Mashable's new video series, Behind the Launch, follows Vungle on its startup journey toward a June launch. Each week on Mashable, the Vungle team offers tips and lessons learned from its own startup experience. This week, we saw Vungle court big-name investors, so co-founder and CEO Zain Jaffer offer tips for courting investors. Watch the episode above, and be sure to tune in to Behind the Launch every Monday and Wednesday.
There are many stories of hot startups raising killer seed rounds, and it can feel like money is flowing everywhere. Times might be good right now, but raising external capital is a complicated process, and it's something every entrepreneur needs to think about carefully. Here are tips that can help you achieve your goals as quickly and pain-free as possible.
1. Be Hungry
As Steve Jobs said, "Stay hungry."
The first thing that will lead you to success in fundraising (and anything in life) is hunger. The moment you get complacent, the game is over. Naturally, most entrepreneurs are hungry because they have little money, but once things start to look good and investors start showing interest, there is a tendency for entrepreneurs to get excited and celebrate prematurely. The deal isn't closed until the money hits the bank, so stay hungry.
2. Adjust Your Mindset
Change your mindset when thinking about investors — they are not evil opponents who are out to destroy your business. Instead, think of investors as partners for life, who will continue to back you in subsequent ventures. Changing your perspective will mean you will treat potential investors with respect, and will naturally focus on the value-add they bring beyond just finance.
Missed earlier episodes? Watch them here!
- Ep. 1: Meet Vungle
- Ep. 2: Bringing in a Closer
- Ep. 3: How to Court Startup Investors
- Ep. 4. A Promising, Yet Controversial Job Candidate
3. Have Integrity
You need to have integrity in everything you do. When you pitch an investor, make sure you are honest but firm. Investors expect you to learn quickly but don't expect you to have all the right answers. So if you're asked a question and you don't know the answer, don't make up something or deflect the question. Investors are quite measured with the questions they ask, and they'll quickly detect that you don't know what you're talking about.
4. Maintain Confidentiality
When an investor asks who else you are pitching to, don't disclose names without permission — this puts you in an awkward position. It signals to investors that you can't maintain confidentiality, but also harms your negotiating position, as investors may collude in hopes of getting a better deal.
5. Have a Big Vision
Investors are mandated to invest in high-growth businesses with multi-billion dollar potential. So make sure you clearly articulate your big vision and where you want to be in the longer term. Nothing turns off investors more than entrepreneurs who think small.
6. Target a Big Market
Investors put a lot of focus on funding startups in high-growth and emerging markets. You need to be able show investors that the market you are targeting has the potential to be worth billions of dollars. More importantly, you need to show you understand the key trends that make a market big. It also helps to try and quantify the size of a market — even though it may seem useless, it will lead you to appreciate the key factors that drive the value of a market.
7. Know How to Frame the Product
You'll be surprised to find that few investors will test your product (especially at the seed stage), so it's important to speak about your product on a higher level. Always stress the benefits about how your product solves a key problem, rather than getting caught up in the details of features. Remember: Investors don't invest in features, they invest in real businesses.
Image courtesy of iStockphoto/tumpikuja
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