Securing the right venture capital can completely transform your startup.
Getting the right partnership in place can prove to be invaluable – particularly in your early stages of development.
This could make all the difference in adding influential contacts, building your networks, providing useful mentoring and education as well as giving you a firmer footing with the all-important capital investment.
As the Founder and Managing Partner of Seed Space Venture Capital, I have seen so many startups over the years struggle because they lack a genuine understanding and appreciation of the pre-screen process.
Too often, the team behind a startup is more important than the idea or the product. It’s no secret that too many founders have excellent ideas that never make the leap from inspiration to commercial success.
Launching a product is one thing but how are you going to scale in the next 12 months? You need to be able to show that any early traction you’ve received can be accelerated and sustained. That can’t be understated.
If you are looking to raise seed capital, here are a few pointers that are an absolute must when it comes to approaching early stage investment organisations like Seed Space.
Articulate your competitive advantage
The first thing a VC like Seed Space looks for is whether an idea is truly unique. Can it be easily replicated? If you can show your product or service has the potential to be patented or trademarked it will instantly put you ahead.
Venture capitalists look for founders who have a good grasp of key metrics of their business, and who can identify the key challenges and principal risks.
Know your company’s revenue growth, sales pipeline and customer churn and how you’re going to take firm steps to address any issues. Be honest about your cash position, how a VC’s capital will be invested and when you may need the next round of financing.
Timing is key
Venture Capital firms, like everyone else, value a solid investments with good upside. Approaching VCs ahead of a funding round is a great tactic for startups.
Don’t waste time in your correspondence. State upfront what it is you’re after. Whether its funding or mentoring, VCs like Seed Space will appreciate you knowing what you want and stating your purpose clearly. If the answer is no, you’ve found out early you weren’t a good fit for us, but that doesn’t mean that you won’t be a good fit for others.
Have a clear path for expansion
According to the 2018 EY Fintech Australia Census 2018, just over half of Australian Fintech founders will focus on overseas expansion in the next 12 months, a figure that has been slowly increasing over the years and one that has long been a defining feature of fintechs abroad.
Having a clear path to commercialisation and a proven strategy for scaling to global markets is certainly a drawcard for VCs. At Seed Space, we think that keeping an international view can not only help you reach new customers, but it will also boost Australia’s recognition in the global startup community and make us more internationally competitive as a startup nation.
Know who to approach
Make sure you target the right early stage investor mix for you and your business. Choose ones that know your sector and also ones that focus on businesses at your stage of growth. For early stage companies, capital is not the only thing you want from your investors.
It’s also important to look for a VC with a track record of providing whatever it is that your business needs now and what it will need in the future. Seed Space, for instance, is passionate about supporting founders and innovators to change the future of financial services.
By partnering with leading incubators like H2 Ventures, innovation hubs like Stone and Chalk and peak body Fintech Australia, we are able to harness a collective network of knowledge and expertise to create an environment where founders and start-ups can thrive.
Having that right expertise together with our team’s experience across multiple sectors in the financial landscape and technology sector at large, means our investments are strategic and visionary in order to maximise returns to our investors.
Knowing this in advance and having complete visibility over which early stage investor is right for you makes all the difference at such a critical stage of your growth journey as a startup.
By having the right investment partners on your share registry and seeking out the most suitable VC will prove fruitful for you in the long run and can have a significant impact on the success of your startup in following rounds.
- Dirk Steller is the founder and managing partner of Seed Space Venture Capital.