When you’re in a startup that is competing with some of the largest companies in the world, funding is critical to give you a level field from which to grow. Love it or hate it, raising money is a key responsibility of yours and something you can’t afford to get wrong.
My company, Jscrambler, recently closed a $15 million Series A round, which was led by cybersecurity investment firm Ace Capital Partners and with follow-on from Sonae and Portugal Ventures — definitely an outcome I’m grateful for, especially looking back at what a journey this has been.
So today I want to share some of the things I’ve learned from this process.
1. Talk to VCs in their own language
When you’re dealing with 100+ prospect VCs, it’s hard to get your message across to every single person.
You must learn how to talk to VCs in their own language. Frame the problem using real examples. Make them clearly understand the urgency behind your solution. Is it a nice-to-have or an urgent thing? When you’re early in the market, you don’t fit a well-established market category.
VCs need to understand why what you sell will be a category in the future. You have to get to the point where they’re personally interested in your product and thinking “My company and companies I have invested in need this!”
2. Your network is everything
You have heard this a million times? — it’s all about relationship building. So you’re always in a marathon preparing for the next funding round.
Sync with people, nurture the relationship because that’s the best way to get access to key people that can help you. Give something and ask for something in return.
In our case, we would offer to help them analyze a market, a company, or a technology, giving back some of our time and expertise for their own time and expertise.
You will be surprised by just how much VCs know about your industry and your technology and the people that drive it. In the early days of Jscrambler, I had the opportunity to be in front of one of the leading partners of a very experienced Silicon Valley VC and I was going through lots of cybersecurity jargon.
He didn’t miss a beat, so I asked “You said you were a business major, how can you understand all of this so easily?” he said, “because I always have someone like you sitting in front of me, I learn from the best”.
3. Get familiar with VC “flirting”
Investors are always “flirting.” They’re nice, they know people, they’re intelligent, charming, and most of them will be happy to keep talking with you. They want to be kept in the loop even if they’re not interested in becoming your investors.
Being in the loop is one of the most valuable assets for VCs? — it means access to valuable information.
So you have to know your way around this “flirting” game. You know the profile of your soulmate VC in each round. When it comes to VCs, reputation is everything. Talk with startups from their portfolio, including the ones that went under — you will learn a lot from past successes and failures.
4. Set the rhythm and keep it
Your first concern when raising money should be timing. Never ask for money when you need it. Ask when you have a strong plan to convert the money you will get into more money. You are talking to investors after all.
Finding this timing isn’t easy, especially in atypical periods like the early days of COVID where markets went dry and everything was a blur.
Assuming you get the timing right, you must then own the rhythm of the process. Don’t allow the train to stop, even when pressured otherwise. You have a goal to achieve and the only way is forward.
5. Embrace change but never lose your core values
Raising capital means constantly learning and changing your perspective. You have to align the interests of multiple stakeholders: your employees, the founders and the VCs. It must be a win-win for everyone.
Your own values will be tested often. What if a prospect VC wanted to take the company in a completely different direction? These things blur the line between having open horizons and staying true to your company’s values and culture.
In the end, you will find yourself a changed person, because you learned a lot during the process. So before signing, think back to when you started and ask “Is this what I wanted? Is this the company I want to build and grow?”
It’s a very personal challenge, so make sure you have the discipline to ask these questions and surround yourself with people who will remind you of that.
Of course, no two entrepreneurs share the same path and there’s no silver bullet in raising money. The next round is always the hardest one but it might be a little easier when you surround yourself with the right people, so choose wisely.
