Pivots, Funding, Valuation and Purpose

For entrepreneurs, particularly those starting out on this road for the first time, the word "pivot" might evoke panic. Potential perception is one factor that makes altering the direction of your company intimidating. However, users are familiar with pivots. They've seen it all before, and depending on how you manage it, their responses can differ dramatically.

 

Why pivot early? 

Pivoting early allows entrepreneurs to adapt and respond to market feedback and changing circumstances. It enables them to fine-tune their business model, identify new opportunities, and avoid wasting time and resources on a path that may not lead to success. Additionally, pivoting early can help entrepreneurs attract funding and investors, who are more likely to support a company that demonstrates agility and the ability to evolve. 

 

Fund Raise

You must first be honest with yourself and decide why you are starting a fundraising campaign. Are you pursuing this for the praise? Has someone instructed you to do this? Or is it that you think your business is at a turning point between an opportunity and the timing of the market? Venture capital investing is not for everyone. For the majority of VCs, the economics of investing only make sense for businesses that have the "potential" of generating dramatically outsized returns, where one or two breakout investments have the ability to completely balance any losses in the rest of the portfolio.

Master your pitch, which should be a succinct, 2-3 sentence summary of who you are, what you do, the market potential, your traction, and your team. This ought to give a complete picture of your business to a total stranger. As much feedback as you can from reputable founders, investors, and advisors is important because it will be how investors first learn about your idea.

Prepare your deck: limit the number of slides to 15 during the pre-seed step. Build a captivating, visually focused deck to leave a lasting mental imprint.

Create a list of investors by looking through those who have given money to entrepreneurs in your network. Verify that they haven't funded your rival and have invested in your market. Create your interactive product demo because investors want to see what you've developed and because it will illustrate what you do much better than words or videos that you might never see.

With an expected double-opt-in conversion rate of 60%, aim for 100 warm intro requests. Instead of just casting a wide net, concentrate on making warm introductions to lead investors (and their partners) who can write a sizeable portion of your round. Everything follows naturally after the lead is established (FOMO). Finally, when considering introductions, avoid requesting or accepting introductions from investors who have passed on your company. 

 

Valuation

Entrepreneurs must negotiate with investors to establish an offer that benefits both parties.

Investors perceive it as a risk vs. reward trade-off, which in turn boils down to the many components: market traction, team expertise, rivals, and competitive moat all influence risk, whereas market size, acquisition multiples, and additional capital needs dictate a possible return. No spreadsheet exists that can take these variables and produce a number. In order to choose the ideal investment opportunity, investors combine their gut feelings about all of these aspects and compare the firm to the hundreds of other startups that are pitched to them.

The valuation is simple: it’s the amount investors are willing to pay.

Purpose for Fund Raise

The real purpose of raising funds is to secure the necessary capital to support the growth and development of the startup. This includes funding for research and development, hiring key talent, expanding operations, and potentially acquiring assets or entering new markets. Ultimately, the goal is to maximize the company's potential for success and generate a significant return on investment for the investors. 

There are numerous advantages and/or reasons for raising funds. However, it is critical to do everything possible to provide a return for that investor. Conduct due diligence to discover investors who understand your startup's offering and share your beliefs, strategic direction, and ultimate financial goals. This can help you build a mutually beneficial connection and develop your business idea into a profitable business.