Writing in leading Norwegian financial daily Dagens Næringsliv, Tapad founder Are Traasdahl shares his 10 best tips for how to secure funding for your startup idea:
#1 Prep like you’ve never prepped before
You need to know more about your startup and your idea than anybody else. No one should be able to pin you down. Obtain as much information about the investor you are about to meet as you possibly can. Read interviews and try to find out what triggers their investment interest and what companies they have invested in. Be truthful and build trust.
#2 Follow up after the meeting
In Tapad, we followed a simple principle: We did not hire anybody who didn’t send a follow-up mail within 24 hours after being interviewed. The same rule goes for meetings with investors. You need to find a way to continue following up in a way that adds value for the recipient. It’s key to establish trust with the investor and that is earned over time.
#3 Don’t ask for money
When meeting investors, the best way to distinguish yourself from 90% of the other entrepreneurs is not to ask for money. Rather, see it as an opportunity to build a relationship with the investor over time. Build more trust by outlining the three most important milestones for your company in the next six months (in terms of team, customers, technology and so on) and ensure you provide updates when you reach these targets. Of course this requires planning so you don’t need to seek funding at the point you’re starting to run out. When you need funding, make contact with the top five that have helped you the most and followed you over time.
#4 Invite your investor to help
The best investor meetings are the ones where you spend 15-20 minutes presenting your startup and then work with your investor to find out how you can build a fantastic company together. Investors want to contribute. They want to share their experience. Be sure to make good use of this. Investors want to contribute with their own experiences. Be sure to make good use of this.
For example, present the biggest challenges facing your startup and ask “how would you solve this?” I did this with David Rosenblatt. He is a legend in my former industry (sold Doubleclick to Google for over USD 3 bln). I always came to him with a question and two alternative answers, and asked him which he would have chosen. It created a completely different dynamic. It led to an investment from him and in return I got one of the top minds in the world to help me with a strategic choice, for free.
#5 Show that you’re data-driven
A company that has and uses tools to analyse their own business is likely to make decisions based on data, even if these go against the original hypotheses. Show your investor that your team makes decisions based on data, and give an account of the hypotheses you have rejected and what kind of evaluations you have made. This builds trust and shows that you will be able to handle challenges in the future and that you are open to pivoting with regards to product and business model if necessary.
#6 Your personal story
This one is a bit difficult. What is it that drives you? What kinds of experiences have shaped you? Don’t be afraid of becoming a bit personal. A few years back, I invested in a company in New York called Mparticle. The entrepreneur had already sold a company to Yahoo for a lot of money and could easily retire. The only question I asked him was why he wanted to start a new company. He said he felt Yahoo had treated him badly after the deal was closed and now he wanted to “show them” what they were missing out on. His company has now become number one in its market. Yahoo has not.
#7 Visualise your product
Investors are assessing a vast number of ideas each year. Despite their high analytical capacity, there is no way that they can understand all industries and technologies. I strongly recommend demonstrating and visualising the technology with a prototype. Don’t be afraid of simplifying something that is complex and show it in an easy way.
#8 Customer success = your success
Not even the smartest investors can argue against great customer feedback. One tip is to build a simple feedback form where your customers rank your product from one to five stars after each session. Do not scale the company until you have a rating of 4.7.
Take the scores back to your team and to your potential investor. I would much rather have ten customers who are true fans and who love the product, than thousands of customers who are so so about it.
#9 Scalable, protectable and profitable
Biggest in a new, small market – or small in a large, established market? I prefer the first. Show that you have 80 per cent market share in a disruptive small market with lots of potential (think Microsoft with a dominating market share in operating systems in 1978 when only a few computers were sold). Show also that the technology development means that your market becomes large and that you are “pulling up the ladder behind you” to maintain your share when the market explodes.
Everyone says they have a good team so show it by letting your team present to the investors. There are plenty of egocentric entrepreneurs who fail to build a good team. Push the other team members forward. Let them run presentations so the investor realises that you’re a leader and not a solo player who enjoy the sound of your own voice.
This op-ed was written by Are Traasdahl in DN 11.01.2018 and is published here with his permission.