Feeling: Thankful for the journey, excited for the future.
So it has been just slightly over a year since we raised our first $500,000 in our seed round. What a crazy 2.5 years it has been since its founding back in 2018!
But I won’t get into the details about our journey and how we began. My co-founder Jiong Han had already talked about it.
Instead, I’d like to take this opportunity to answer a question that I’ve been asked most often as a co-founder. And that is “how did you find your investors?” Let’s delve right in, shall we?
So let’s start from the basics
For any company to achieve profitability, it needs money. This money is used to support the company’s wide variety of business activities. These range from costs like software subscription and salary.
And for an early-stage company that hasn’t secured a good number of customers yet, it is quite common for its cost to exceed its revenue. There’re definitely several startups with successful bootstrapping stories, but those are usually rare.
So from the very beginning, we told ourselves that we needed to secure funds if we were to grow the company fast.
We had the product but needed an initial pool of customers to validate it. But in order to bring in that pool of customers, we needed capital to bring in talents to refine our product and grow our customer base.
P.S. The whole bootstrapping vs investment-backed method to start a company is a whole other discussion. But this twitter thread best illustrates it:
This is a story about how I lost $10,000,000 by doing something stupid.— Andrew Wilkinson (@awilkinson) March 30, 2021
Ten. Million. Dollars.
Literally up in smoke. Money bonfire.
That’s enough to retire with $250,000+ in annual income.
Here’s what happened…
A venture capital, or VC for short, is basically an entity that provides funds to startups which they think has long-term growth potential.
The funds they use to invest in startups come from other investors and financial institutions.
A startup accelerator provides companies with a guided short-term growth program that aims to help them grow at, you guessed it, an accelerated rate.
These programs are structured and come with clear mentorship and clear learning objectives. Meanwhile, accelerators also provide seed funding (but some of the funds tend to get deducted or discounted to pay for the accelerator’s program fees).
These are people, typically wealthy entrepreneurs, who provide capital to companies, in exchange for ownership in the company in the form of preferred stock.
The investor is also able to provide guidance to the team, especially if the startup is in the same niche as the investor.
Because these investors have a vested interest in the company’s growth, they may too closely monitor how the company is performing.
Sometimes the answer is right before our very eyes 👀
Don’t be afraid to reach out to your loved ones for help. Too often, I hear people say that they are shy or that they are afraid that it will leave a dent in their relationships.
In reality, they may even turn out to be super supportive.
If you still do not want to reach out to loved ones, consider creating accounts on crowdfunding platforms like Kickstarter or Gofundme. Many successful businesses have been crowdfunded using these platforms.
What makes a good business idea is completely subjective. So I won’t touch too much on what I define as a good idea. But generally speaking, investors look out for two things in a business idea:
Let’s use Novocall as an example. The business problem we are trying to solve is lengthy lead journeys.
We also recognized that not every business uses calls. However, businesses selling high-value products do. These include businesses in the finance, insurance, and automotive industries. This not only meant that we had a differentiating factor, there was definitely a specific market for our solution.
Investors are very keen on your company’s growth. After all, if you are not showing results, why should they continue to invest in you?
But to properly track your growth, you need to determine which metrics to measure. And the metrics each business uses to track their growth really depends on your type of business.
For SaaS companies like Novocall, the key traction metrics are MRR (monthly recurring revenue), CAC (cost per acquisition), LTV (lifetime value), ARPU (average revenue per user), ACV (average contract value).
Apart from these, they also want to know your growth rate. This basically means how fast your company is growing month on month.
However, if you are a different type of business such as a marketplace or an AI startup, then the metrics used to measure success are totally different.
For businesses running a marketplace, perhaps it could be the number of users (both the demand and supply side), perhaps it could be gross merchandise volume (GMV).
No matter what your metric, the most important is the growth rate – investors love this 😍 They want proof that you got the potential to grow fast after they put money in you.
