One of the greatest challenges of entrepreneurship is raising money for your startup, especially if you don’t have an established network of venture capitalists (VCs) to rely on. However, with the right strategies and approach, it’s possible to secure the funding you need even without prior connections.
My DTC cat company, tuft + paw, is living proof of this concept. In 2022, the company faced a critical situation: We urgently needed funds to address supply chain and inventory requirements. I hadn’t built a network of VCs at that point, but I was determined to secure the capital we needed to keep the business running smoothly. In the end, I successfully raised $2 million in six months by using the strategies I outline here.
I understand the challenges that come with raising funds without an established network, so I hope my story and advice can help you navigate the fundraising landscape more effectively. But before you get started, set realistic expectations — this is gonna take plenty of time and effort…
Related: How to Raise VC Funding When the Odds Are Against You
1. Fundraising takes time and patience
Raising funds always takes longer than you anticipate. Even if you already know investors, it’s wise to allow a minimum of three months for the process. For those starting from scratch like I did, be prepared for it to take around six months. Patience and persistence are key virtues during this journey. Embrace the process and give it the time it deserves.
Dedication and follow-ups:
Raising funds requires significant effort and labor. In my case, nearly 50% of my time was spent in meetings and following up with potential investors. Remember, this is not a one-and-done process. You have to be dedicated, attend multiple meetings and provide timely updates to build trust and keep investors engaged.
Give yourself some runway:
Ideally, raise funds for a runway of at least 18 months. This ensures you have a comfortable buffer and don’t find yourself constantly chasing funding every six months. Raising capital is a demanding process, and having an extended financial runway allows you to focus on growing your business without constant financial stress.
2. Craft a compelling pitch deck
Your pitch deck is a critical tool for capturing investors’ attention. Keep it simple, direct and transparent. Fancy visuals won’t fool investors; they can see through any BS. Focus on showcasing your traction and growth, as well as your unique value proposition. Check out tuft + paw’s online example for inspiration on how to create an effective pitch deck.
3. Leverage your founder network
Founders are often the best way to connect with VCs. Reach out to your founder friends and ask for warm introductions to any VCs they may know. Personal referrals hold significant weight in the startup ecosystem and can help establish initial trust and credibility.
4. Build a VC database and connections
Create a Google Sheet, and list as many VCs in your industry or category as possible. Our focus was on direct-to-consumer brands, but tailor it to your specific niche. Use LinkedIn to connect with these VCs. Try to secure warm introductions through mutual contacts. If you don’t have any shared connections, don’t worry. You can reach out to them directly using tools like Rocket Reach to find their email addresses. Craft personalized and compelling messages that demonstrate your knowledge of their investment focus, and express genuine interest in their expertise.
The importance of building relationships:
Remember, building relationships with VCs takes time. Don’t expect immediate results after just one meeting. In my experience, it typically takes at least five meetings with a particular VC before they make an investment decision. So, be patient, and nurture these relationships. Address their concerns, answer their questions, and demonstrate your industry knowledge and growth strategy. Show them why your business stands out and how it aligns with their investment thesis.
Related: 5 Unconventional Ways to Attract VCs
5. Effective outreach strategies
When reaching out to VCs directly, a concise email is the medium of choice. Craft a brief message that highlights your traction and includes a specific ask. This approach cuts to the chase and increases the chances of getting a response. For example:
Hi Dave — we’re a direct-to-consumer cat brand that achieved 100% year-over-year growth, with our most recent month generating $1 million in revenue. We’re finalizing a $1 million raise, any interest? Deck attached.
6. The power of S.A.F.E.
When it comes to paperwork and legal fees, a Simple Agreement for Future Equity (SAFE) is the preferred format. It simplifies the process, reduces legal costs and allows you to concentrate on your business rather than getting tangled in complex legal negotiations. I definitely recommend using S.A.F.E. to streamline your fundraising journey.
7. Explore alternative funding sources
While VCs are often the go-to for startup funding, don’t overlook alternative sources such as angel investors, crowdfunding platforms or small business grants. These avenues can provide access to capital and additional support for your business.
Related: 3 Alternatives to Venture Capital Funding for Startups
I’ve said it once already, and I’ll say it again: Raising funds will almost always take more time and labor than you expect. I was able to secure funding for my company because I was persistent, patient and proactive, even when things got held up or I was feeling frustrated. Allow ample time for the fundraising process, leverage your founder network, create a compelling pitch deck, and craft personalized outreach messages. Be prepared for multiple meetings, and invest in building relationships with potential investors. Remember, fundraising is a journey, and by following these strategies, you can increase your chances of securing the funding you need to propel your business forward. Best of luck on your fundraising endeavors!
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