Both aspiring and established entrepreneurs can struggle to locate and acquire funding for their businesses. Sorting through the variety of funding options can be overwhelming, so recent Rev Content Session, “Strategies for Funding Your Startup,” aimed to tackle this topic.
The virtual event was hosted by Brad Treat, experienced startup founder and entrepreneurial leader, who covered a variety of funding options—ranging from venture capital to Small Business Innovation Research (SBIR) funding—as well as strategies and programs to assist entrepreneurs in landing funding.
In addition to serving as an Entrepreneur in Residence at Rev: Ithaca Startup Works, Treat is the Program Director for the Southern Tier Startup Alliance. He also teaches about entrepreneurship topics at Cornell University and Ithaca College, with creative fundraising being one of his specialties.
During the session, Treat offered tips on how entrepreneurs can find and take advantage of different sources of funding:
- Identify investors who invest in your space. Investors today tend to focus on specific industries that they have expertise in. Treat advised entrepreneurs to use resources like Pitchbook or CB Insights to get an idea of who invests in companies that are comparable to theirs. These websites allow users to see lists of companies that angel investors or venture capitalists invest in as well as when they chose to invest. If you run an early-stage startup, you can use Pitchbook or CB to find investors who have a history of investing in newer companies.
- Introductions are key. Once you find potential investors, Treat warned against cold sending pitch decks to them. “It’s just a waste of your time,” he said. “They’re probably going to ignore it; they may never even see it.” Also, this may backfire if the investor or firm happens to invest in one of your competitors because they could share information about your company with them. Instead, Treat recommends taking advantage of your network—including university and employer connections, lawyers, and bankers. Use LinkedIn to find people you know who are already connected with the investor you want to contact who can then make the introduction. Ask your connections to forward an email to the investor that includes an elevator pitch and a request to call or meet over Zoom. “Keep in mind, the hit rate here is still maybe 50%, but it’s way better than a cold email,” added Treat.
- Keep track of potential investors. As you find possible investors, organize their information in a spreadsheet. Rank them by their perceived level of interest in your company and include contact information for your closest connection at the investment firm. Also track the last time you contacted them to ensure that you remember to consistently keep in touch with your top choices. Treat said this relationship building process takes between nine months and two years. “This is not a quick thing to do,” he said. “But it can be a methodical way of you building up a meaningful list.”
- Give investors a reason to invest today and not tomorrow. In your communications with potential investors, it is important to convey a sense of urgency. Convince them to invest in your startup early or risk missing out on profits. “You have to consider, ‘Who are the other investors I can bring, or what are the other motivations to make them think this deal is not going to be as good tomorrow as it is today?’” said Treat. If investors think they can wait without the price changing, they will hold off on investing.
- Utilize government grants. Aside from private investors, entrepreneurs can also apply for government funding through the SBIR/STTR programs. “This is money that is grant money, so that means you don’t have to pay it back, and you don’t have to give them equity,” explained Treat.
- Seek out several different funding sources. Treat emphasized the importance of looking for multiple funding sources. Venture capital is “by no means a silver bullet,” said Treat. “I talked about angels, venture capitalists, and very briefly, government grants here because they’re the most common, and quite frankly, can write some of the biggest checks.” Seeking out a variety of funding sources gives your startup the best chance of acquiring the backing you need.
For more information about startup funding, watch the full session. Entrepreneurs from established companies are encouraged to attend the next Rev Content Session, “Telling Your Startup Story,” on April 15 (9:30 – 11:00 a.m. ET) for another presentation by Brad Treat on perfecting your business pitch. Learn how to structure your pitch for specific audiences and how to design both elevator pitches and investor presentations. Register here.