Now that i know what type of investors i wanted, it’s hunting time 🎯
In an ideal world, you can easily obtain a list of potential investors, along with information such as their website, email address, deal size, etc.
But in case you haven’t noticed, the world isn’t that nice 😢
Investors are everywhere. Technically. There are the more famous and public ones, and there are also the low profile ones. You need to invest the time and effort to find the right investor.
But before you get started, we need to know what type of investor you want onboard. Ask yourselves some of these questions:
For us, we wanted an investor that will be able to provide us with guidance and feedback, but not dictate how we do things. That, to me, is a boss, not an investor. We are also not industry-specific, so we look for investors who are more open in terms of the variety of industries they invested in as well.
Next, look to your professional network to see if you are connected with some people who could potentially be your investors. Find a warm connection.
For investors I am connected to, I just reached out.
For me, Novocall was lucky enough to be incubated at the Singapore Management University’s (SMU) startup incubator where its Director, Hau Koh Foo, is connected to many people. I simply reached out with a list of people I want to be connected with.
For those of you who may not be in the close proximity of well-connected individuals, treat your search for investors like a cold outreach. I did this for investors I was not connected with.
I compiled a list of investors manually by searching on LinkedIn, Google, Tech in Asia, and other sources. In this case, think of your potential investors as your prospects. Then organize your ‘prospects’ based on their company by deal size, area focus, and other attributes.
I then determined the stakeholder I needed to talk to. Typically, you speak to an investment analyst, but speaking out to an investment partner is much better.
Also, there is a difference between meeting an analyst or a partner. A partner is a decision-maker. So convincing them first is better than meeting & convincing the analyst first.
Once you’ve decided the stakeholder you want to reach out to, go onto LinkedIn and reach out to them.
Quick tip. Check if you and your identified stakeholders have any mutual connections on LinkedIn. If you do, great!
Reach out to the mutual connections that are sufficiently close to you, and reach out to them to connect you and your stakeholders.
If not, going about the good’ol cold outreach method is fine too 😊
So investor meetings can vary in group size. Sometimes, you just meet one person. Others, you’ll find yourself speaking to a few investors at the same time. I’ve had experience with both, but generally prefer 1-1 as can establish a stronger rapport first 💪💪💪
Anyways, when it comes to pitching, the key thing is to be prepared. Don’t just be prepared in terms of logistics (e.g. your deck or pitch script). You also really need to know your business inside out. This is because investors are often experienced in these types of investor pitches. They have seen so many decks and start-ups and know how to identify startups worthy of their investments.
So aside from sharing your vision & idea, you need to know:
Every founder has a different style of pitching, so I can’t offer good advice on how to deliver your pitch. But the key takeaway here is to be prepared.
The worst thing to do is to go to a meeting unprepared and not be able to answer investor questions. It shows that you’re not understanding your business or market well enough – that’s usually a huge red flag to them 🚩
For the pitch deck, I see many founders like to squeeze as much detail into each slide as possible. Don’t, just don’t. Conventional wisdom would have you believe that one PowerPoint presentation should have 10-13 slides.
I don’t do that 😎
Instead, I ensure that I only include one point per slide. This makes it palatable and easy to follow. So my slides can go up to 30-50 pages, but each slide is super short.
Slides should also have something like a viewer’s journey. You don’t want to jump from a section on product features to a section on FAQs. It’ll be super confusing.
Instead, you want to arrange your slides based on what an investor thinks, try this format:
What’s the business problem you are trying to solve?
Well, that’s it! I hope you’ve found my tips helpful 😃
At the end of the day, there is no one-size-fits-all method and you gotta tailor your approach to your specific pitch.
But one thing is certain. You must come prepared. Know your business idea and market better than anyone else and you may just see that funding you need.
I can’t believe that it has been so long since Novocall was founded. Over the years, we’ve changed so much. From branding to sales and product strategies, we pivoted so much.
We still have a long way to go and I can’t wait for you to grow along with us. 😊
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