Right on the Money: David Chang’s Fundraising Advice
Funding: Everyone wants it, but no one knows how to get it. David Chang, entrepreneur (5 startups/exits), angel investor (40 startups), and Summer Venture Program director, joined us at the Blank Center for How 2 Raise a Seed Round to demystify fundraising and to share pitch tips. Here are five takeaways from his presentation for entrepreneurs planning to raise a round:
Think like Goldilocks
What will your raise enable you to do? David challenged the room of entrepreneurs with a thought-provoking question: “If you were to double your raise, whatever your ask was, what would you do that’s different?” If you would do the same thing, you likely haven’t find the right number. On the flip side, if you halved your raise, would you just do half as much work? Would you just not last as long? Again, if so, you haven’t found the right number. Using this litmus test will help guide you to the right fundraising goal, keeping in mind the need to demonstrate ROI to investors.
Know your audience
David suggested doing your homework and knowing your prospective investor well – from industry and vertical, to geography, to the standard investment size they make and at what stage of business they invest. As well, consider your go-to market strategy – are you B2B or B2C? – and whether this aligns with the investor’s expertise. Finally, knowing your investor, literally, is very impactful. Having connections in common can help to validate you as credible.
Knock over the first domino
Your anchor investor will act as the first domino. As David explained, “Investors always want to know, ‘Who else is in?’” So, don’t hesitate to share the good news when you land your anchor investor and be sure to say you are “closing” your round, not “raising” a round. Communicating in this way will create a sense of competition and trigger additional investment events.
Don’t count your chickens before they hatch
Meaning, don’t count your dollars before they are in your bank account. Things happen all the time, so don’t consider your fundraising round over until it’s over.
Stand on equal ground
Investors are not the only ones that hold the chips – you do too! You may need money, but, as David explained, investors need entrepreneurs. Consider the process of fundraising as a two way street, or a marriage.
Looking for more learnings from How 2 Tuesdays? Read our recap, and join us for the last How 2 Tuesday of the semester: How 2 Read a Term Sheet with Angelo Santinelli on Tuesday, November 27.