Let's start with the basics first!
Why Should You Raise Capital for Your Startup?
Simple, without funding, you would not have seen Facebook, Twitter, etc ... etc. Often most startups can't survive or grow solely on funding from the founders or family and friends. The exception of bootstrapped startups does exist but is omitted for this post.
Here are some of the key reasons, why you should raise capital:
You can scale up or rapidly grow with funding.
Besides funding, investors can support you with expertise, extensive resources, and an expanded network of customers and/or partners. These are valuable resources, to say the least.
During challenging times or should you pivot, investors come in handy in guiding you in the right direction.
Lastly, you gain credibility for early backing and thus can enjoy much more generous terms during future rounds.
Now that the above reasons specify why should you raise capital, let's move on to the next big aspect ...
Whom to Raise Capital from?
It depends on your startup's stage and what you need:
Cash
Cash + Support (often the ideal reason for fundraising).
The picture truly emphasizes whom to raise from, and why!
Fundraising is Art and Science
Fundraising is both an Art as well as Science, and every founder/entrepreneur must quickly learn and adapt to it.
Fundraising as an Art
Founders should be able to sell their unique stories to potential investors. Your story convinces the potential investors of each of the below factors:
What problem/pain are you solving? Is this really a problem? Why can't the existing players solve/address it?
How large are the market size and its growth potential?
Is this idea really scalable?
What is your secret sauce (value proposition) of your product/service i.e. why would the customers pay for it?
What are your unfair advantage/s against the competitors as well as new entrants? How can you sustain it, 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. Remember, you only have about 90-seconds orally (elevator pitch) or a max of 3-5 mins to present your pitch deck to the group of investors (or VC partners).
Note: The art would work only when the science i.e. all the above factors are actually present in your venture. Missing out on 2 or more factors, means you aren't investable!
Fundraising as a Science
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 support in your story:
Market size and its growth potential
Traction (MRR/ARR) to prove customers are buying it
Price-unit economics, is it positive/profitable and how soon can it break even?
No. of Customers (incl NPS/Ratings, 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?
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According to Paul Graham, the perfect recipe for fundraising is:
Identify the factors, which 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).
Role of Pitch Deck in Fundraising
First things first, "pitch decks only help you to get a meeting with the investors!"
Seasoned investors use pitch decks effectively to understand all aspects of the venture.
Essentially, pitch decks either open or shut the gates to fundraising. Now, investors have this unconscious dislike for the poorly designed pitch deck, before they even read its content. Hence, a lousy pitch deck does nothing, it either gets archived (in lateral terms tossed away) or at best, evokes an automated revert of, why you didn't make it.
Your Pitch Deck must be compelling i.e. effectively incorporating both the key elements i.e. art and science. This is why most founders opt for business advisors like me to prepare pitch decks for them. Because, even the pitch decks with fancy graphics without substance, is no better than a lousy one.
Need a compelling pitch deck for your startup? Click here.
Here are the finest two key examples, which are the most preferred ones in the founders' community i.e. Airbnb Pitch Deck and iPhone presentation, where I've provided the key insights to help you craft your own pitch deck!