Weekly 🔥 24: Adventures in Venture Capital
Welcome to another edition of our newsletter! You’ll receive practical startup advice straight to your inbox every week.
In this week’s edition, we discuss
- How to negotiate your startup’s valuation.
- How to fundraise in the current landscape of uncertainty.
- Are you actually ready to pitch?
Let’s do this.
How do you negotiate the valuation of your startup?
When pitching, the startup has to put a number on the table. But, set the valuation too high, and you won’t get any investment. Set it too low, and you’re giving up more of the company than you need to. So what do you do? Thankfully, seasoned investor DC Palter offers some advice:
- Find the deal lead — Since all investors in the round get the same valuation and terms, one investor must be the lead to negotiate for everyone.
- Negotiate with the lead — The wording is: “We’re targeting $X million.” Targeting is the key word to tell investors the valuation is negotiable. An alternative to specifying a target is to give a range.
- Remember, this is the beginning of a collaborative relationship — Find terms that are fair to both sides rather than driving the hardest bargain.
- It’s more than just money — Finding the right investors who share your vision and can contribute to your success, especially for the lead investor, is far more important than who will give you the most money at the highest valuation.
👉 Find out more: How to Negotiate a Startup Valuation
🎙️ Funding underrepresented entrepreneurs 🎙️
This week on the pod, we were joined by Ezechi Britton MBE, a founding member, principal and CTO of Impact X Capital. He’s also a co-founder of Code Untapped and was a co-founder at Neybar.
He started as an employee in the banking industry before building Neybar which gained hundreds of millions of investment from non-VC sources. He’s then founded other businesses including Code Untapped but his main focus is Impact X Capital which is all about funding underrepresented founders.
Listen/watch: From Developer To Serial Entrepreneur To Venture Capitalist
Fundraising in these uncertain times? We got you
Raising capital is hard, but doing so in unstable economic conditions makes the job much more challenging. B2B tech investor Joachim Schelde advises that early-stage tech founders (at Angel, Pre-Seed, Seed, Series A) should make good use of these fundraising practices:
- Build ties to investors before you need them —An investment relationship is longer than the average American marriage, so being aligned and trusting is paramount. Start talking to investors between 6–12 months before you need the money in your account and build that confidence.
- Have strong arguments for your “why now” — Timing is everything, and investors know it. You need an organization and product that are ready for scaling, or at least have proof of concept.
- Consider raising a bridge/smaller round — It is hard to spend a lot of money quickly, and even harder to generate a nice return on it for your investors. Do not raise more than what is needed.
👉 Read more: How to Fundraise in Uncertain Times
Are you truly ready to pitch?
Did you know the average new business pitch costs $450,000?! With that kind of money at stake, you can’t afford to lose a pitch or, even worse, win a pitch that’s not the right fit for your business. Jeff Mard suggests there are 6 must-answer-with-a-yes elements:
- Values: Your team aligns with the brand’s value system.
- Interest: Your colleagues want to work with the brand.
- Experience: The work requested is a core capability of what you do best.
- Resources: The brand has worked with a business in this capacity and/or is embracing the level of resources required.
- Authority: You are talking to the right people in the process, and they have the authority to make binding decisions.
- Realistic: The prospect ask / Request for Proposal (RFP) is realistic, and you can be successful given what you know to be true.
👉 Read more: Save $450,000, and Win Your Next Pitch
Till next week,
Team EH
