2020 was undoubtedly a bad time for the economy. But, for some companies, it was as good as it gets. Sold for $104 billion cumulatively, 41 funded companies were bought for more than $1 billion. It was the highest number and amount of exits in the last decade.
However, these big breaks have humble beginnings. They start as ideas, which are then usually presented to venture capitalists or angel investors. The company’s success, to a large extent, depends on the funding they get from these. Of course, these companies can be bootstrapped too, but it’s challenging to become a market leader with high growth when one’s resources are limited.
But, what’s the first step of these exits? The fundraiser. Only when one has successfully pitched one’s company to the investors who will invest in it can it finally run it the way one wishes to. However, there are specific attributes of a fundraiser that make it successful. Some of them are industry climate, fund cycle, check size, and soft skills.
Attributes of a Fundraiser
The industry climate refers to the type of industry that the founders wish to found their company in. For instance, the founders can have a great idea to build their startup around a restaurant. However, this is not feasible for the investors as they will not get an excellent return on a single branch of a restaurant. Instead, they look at rapidly growing industries and have multiple times of returns on their investment. It is only when the market size is large enough that they can expect customers to spend their money, and thus, the investors will also invest accordingly. The Size of the market is an essential variable while looking for successful fundraising.
There are usually different rounds of funding- Pre-seed, Seed, Series A, Series B, Series C, etc. The fund cycle refers to the period in which investors are investing their money. Sometimes, it so happens that the money which is invested is entirely spent without any backup. Founders then may wish to raise more capital, but it becomes difficult to raise funds within that same series. Moreover, venture capital has limited means to give to the various companies that it manages. If it has already done a certain number of seed rounds, it may not provide other companies capital, although they may actively take meetings.
Check Size refers to the Size and the amount of money the venture capital has. A micro VC may be a better fit for one’s company if one wants to raise a comparatively less amount of money. From 2018 to 2020, micro VCs invested $341 Million in Indian Startups, according to a co-authored report by Amazon Web Services and the Indian Private Equity and Venture Capital Association (IVCA) with business analytics and research firm Praxis Global Alliance.
However, if one is looking to raise more money, they might want to consider pitching to a VC with that kind of backing. If one is looking for $10 Million, it is more likely that one will get it in one shot from a more prominent VC than from a micro one, which may only have $20 Million in its corpus portfolio.
Lastly, soft skills may be underrated but are one of the most critical parts of the fundraiser. It is communication that leads to good networking and a great pitch deck. One can have the best idea for a startup and still not get any funding just because they could not present it efficiently. Therefore, it is suggested to practise pitching your vision as well as working on communication skills. A successful fundraiser exists due to its founders and their dedication. Besides these, there may be factors that affect it, but fundraising can be successfully achieved with good practice. It is also recommended to focus on the soft skills as much as the technical ones.