10 Top Strategies for Raising Startup Capital

It’s competitive out there. Being pleasant, being prepared and being truthful are among the ways to stand out in a sea of startups.

In the high-stakes game of startup financing, the ability to secure capital is akin to holding a lifeline that can pull your venture from the brink of death. Last month, in How to Avoid the Startup Death Spiral, I emphasized the critical need for startups to prioritize raising capital to avert their demise.

10 Commandments for Raising Startup Capital

Be prepared.
Be accurate.
Be truthful.
Be reliable.
Be responsive.
Be accessible.
Be pleasant.
Be appealing.
Be humble.
Be brave.

The current fundraising landscape presents a formidable challenge, with the demand from companies seeking capital significantly outpacing the available supply. Investors now find themselves in a position where they have an abundance of viable options for deploying their capital. As a founder, amidst the sea of ambitious entrepreneurs, how can your startup stand out to a much smaller pool of investors.

This challenge requires a strategic approach that transcends business models and financials and focuses on cultivating strong relationships — the often-underappreciated bridge between founders and funders.

This month, I introduce 10 transformative strategies that will fundamentally redefine how you engage with potential investors.

By committing to the strategies below, you will build a relationship that is FAT — fair, aligned, transparent — priming you for capital raising success.

Be Prepared

Grasping the complexities of raising capital is crucial. Know your company and industry inside out, understand the raise details, and anticipate what investors might ask. If unfamiliar with venture equity and venture debt deal processes and term sheets, hire a seasoned professional to assist you with the process. Such preparation enables you to address investor queries confidently and boosts your negotiation position.

Ensure Accuracy

Credibility relies on accurate data and realistic financial projections. Keep a well-maintained data room with audited financials, ideally with a third-party firm’s help, to ensure integrity. Use conservative estimates and plan for various scenarios to highlight your understanding of potential risks. This approach demonstrates transparency and will show investors that your startup is grounded in realism and prepared for all market conditions.

Embrace Truthfulness

In every exchange, prioritize being open and honest, especially when it comes to discussing difficulties and obstacles. Transparently distinguishing between what is proven, presumed and projected will highlight your authenticity and enhance credibility.

Demonstrate Reliability

Build a track record of consistently meeting or exceeding expectations through quality deliverables, timely execution and regular updates to investors. Ultimately, do what you say you are going to do, and you will stand out.

Stay Responsive

Promptly responding to investor inquiries shows you are professional and respect their time. Adopt tools and software for customer relationship management (CRM) to track interactions, set reminders for follow-ups and ensure no request falls through the cracks. Train your team to be responsive and equip them with the information and authority to answer questions or direct inquiries appropriately. Don’t make investors wait for you. Acknowledging received messages, even when an immediate, detailed response is not possible, maintains communication flow and shows respect for the investor’s input.

Be Accessible

Time kills many deals. Being readily available for discussions and queries signifies your respect for the investment relationship and your commitment to the fundraising process. Use technology to your advantage, offering flexible meeting options such as video calls, which can speed up decision-making processes and accommodate the busy schedules of your investors.

Exhibit Pleasantness

Investors want to invest in people they like. Be pleasant in all your interactions to enhance the willingness of investors to engage with your startup. By fostering a positive dynamic, you encourage more open and constructive dialogue, which will lead to better alignment and support from your investors.

Leverage Social Proof

In a market driven by trends and confidence, showcasing endorsements, partnerships or investments from recognized industry leaders or institutions can massively boost your startup’s appeal. Social proof acts as a powerful vote of confidence in your venture, demonstrating that influential people and firms are willing to back it, while leveraging the fear of missing out (FOMO) among venture capitalists and investors.

Show Humility

Displaying humility by acknowledging the competitive fundraising landscape makes you appear more grounded and approachable to potential investors. By understanding and conveying a realistic perspective of the market and your startup’s position within it, you foster a sense of trust and relatability. This approach demonstrates to investors that you are not only aware of the challenges but are also prepared to navigate them thoughtfully and effectively.

Act Bravely

Ask for what you want, with clear and compelling reasons, displaying confidence in your venture’s value and potential. This bravery, especially when articulated thoughtfully, not only highlights your belief in the startup’s success but also invites investors to share in your vision. Making the ask respectfully and with solid justification can significantly move the needle.

Raising capital in today’s saturated market demands a strategic approach to building and nurturing relationships with potential investors. The 10 strategies outlined above offer practical, actionable steps that can significantly improve your startup’s appeal to investors without necessitating fundamental changes to your business model.

By embodying these qualities, you can enhance your prospects of securing the necessary capital to propel your startup forward. Remember, in the realm of startup funding, it is not just about what you know or who you know, but how you engage with those who hold the keys to your success. Implement these strategies to make your startup stand out and secure the capital it needs to thrive.

Zack Ellison, MBA, MS, CFA, CAIA is the founder and managing general partner of Applied Real Intelligence (A.R.I.) and the chief investment officer of the A.R.I. Senior Secured Growth Credit Fund, which provides debt financing solutions to premier VC-backed companies. He previously worked as a loan underwriter, investment banker, corporate bond trader, and fixed income portfolio manager at three firms with over $1 trillion in assets – Scotia Bank, Deutsche Bank, and Sun Life. Ellison holds an MBA from the University of Chicago, an MS in Risk Management from NYU, and is completing his Doctorate in Business Administration at the University of Florida.