write a marketing plan for startup is available in nowadays. But we still meet too many myths in startup founders' minds.
3 Typical Myths about Startup Marketing
Myth #1: if you have a good idea and potential market demand, after a product launch clients will knock your door and purchase a product without additional efforts.
Myth #2: marketing depends on money. Once you have a sufficient marketing budget, you'll be able to get a huge flow of traffic and leads trough paid advertisement. Therefore, all you need is to ensure investors to provide you with necessary funds.
Myth #3: long-term marketing strategy and planning is an old-schoolish, overdated approach. Instead of this, modern startups should seek for so-called "growth hacking" methods, formulas and lifehacks which may bring you to success after a few magic manipulations.
Don't be naive, it will never work like this! Do you know that the most effective well-known and successful growth hacking strategies were found after many months or even years of consistent marketing efforts and continuous experiments?
Marketing is a marathon, not a sprint. And to win this marathon you need to have a well-designed marketing strategy and marketing plan, which won't let you forget the priorities and will help you to reach your audience and your goals.
💡 Here you can find a free to use template of a comprehnsive marketing plan for startups with explanations, tips and advices for every chapter. With this template it would be easier for you to understand what to do and what should be included into marketing plan.
💡 It will also be very useful to watch this video of the special webinar about startup marketing: "Marketing in Startups - step by step guide" by ex-chief marketing officer InnMind Ekaterina Voronova, who explained in details all the milestones, todos and must-haves in a startup marketing strategy.
💡 And to get the expert's opinion, we recommend you to watch a recent interview with a well-known strategic marketing expert Zineb Layachi, who shared her thoughts and experience in growth hacking and revenue marketing techniques for startups:
And your 🎁 BONUS:
Hope this article helped you to understand better why and what should be prepared for your communication with potential investors. But if you still have any questions or need support, feel free to apply for a free consultation with InnMind experts on how to get prepared for your startup fundraising.
Knowing more about our users, we learn what else we can do to deliver maximum value and support startups in the most effective way.
As you can see, it is lot's of work to be done. But the good think that when once you did it - you will have a very strong positions and high chances both to succeed in fundraising and in business development. So finally it worth it, be sure!
If you want to learn more about VC investors' decision-making and startup assessment process, you can find plenty of useful videos and interviews with active venture capitalists in the following playlists:
📺 Venture Capital 2020 (Interviews with venture capitalists about investment strategy, startup valuation and investment decision-making)
📺 InnMind VC Shark-Tanks (Online pitching sessions with VC investors, where entrepreneurs present their startups to investors directly, get immediate feedback and opportunity to negotiate for future funding round). By the way, you may apply to participate here.
📺 How venture investors look at ongoing covid19 crisis? (Exclusive interviews with venture investors and business angels from Silicon Valley and Europe about the 2020 pandemic and financial crisis and how it will affect venture capital and startup industry).
In the playlists you will find answers to questions:
- How to make an attractive investment pitch;
- How to answer tough questions by investors;
- What criteria are the most important for venture investors in startup valuation process;
- How to demonstrate professional approach and commitment to success;
- How to make investor believe in your project & idea.