The Inside Scoop On Silicon Valley Startup Fundraising

Many founders dream of building successful startups in Silicon Valley and raising funds like a pro. But how many startups get that far? Uber, Airbnb and Salesforce have seemingly reached the ultimate dream, but even these startups are not yet profitable — revenue doesn’t equal profit.

As a startup founder in Silicon Valley and advisor to some of the hottest startups in the last five years, I have had the opportunity to understand founders, fundraising and the startup growth process. (Full disclosure: I was a consultant for Uber and Airbnb and a startup advisor for Salesforce Ventures and Google Ventures.) In 2018, I moderated 12 pitch competitions across the country, funding 10 up-and-coming startups. But it isn’t easy being a founder in highly competitive Silicon Valley, and funding is becoming scarce. Here are my top dos (and don’ts) for grabbing the attention of Silicon Valley investors.

Highlight your ability to build a big business.

Silicon Valley investors are looking to invest in leaders who have the skills it takes to build a big business. As your company grows, it requires a new level of leadership. Show that you can steer and direct a team, create streamlined processes that bring in revenue and have a deep understanding of both your product/service and the industry. Understand your growth cycle and be able to build a repeatable process around your current organization and team.

Leadership is an evolving process, and investors want to see that you are able to evolve as a person during this transformation. You are no longer just in charge of tasks that need to be executed, but you’re also in charge of hiring successful decision makers who execute for each department.

Build something of value that an investor can’t deny.

Metrics are important to a certain degree because they will help validate the opportunity that your business offers. Investors love generating revenue so MRR (monthly recurring revenue) is usually important, but it depends on your business and the industry.

What investors really want to see is that you’re willing to get scrappy with the business. What is your interest level in the industry? Are you playing in a field you fully understand? This is where your obsession has to show. Being scrappy may mean investing your own resources to build something that generates revenue.

When an investor can see that your company is generating recurring revenue and active users, they will respect that. They want to see that you have the “whatever it takes” mentality to grow and scale your startup. In today’s competitive world, you are no longer going to get funded for just the “ideation” process. Instead, you must show your investment and dedication to build the foundation for that believable and successful company.

Be diligent, but don’t be annoying.

Grow as much as possible before approaching an investor. That way, when an investor is looking into the business, they can’t stump you. Follow-up emails and persistence are great but it can get to a point where you are just another annoying entrepreneur looking to get inside their wallets. They have many of those and don’t need more. That’s why it is best to focus on building a business from your passion.

I love using the example of Van Gogh. He didn’t make a dime with his painting, and yet he was so determined to follow his passion because he wanted to show something to others in a different light. Today, his paintings are famous and sell for tens of millions of dollars. This is the same type of passion you want to have when building a startup.

Focus on being the best in your industry.

When you’re focused on being the best in your industry, investors will find you. It’s their job. Most startups become the best through demand. This demand originates from users and customers who want your products and services. After you have demand, however, you have to be able to figure out how to drive a sustainable model to profitability.

At my first startup, we only validated our product and service using Google AdWords. This was a massive fail. At my next marketing technology startup, we validated demand through partnerships, web marketing, complementary products and trade shows. This gave us a deep understanding of what people were willing to pay for the product and service.

The days of endless pools of funding are over, even in Silicon Valley. The only way to receive venture funding is by building a cash-flow business that leads to profitability. To do so:

• Focus on becoming the best in your industry.

Be scrappy and as invested in your startup as you want the investor to be.

• Remember that leadership is an evolving process. Investors need to see that you are able to hire successful decision makers.

• Don’t be annoying. It’s okay to be persistent, but understand that persistence isn’t going to validate a business in the eyes of an investor. Get back to the drawing board and focus on revenue generation.

If you want to raise money in Silicon Valley, it takes more than just an amazing idea and luck. Once you realize that, raise away!


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