Ali

Over the past five years, I have been helping many startups with their pitchdeck, fundraising, and startups.

The only reason I have gained experience is by having made those mistakes and erroneous assumptions myself. Fundraising for my startup turned out to be more difficult than I anticipated, mostly because of my incorrect assumptions. I had a good project, and I had many people interested but I made many mistakes along the way, which meant losing deals and investors.

Here are some of the most common mistakes I see over and over.

A) There are no investors where I live.

When we first start pitching our idea we are all excited and fired up about it. We think that it going to make us millions if not billions and we expect everyone to jump at the opportunity. Unfortunately, that’s not the case. Once you start any business you will find that there are many hurdles, some things work, and not. For this reason, most savvy business angels don’t directly jump at your idea and give you all their money. They believe in doing things in step, removing unnecessary costs, and so on.

No matter where you live. There are Business Angels (Investors) around you, their budget is most probably similar to the expenses of your town, city, and locality. You can start from where you are and always expand. There is no need to move to expensive hubs and hire the most expensive.

Your best bet for fundraising is more than often your own network in your local area. There is a good reason why they call it FFF (Family, Fouls, and Friends). They are the ones who trust you and believe in you the most.

B) I just want one investor.

When I first started, I thought I needed to get one investor and I thought that should need to get the full amount required in one go. This was back in 2005–2008. There was not as much information available for Startups and what I could find was mostly advice from the US startup scene (which made things worse). Whatever US advice you read for startups divide it by 10 for Europe.

I had never heard of tickets, convertible and safe notes, and …

When my angel investor suggested that we should sell investment tickets of 10,000 euros, I thought how are we ever going to get to the 1M€ business plan I have created!

What I really needed was probably just 15 to 25 investors to get me just €250,000. That was easily achievable from my network of friends and family. They were all close to me and I could have raised the first round in no time, had I understood the logic in lowering my valuation, requesting lower funds, and building up the business at each round.

I would not be exaggerating if I said, that almost on a weekly basis I meet with one or two entrepreneurs who think they have to go outside of their city or country, or even continent to look for investors in their ideas/startups.

C) I want a silent Angel Investor.

Of course, it is not impossible to find silent Angel Investors who just give you the money and leave you to it, but more than often Angel Investors have to give you their hard earnt cash.

1- Investors want to protect their investment, they want to make sure you avoid making the same mistakes they did and they genuinely want to help. Their experience while good, can also be bad. You need to establish some basic understanding before the investment on how much influence they can assert and how you can use their expertise and knowledge to your advantage.

2- Investors don’t just bring cash and expertise, but very often bring their network. Their network of frinds is sometimes as valuable or even more valuable than their cash.

A few months ago one of the investors who approached the startup I was mentoring was offering the startup access to their investors network. The fundraising process was based on a retainer + rather a high comission. Startups desperate for cash often end up accepting these offers. However I managed to help and turn things around. Instead of a fundraising agreement, we turned things around and they become a reseller of the startups product.

Yes, basically they started selling the product to their network. This was a huge plus for the startup. They get clients that would normally have cost them a lot of advertising and marketing efforts. They go direct to the decision maker, and the decision making process is influenced/improved and speeded up because of the introducer.

Each deal creates income for the startup and makes them more attractive to VCs, increases their valuation and solidifies their business.

Could you ask for more? Do you see how the investors network is worth more than their investment? Not always a 100% linear relation but in many cases you underestimate your investor’s network value.

Put all the above together and I can almost guarantee you that you can raise any sum of money to get your business started in the first few rounds, just from your local network and immediate surrounding.