Tip 1 Tell a compelling and complete story
Many entrepreneurs begin their pitch with the technical specifications of their product. This is understandable, especially if you're working on a complex innovation. However, investors first look at a different question: what problem are you solving, and for whom?
A convincing pitch therefore shows:
• what challenge your client is experiencing;
• how big and urgent that problem is;
• why your solution makes the difference here;
• how big the market is;
• where the growth opportunities lie.
The more concretely you substantiate this, the stronger your story becomes. The following components also play an important role in this:
• your revenue model;
customer validation;
go-to-market strategy.
A good story gives investors confidence that your startup is not only innovative but also scalable. This creates a realistic and attractive growth path for investors.
Tip 2 Know how much funding you need
If your growth path is clear, this leads to a clear funding requirement. How much funding you need and which milestones you want to achieve with the funding are closely related to:
• the nature of your product;
• my strategies;
• the business model;
• the speed at which your business can grow.
The stage your business is in dictates a lot. Consider the following:
• your product's development costs;
The speed at which you want to scale up;
• the moment you are going to hire staff.
Think carefully about this beforehand. This will enable you to have a more focused discussion with investors and make a more professional impression.
Tip 3: Choose investors that are a good fit for your startup
It might sound strange, but not every investor is the right fit for every startup. Of course, capital is important, but the right investor often brings more, such as sector knowledge, expertise, and a network. And that can give your business an enormous boost!
This can make all the difference, especially for innovative startups. An investor with experience in your sector understands your playing field better and can therefore actively contribute ideas and open doors for you. Also consider the mix of investors. Ideally, you'd have a group of investors who complement each other and can help you in different areas. One investor might be more financially oriented, while another can help in a specific sector, and a third might bring a particular network.
Therefore, don't just look at the money, but also at:
• an investor's sector experience;
• the investment horizon;
• the level of engagement;
• the expectations surrounding the increase in value;
• hoe investeerders omgaan met tegenslagen.
Remember that you are often connected for years. It is then important to have a shared vision and to know well what kind of party you are dealing with.
Tip 4 Choose financing that suits your business stage
The funding method that is suitable for your startup changes with the stage you are in:
• In an early stage, you can consider equity, friends and family, subsidies for innovative startups (such as the MIT Feasibility Project Grant or MIT R&D Call), early-stage funds and crowdfunding. You can also raise some of the funding through donations or by pre-selling products, which allows customers to co-fund the development of your product in advance.
• As soon as you demonstrate more traction, other financiers will come into play, such as business angels, regional development companies (like ROM InWest) or venture capital firms. RVO Innovation Credit can also offer a solution at this stage.
• If your business is of sufficient size, bank financing may become possible or Private Equity investors can get involved.
It's important to realise that every financier expects a certain return. A bank wants interest and repayment. Venture capital investors take on more risk and therefore often expect a higher return. This return is ‘cashed in’ at the time of an ‘exit’, which venture capital investors generally want to see realised within five to ten years.
External financing places extra pressure on your business to perform. If objectives are not met, this can lead to difficult situations. Therefore, it's important to carefully consider which type of financing suits your ambitions and entrepreneurial spirit.
Tip 5 Begin op tijd
The process of raising capital takes time, often more time than entrepreneurs initially expect. Bear in mind that a funding round typically takes between six and nine months. Therefore, it’s wise to start early.
This process requires a lot of attention and energy alongside your daily duties. If you start in good time, you will create more calm and space to make good choices. So, don't wait until you're in financial distress, because then raising funds often becomes more difficult and creates unnecessary pressure. By planning ahead, you maintain control over the growth of your company.
Furthermore, investor conversations often provide valuable insights, even if they don't directly lead to an investment. Investor feedback helps you refine your pitch, and sometimes new opportunities arise indirectly. For example, always ask for a warm connection to another investor at the end of a conversation. This way, a conversation often yields more than just a potential investment.
You don't have to do it alone
Raising finance can be complex. Fortunately, you don't have to reinvent the wheel yourself. There are many public and private parties that support startups with advice, guidance, and funding, such as ROM InWest.
At ROM InWest, we look beyond just investing. Our Business Developers support entrepreneurs in North Holland with strategic choices and growth challenges. We also have various programmes within ROM InWest, such as PIM and GO!-NH in which we help groups of entrepreneurs further. Sometimes this leads to funding, sometimes to advice or a valuable referral within our network. The goal is always the same: to help entrepreneurs successfully take the next step towards scaling up and ultimately achieving that desired impact.
Would you like to know more about our support? Please feel free to contact Meet us.
