Fundraising - Everything you need to know to get your business off the ground
You are convinced that your novel and amazing business idea is going to change the world. So what do you do next to get it off and running? In the autumn of 2021, we raised a £300k pre-seed round for FoodLama from some notable angels who had exited their ventures to companies like Snap and Twitter, as well as someone on the board of Kraft Heinz. This is an attempt at describing what we learnt before, during and after that journey.
The importance of first validating an idea cannot be overstated. Although ideas rule the world, without some reality check, they may just be steeped in pure fantasy. Fortunately, the idea behind FoodLama was borne out of the personal frustrations of one of the co-founders. To further validate the idea, we spoke to hundreds of our potential audience via surveys, focus groups, one-on-one interviews, as well as testing out the prototype with them. We took this approach because we wanted to thoroughly understand the problem, before we narrowed the solution to the idea we had. It’s important to note that validation doesn’t mean that people tell you that’s such a brilliant idea or that it’s such a dumb idea. For us, it meant, is this a problem people really have and how do they currently solve that today. An example of such feedback was when we were looking to recruit a content writer to work with the team and shared this request on a public Facebook group. We got this interesting response which was an additional validation point for us.
Having validated the idea and iterated on a few possible solutions, it’s important to then build the team that would execute on this brilliant idea. Most early-stage investors admit that the team is the most important element they look at when making their decision. It’s easy to understand why. In the earliest days of any venture, there are few data points that an investor can make a bet on. Hence, there is a consensus about the team being a critical influence factor for investments. In our case, we as co-founders had the luck of meeting each other via a co-founder matchmaking platform. From co-founders to early hires, there are tons of ways you can find great talents. Whether it be matchmaking platforms (like it was for us), networking at events, or doing a deep search of your network (and network of networks), there is no shortage of channels to connect with people who are looking to work on the next big thing like yourself.
The next step for us was fundraising. It is important to mention that this isn’t necessarily always the next step for everyone. While one venture might be able to fundraise based off of a deck, another might need to be revenue generating before it can be considered investment-ready. This is yet another one of those things where a reality check is important, and includes assessing the strength of your team, the market size and industry, the novelty of your idea, the strength of your network, the proof points you have that this would succeed (traction), the size of the round and the general investment landscape. The result of such assessment is never binary, so it’s totally up to you to decide what to do with the outcome.
For us, we were convinced we had a strong team with deep insights on the problem and solution, were addressing a large market in an exciting industry, had built a prototype that worked even if the user interface and user experience left much to be desired, and ultimately had the privilege of a great network which we had built over the course of our careers. In hindsight, weaving these positives into a simple story coupled with a strategic plan made our fundraising process much easier. We wrote in detail about the preparation, the strategy, the challenges and the deck we used for that round here.
For many people, raising investment for a new business idea is daunting. Like most skills, it can be learnt and honed by checking off the things described above. Although it can be filled with loads of rejection and feelings of inadequacy, one of the most important things to recognise is the power of momentum. Sometimes, all it takes is a single yes amidst such waves of disappointment to reverse the tide. So, it is not only important to compress your fundraising window, but also critical to optimise your outreach strategy to have the highest chances of a yes earlier on. These factors make a huge world of difference. Raising a round with 0% committed is in a different class from a round with 30% committed, which is also in a different league from a round with 60% committed. Even if nothing has materially changed about your venture (team, product, revenue, etc.) during the course of the fundraise, just having additional commitments hugely increases the likelihood of getting further commitments.
We are certain you have got all it takes to take your business idea from where it is now to the level of ambitions you have for it. Go make it happen! We are currently off to the races for our next round of fundraising. Wish us good luck!