Fundraising is a unique blend of Art and Science, and every founder/entrepreneur must quickly learn and adapt to it.
Fundraising: A Unique Blend of Art and Science
It's more than just numbers; it's about building compelling narratives, genuine relationships with investors, and understanding their psych. On one hand, it requires creativity to craft persuasive pitch (compelling story), while on the other hand, it demands a data-driven approach to fundraising.
According to Paul Graham (Co-founder, Y Combinator) the secret recipe for fundraising is:
Identify the factors that make your startup worth investing in (i.e. science), and
Create a great story, which convinces the investors to invest in you (i.e. art).
Fundraising as an Art (Creativity)
Founders should be able to sell their unique stories to potential investors. Your story should be able to convince the potential investors on:
What problem/pain are you solving?
Is this really a problem?
Why aren't the existing players able to fully solve/address it?
How large is the market size and its growth potential?
Is this idea really scalable?
What is your secret sauce (unique value proposition or UVP) of your product/service i.e. why would the customers pay for it?
Can you sustain this UVP for the next 5-10 years?
What is your go-to-market strategy?
Why is your team perfectly suited to execute and make it BIG?
Many more ...
Each of the above factors/aspects needs to be explained by the founder, in a compelling way. And, you barely have about 90-seconds orally (elevator pitch) or a max of 3 mins to present your pitch deck to the group of investors (or VC partners).
Note:
The art (creativity) only works when the science (supporting data) is available on the above factors.
Missing out on any 2 or more above factors would make your venture un-investable!
Fundraising as a Science (Data-driven)
Investors are predominantly analytical (data-oriented), they would always evaluate the data/information, which proves or negates "your story" i.e. the art.
You also need to depict the supporting data in your story:
Market size and its growth potential
Traction (MRR/ARR) to prove customers are buying it
Is your Unit Economics positive, and how soon can it break even?
No. of Customers (incl Lifetime Value, Retention), Key Partnerships, Network, etc.
Financial Projections (Roadmap of up to 5 years)
Funds Required and Usage, how the investors' money will be used to scale up?
Conclusion
The Art and Science of Fundraising are intertwined, and none better understood this than Steve Jobs, who radicalized the smartphone market by introducing iPhone in 2007.
Here's my take on his iconic iPhone presentation that would guide you to not only secure the necessary funding, but to also inspire a community of your supporters (stakeholders i.e. investors, customers, employers) to believe in your vision.
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