In-the-Know Tips on Getting Your Startup Funded

I had the pleasure of moderating the keynote panel, “Getting Your Company Funded,” at the Young Start-Up Ventures’ Venture Summit West 2022, attended by approximately 1,000 entrepreneurs and investors. The expert panel provided best practices on how start-ups could obtain funding.

Panelists

• Alan Wink, Managing Director of Capital Markets, EisnerAmper
• Andrew McClure, Partner, Forgepoint Capital
• Ivan Landabaso, Partner, JME Ventures
• Jeff Calcagno, Head of Johnson & Johnson Innovation-JLABS, Bay Area
• Reese Schroeder, Investor, Allstate Strategic Ventures
• Sameer Chopra, Venture Investor, Monta Vista Capital
• Simon Andrews, CIO, Edge VC

Key Takeaways

Entrepreneurs often do not know the appropriate amount of capital to raise at each stage of their business life cycle. It’s important that they understand the timeline for capital deployment and what milestones each tranche of capital will allow them to achieve. Most panelists agreed that their funds invest in tranches based upon the achievement of milestones rather than investing all the capital at once.

Before making an investment, each venture capital (“VC”) firm spends considerable time evaluating the start-up’s financial model. The key metrics they focus on are revenue growth, customer acquisition cost, lifetime value of a customer, cashflow breakeven and recurring revenues.

VCs certainly like it when a founder has a business plan, but most VCs prefer not to read through voluminous business plans at the outset of interactions with a company seeking funding. Most venture investors prefer pitch decks, because they force the founder and/or management team to be both concise. For an initial meeting with a VC, the shorter and more focused the pitch, the better.

VCs can spend a lot of time evaluating the founder and members of the management team. They are looking for a founder and management team who are coachable. Coachability really means being both able and willing to take advice and criticism from others. While most VCs prioritize investing in “the jockey and not the horse,” the optimal investment prospect features both.

VCs always like personal introductions to a founder from a respected source—lawyers, accountants, bankers or other professionals—with whom they work on a regular basis. VCs would usually not advise a founder to hire an investment banker to help them source capital, particularly if it is an early-stage company. Instead, founders should be entrepreneurial enough to find introductions to potential investors without having to retain the services of a banker and pay investment banking fees.

A single VC may see several hundred deals annually yet makes only a few investments. VCs are generally looking for companies that are disruptive, solve big problems and sell into very large viable markets.