Daniel Stack is Head of Engagement and Investment Programme at Innovate Finance, the industry body representing the UK FinTech sector. He is responsible for driving strategic engagement initiatives and programmes for Innovate Finance’s 250 member companies. Daniel offers five suggestions for founders to keep in mind when preparing to pitch to investors.
Understand your audience
Before you approach an experienced investor for money, do your research and find out what type of company they like to invest in. Is it early or late? Is there a geographic preference to where they're investing? If they’re based in London, are they only doing London deals? Sector is another factor - is FinTech an area of focus for them? How much money is in their fund? If they have just closed a fund recently, that will likely be indicative of how many opportunities they're actively considering. Find the right people to ask for money so it’s not a waste of your time.
Once you're in discussions, really try to understand their decision-making process. With institutional funds, find out who has the ability to invest and lead a deal. This will inform your messaging and communication. Sometimes you can speak with someone more junior who can drive a decision up to an investment committee. In most cases, you will need to engage with a partner at an institutional fund.
Time it well
Understand when in the process you need to raise from a cash flow point of view. You also have to be aware of the wider economic environment, which will affect your timing. Consider whether you have a positive, compelling reason to raise and be able to communicate this reason clearly.
Why are you raising at this particular time? Are you just getting started? Do you need a longer runway due to an uncertain environment? Is it because you want to scale a certain product? Is it a plan to grow? Or is it because you're running out of money?
That's likely not the ideal selling story to tell. It’s often useful to share the reason behind why you’re planning to raise now and the opportunity for an investor to partner with you at this point in time.
It’s very hard to backtrack once you take someone's money. So make sure you think long-term about the value that this investor will bring and what the expectation alignment is. Understand elements like if they will want to be either very or not at all involved in operational decisions? Does the investor offer support beyond the investment (recruitment, customer network, advisors)?
If you’re taking institutional money, they're investing money in your company on behalf of other people, and will expect a certain outcome. Make sure you’re in alignment because you're in it for the long run.
These are very important relationships so do reference checking and due diligence on your potential investors. Speak with other founders who have partnered with them before. Ask them what their expectations of growth, operational support, and other elements are and what they look for in companies.
Have a clear vision and articulate it
This is the storytelling element of your communications and is an essential part of fundraising. Can you articulate a very clear and compelling vision? Show your investors what the market opportunity is and how you will grasp it.
Explain the problem you are solving and how you have succeeded to date.
Be clear that this is an opportunity for the investors. Don’t be afraid to have a big bold vision, but the key is being able to explain how you will achieve it, with their help.
Demonstrate that you are the person to do this and that you have a great team behind you. Try to impress on the investors that by not investing in you they are missing out.
Understand the process
Being properly prepared for a successful fundraise takes time. You need to commit the resource and stick with it. It's not going to be easy, so ready yourself for that. Understand that the process involves a great pitch deck and story, but that only gets you in the door.
You still have to communicate well, answer tough questions and present a great financial plan. Be resilient and don't give up at the first difficult conversation.
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