Fundraising 101 – Timing & Relationships
How & why you need to Nurture Relationships with Potential Investors
The capital-raising process typically takes much longer than anticipated, so entrepreneurs need to plan for this. Investors want to see dedication and probability of success. Forming relationships with potential investors and players in the industry is key before you start any fundraising attempts. This allows you to build up positive associations and a demonstrated track record over time.
When to start fundraising & why timing is so important
Timing is essential. Ideally, you should begin to develop funding relationships when you start developing your business idea so that they can grow together. Based on your company stage you might have a good sense of what kind of investment to seek but finding potential investors might still seem impossible. By adopting the strategy of building relationships with investors before you start preparing for a fundraising round, you can consciously create connections from the early stages of your startup growth. You will have to create a list of possible relevant investors, figure out how to get their attention, and then learn how to nurture these connections over time.
Importance of building funding relationships
Ultimately, it all comes down to networking. If you are starting to strategise on how to acquire investors, make sure that you know your industry. When you meet the right people, you open doors to funding possibilities. Network with people in your industry even if you think you are underqualified. You may or may not find investors in this way, but you will certainly gain knowledge from fellow startups or business veterans. Attending startup up events within your community or sector is crucial. There are many VC/startup events that happen around the world, such as FinTech week in London and WebSummit in Lisbon. Try to create relationships that may benefit you in the future – you never know when or where you might find investors. As a member of the Floww family, you will have access to over 2,000 possible funding partners.
Building an investor database
By doing research on previous fundraising rounds for similar startups, you can source a potential investor database of 50-100 relevant prospects. The Floww platform has been designed to simplify the process of keeping your investor database informed. Once you have a profile on Floww, you can issue potential investors with unique login details. This allows them to view your company profile via a live link whenever they want to, making the process of building and maintaining relationships effortless.
The Floww platform is the perfect way to keep potential investors in the loop. Instead of bombarding them with unnecessary emails, they can view your live profile at any time and find all the information they might be interested in, including recent funding information, financial projections, and your pitch deck. Remember – only you have permission to share your information with the investors and all sharing permissions are under your full control.
It is important to understand that you should first look for perspective, constructive criticism and advice from potential investors before you look to pitch to them. You will be more likely to get funding down the line if you have an existing relationship with the investor. Understanding and anticipating investor concerns is a great way to mitigate the risk of issues arising during the raise which can prolong it unnecessarily.
The importance of signalling – keeping potential investors engaged
The onus of relationship development falls on the shoulders of the founder. You should not expect investors to follow up with you. However, this may change once you announce the closing of your seed funding rounds. Typically, later-stage VCs will make contact at this point so this is a great way to organically build relationships for later growth rounds. It is important to manage the media & marketing around your funding round closes as the more media time you can garner, the more VCs will notice you.
The investor/founder relationship
Once you have outlined the profile of your target investor, you can dive into how to build and nurture those relationships from afar. Simply put, the role of an investor is to find great deals that earn a return. Their role is to meet interesting founders, attend relevant industry events and learn about emerging technology. By normalising their behaviour you can begin to create a strategy to maintain relationships with them. Are you popping up on their social media? Are you attending the events they are? Don’t forget that once you have joined the Floww platform, you can easily keep all potential investors updated on the latest developments of your company by sending them a live link to your profile.
By committing to future fundraising efforts now, you will save countless hours when you are ready down the road. Forming long-term relationships with investors is a critical responsibility of startup founders. These relationships are often built on advice and mentorship, rather than the traditional transactional investor/founder relationship.