How and When to Win Investors
Many first-time entrepreneurs are unsure when and how to approach the topic of investment into their ideas and products. They recognize the need to financially support their journey, yet they lack guidance on the right things to consider.
To bust through this confusion and gain some trusted knowledge on the topic, it helps to try on the mindset of more experienced founders. This especially includes founders who have transitioned from first-timers to higher-up the hockey stick, as well as those who have leaped across the VC table, to now offer funding opportunities to new entrepreneurs.
With that in mind, I was delighted to check out a Factory Berlin Community event, a meeting of the Women’s Circle called How to Win Investors, which coincidentally included plenty of guys, plus two invitational speakers whom I admire: Farina Schurzfeld and Bryony Cooper.
I first heard about Farina and her company Selfapy back in 2017 when covering breakthrough startups during the Frontiers Health conference in Berlin. Farina is Chief Marketing Officer and co-Founder of Selfapy, with a proven track record in international startups and was awarded in the Forbes’ Top 30 under 30 category.
She and her team have worked hard and benefited from strategic relations in the digital health space, to bring about a ‘psychologically-guided online program to treat depression, burnout & anxiety.’ This is pertinent in today’s world where mental health issues are underreported yet ever more prevalent around the globe.
Farina delivered an earnest and honest dialogue to this gathering, offering some powerful tips on how to approach investors.
After Farina spoke, we heard a polished presentation from Bryony Cooper, Managing Partner at Arkley Brinc VC. Bryony is also a highly accomplished entrepreneur whom I had invited to present at an NBT event on solutions in agriculture and healthcare. I value her perspective, having progressed from a three-time founder herself to a founder-funder, and especially because she is quite focused on IoT. She gave many practical guidelines, which I only touch upon here.
Why Write This?
Although happy enough to simply soak up knowledge from these speakers, I then noticed in my Twitter feed a particularly keen interest in when entrepreneurs should bootstrap or seek VC funding:
This echoed topics I had just heard about. To close the knowledge gap here, I decided to transform the notes I jotted down into this Medium post, and offer a few thoughts of my own from working at Next Big Thing AG, a company builder in Berlin that mixes VC with co-founding new startups to sustainably solve real-world problems.
Hope it helps! Let’s get into the key takeways.
Investors Invest in Teams:
Do not forget this important fact. I only caught the last few minutes of Ekkehard Endruweit’s presentation prior to Farina’s, but he said that investors nearly always invest in teams. This concept was reiterated throughout the session by all of the speakers. Usually, a VC looking for the next unicorn will not invest in a solo-founder. Why? Because a team is simply stronger in accomplishing feats, and has a more varied skill set and can, as Farina says, “steer the ship if it gets off track.”
Teams should show complementary skill sets and demonstrate an existing and functional relationship across the co-founders. If you are missing a key team member, then mention what you plan to do about that in your business plan so you are not ignoring the fact. Some roles like CFO you won’t need until you are further advanced in your development. Bryony also says the team is the number one thing and should reflect one tech person and one business-minded person.
When in Berlin, I will personally add here to check out Looking for Female Co-founders. Or bring your early IoT or blockchain-inspired idea to NBT and they can also help you develop a great team. You can read more on that right here.
Deeply Consider External Funding:
One of the benefits of bootstrapping your startup is that you don’t have a new “boss” that you need to answer to. Yes, you are beholden to generous individuals or you have to dig deeper in your pockets but it’s different from the interactions with an investor, like monthly meetings and reports on progress, as well as formal legal interactions. (Yes, you will need a lawyer, so account for that too in your business plan.) Therefore, Farina strongly suggests that you ensure proper alignment before moving ahead with a VC. This means being clear on your own values and on the values of the potential VC. Listen to your gut. The more you get along, the better.
Only Take ‘Smart Money’:
Farina considers VC-startup initial interactions, such as an interview, as a 2-way street. As a startup, you are also evaluating the VC. Will you be compatible, and can they guide you? Will you have fun? Do you have shared values? You should ideally only take money from someone who brings you strategic value and can guide you on the difficult path of a founder, helping you build up the company. You don’t just want an investor who simply wants to get a multiple of x. An angel investor should be able to leverage you and your ideas or product, especially here in Berlin.
Be Prepared & Keep Learning:
You should only go to an angel investor when you have more than an idea in mind. Bryony offered a Fundraising Toolkit that includes a checklist: a killer 1-liner, one-pager, pitch deck, and 3-yr financial plan as well as a prototype. She says: be ambitious but don’t overpromise or delude investors.
Echoing what Farina had to say about market validation (see the de-risking section below,) Bryony focused on the importance of a high-quality pitch that includes awareness of your competitors and overall market landscape.
Bryony recommends some simple tricks for readiness, like recording your own voice to hone your pitching technique as well as advanced tips too, like making sure your IP belongs to the company and not the individual founders!
Farina recommends dedicating some time to building up your reputation. Self-branding will help your overall efforts. This can be done via marketing initiatives, partaking in competitions, and sharing a bit of your personality in what you do. One concrete thing she did was to keep a spreadsheet of potential investors and rank them by priority. Then, instead of going to her A-list first, where she knew she’d need to bring her A-game, she approached investors deeper down on the list, so she could resolve any open questions and refine her business plan, applying learnings to her later pitches.
Need more tips? Check out NBT’s Guide to Pitching.
De-risk an Investor’s Decision:
Farina gave this example: if you quit your day-job that’s an extremely strong signal that you are fully committed to your idea. Along with that spirit, prepare your documents and only approach an investor with proof of credibility. This proof can be in the form of a landing page that already shows traffic, or that you’ve dropped 500 Euros on ads.
Consider what it would take to de-risk the decision for the investor. She also suggests setting proper expectations, like you want to be able to sit at the table with the investor confidently. Use your body language to convey your “optimistic realism.” She notes that women would do well to focus ever more on optimism as in her experience, they are wired to focus more on realism.
She reminded the group that you want to be building something that is sustainable and not purely for the interest of an investor. In other words, look beyond the Gründerszene funding announcement, and rather plan to make your mark with a product that affects the world in an impactful way.
Bryony suggests you do your homework of having read the VC’s website to know what areas they focus on and brush up on financial jargon so you can partake in meaningful numbers conversations.
Be a Model Founder (and maybe a Role Model):
Curious what the ideal characteristics of a founder are? Bryony has that covered. Her list includes these attributes: Adaptable, Honest, Transparent, Resilient, and Tenacious. As you move along your entrepreneurial path and seek to avoid burnout, she suggests that you strive to be organized, have patience, do your research, and remain authentic.
Seeing female founders who have progressed successfully through the stages of startup development into positions where they are able to give back and advise other entrepreneurs gives me much hope for the future!
Save the Date: The next Factory Women’s Brunch will be on September 26th 10 a.m. at Factory Görlitzer Park. The topic will be “Reprogramming the Subconscious mind: Sales and Pitching Blockages”.
Do these insights help on your path? Feel free to clap or let me know in the comments. Thanks for reading. You can follow me, Elisheva Marcus, for first-hand takes on Berlin’s entrepreneurial scene, women in tech, and digital health trends.