What New Founders Need to Know About Fundraising
Our Acuity Law start-up events can be a treasure trove of guidance drawn from lived experience – as well as a great opportunity to get to know other founders, investors and (of course!) our expert Acuity lawyers.
In summer 2024, start-up founders from incubator programmes run by UCL, King’s College London and Imperial, as well as accelerator programme Digital Health London, got together with some of our investor network to share knowledge and best practices.
Together, they came up with the following top tips for new founders.
- The first raise is the hardest
Having to prove yourself without revenue or traction can mean a small pool of potential investors – but have faith that the right investors are out there for you.
Top tip: Focus on finding people who believe in you as a founder.
Accelerators, family, friends, friends of friends, friends of friends of friends – you get it. Broadening your network will be key at this stage, and putting in the legwork now will give you the traction to attract more established investors at subsequent rounds.
In a slower market, investors are more cautious, targeting cash-savvy startups prioritising profits over revenues and demonstrating they can look after the bottom line and build even in a harsh economic environment. They might not be looking for profitability right now, but they will want to see profit before growth in today’s market.
- Always be fundraising
As a founder, you’re either in a fundraising process right now, or you’re thinking about what you need to achieve before the next fundraising process. If you have just closed a fundraising round, you may feel as though you have shelved that job for several months. But now is actually a great time to put the work into relationship building – building a rapport with recent investors and those investors that you recently spoke to, updating them on your progress and investing in your network.
Top tip: capitalise on all interest and expand your network.
If an investor is interested, ask them to connect you to others. Even if they are not the right fit for you, they might know someone who is – so be confident. Be bold and ask for access to their network. You can do the same with peers in your industry – for example asking approaching series B founders for introductions or even mentorship.
Top tip: Make sure you are EIS and SEIS assured to provide tax relief for investors as an additional incentive.
- Get your pitch right
If you are pitching cold to an investor, work to build rapport in the first instance. You could begin communications by asking for advice, hooking them in as early adopters/testers and soliciting feedback, then follow up with communications that build traction and a relationship, telling the story of your business. Follow up regularly with news, creating anticipation and keeping them in the loop.
Top tip: Don’t attach your entire pitch deck in the first cold email outreach.
Let your story unfold over time. Follow ups can be more important than the first pitch or conversation.
Top tip: Research VCs.
Know their profile, their portfolios and their roles. If you’re pitching to an analysts or an associate rather than a partner, do the grandparent test: if you pitched it to your grandparents, would they understand what you’re talking about? More junior analysts and associates may lack to confidence to clarify your pitch – but their report will influence partner decisions.
Top tip: Get a CRM that you enjoy using and suits your needs.
Top tip: Have your data room ready so you can respond instantly to any expressions of interest.
- If you ever get the opportunity to raise more than you need, give serious consideration to taking it.
You may worry about the dilution you might take by taking on extra funding but, generally speaking given the current fundraising environment, if there is money on the table, it’s always a good idea to seriously consider taking it. The extra time and resources it will buy you could increase your valuation at the subsequent funding round.
If you need additional advice on fundraising rounds, or your corporate governance, our specialist Acuity start-up lawyers are on hand for further advice.
