For tech startups, money is the fuel that keeps a company going. Raising funds to sustain operation is as difficult as marketing a product or coming up with innovative ideas to lead the race.
Good thing there are investors who are willing to invest some money in new enterprises. But convincing investors to bet on a company, especially startups, is not a piece of cake.
Michael Lints, partner at early‑stage venture capital firm Golden Gate Ventures (GGV), knows this struggle among startups very well. For one, his current job requires him to negotiate with founders where his company can invest in. GGV, to date, has already invested in more than 40 startups in Southeast Asia, including some enterprises in the Philippines such as Lendo, Ayannah, and Carousell.
Lints has also had a fair share of struggle in courting investors back in early 2000’s when he, together with his two best friends, put up a startup that provided small enterprises with IT platforms. The lack of funds and tractions prompted them to stop its operation in 2006.
In a forum organized by QBO Philippines on January 9 in Makati City, Lints shared some pointers that startup founders should always remember when dealing with investors.
There’s a lot of money that businesses can get from investors. But the question is, how do you get those money?
According to Lints, allowing investors to invest in a company is more that just about money. Startup founders should, instead, consider it as a form of marriage that will last for at least ten years.
“It’s all about the marriage between you and the investors ,” he said. “There’s always this weird relationship between investors and founders because [when money is involved,] people feel some form of guilt … But you have to view it as a partnership, and partnership means we’re building this business together [and that] we want you to be successful. If you’re successful, we’re successful.”
Startups should not consider fundraising as a side gig. Instead, Lints said, they should take it as important as their sales.
“[Companies] do fundraising two months before they run out of money, and what happens when you do that, you’re gonna [have] the wrong partners,” he said. “Fund raising is a part of your business, it’s not different from sales. Fund raising is something you do every single day. And what does that mean? That means that you do research.”
In talking to investors, he said, startup founders should “do their homework” and research by reading about investment‑related articles that are available online.
“If a fund is coming, you should know. If a new Chinese player is coming to the Philippines to look for a deal, you should know. You should be the first one to know. The next thing is to ask, how can I find a way to be connected to these guys?” he said.
Before meeting with an investor, founders should make sure that all important files and documents containing crucial information about their company are organized.
“Whenever an investor asks questions about your finance, contracts, you wanna answer them fast,” Lints said. “So if you take up to two months to answer because you have to look [for an answer], you can’t find it, that’s a sign in itself. It basically means you don’t have your [things] in order. It’s something that you can solve, but it’s a worry.”
In pitching to investors, conveying a clear message through a presentation is essential. And, according to Lints, founders can achieve an effective pitch by practicing.
“I’m 42, but every single pitch, I practice. Every single [time]. I wanna make sure that the story I’m telling is sticking with investors I’m talking to. Use your friends, relatives, to practice with,” he said, adding that founders can even film themselves while delivering their presentation to make their pitch clearer.
While there is no formula in creating a successful pitch presentation, Lints said a good one should have at least three key contents: context by “describing how the world looks today,” the change that the company introduces through its product or service, and the world after using this change.
“Your company is about making a change because if you’re not changing anything, that means you’re not also starting anything,” he said.
He added that presenters should also let investors know how they will generate revenue and scale the business. In proving the company’s relevance, startup founders should present the growth in traction that their companies have generated.
“Investors will always ask about traction. Try to show that you’re relevant,” he finally advised. “And relevant means yesterday we had 200 users, now we have 400. But don’t just show growth. Explain why you’re growing.”