How to raise your first round of funding as a first time founder
Crafting a compelling story and building a fundraising deck
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Are you a first-time SaaS founder looking to raise your first ever round of funding?
Here are 11 steps you can follow to maximize your chances:
1. Have a name
It might sound trivial, but any name is better than no name. Shakespeare said “What’s in a name?”, but he didn’t have to fundraise from VCs. Having a name will allow people to talk about you. That’s what you want at this stage. Let people talk about you and help you. You can always change the name later on. Most iconic companies have.
2. One liner of your product
People struggle with this a lot. They just can’t seem to fit it all in one sentence. One-liners are so reductive that it makes their stomach churn.
“But what about the fact that I’m using neural networks, kubernetes, and blockchain? Should I just skip all this super important stuff?”. The answer is a resounding YES. Describe it in 5-7 words using plain English.
3. Bio of the founder(s)
This shouldn’t be a collection of facts. At this stage of fundraising, the biggest selling point is the founder(s).
You should pay close attention to making the bio super attractive. If investors are not excited by the founder(s), the rest of it won’t matter anyway.
4. What's the status quo you're addressing
Your product is supposed to help your customers do something. How are people doing that thing today? Unless you’ve invented something that nobody has ever heard of, people usually have a way of doing things. Quickly describe it.
The reader should know that even without your product, the thing is important enough that people are trying to get it done.
5. Who's facing that problem
The description of your potential customer should be as narrow as possible. Narrower the better. Your ideal customer shouldn’t be a broad category like “every person who has a mobile phone”. It might be true, but it won’t help at this stage.
If you don’t know the answer, keep conducting customer interviews until you get the answer. Usually takes about 50 interviews.
6. Why is that status quo bad
Describe the #1 reason why this status quo is bad. Because if it’s not bad enough, it will be difficult to justify the existence of your product.
What is it costing the people in terms of time/money/choices? Make it clear and make it obvious.
7. What's the solution to that problem
Describe the qualities of an ideal solution. In plain English. Without embellishing your product.
Once the reader understand what you’re solving, they should why your solution is the right one.
8. What's the top reason your solution is better than status quo
Your solution should be equal to or better than status quo in most aspects.
But in at least one aspect, it should be shockingly better (10X) than status quo. For anyone who cares about this aspect, it should be a no-brainer to switch to your product.
9. How do you price your product
The exact dollar amount is less relevant at this stage.
You just want to communicate how your company will make money. What is the customer paying for?
Figure out the unit of work. The pricing should be clean and productized.
10. What's the size of your target market
Bottom-up sizing approach works a lot better than top down. Just take the number of potential customers and multiply it by your annual price.
The target market needs to be specific enough, but not so specific that it becomes too small. Double-digit billion TAM usually works well.
11. What's the #1 metric you use to measure customer engagement
Apart from revenue, how do you know if your customer is engaging with your product?
You need to decide what this metric is. If you know what it is, you can invest your resources in driving it up.
Where to go from here
The path to building a company is filled with ups and downs. It’s unpredictable. You should start developing the material outlined above.
Always be ready with your story. Tell it over and over again until it’s completely internalized. Be prepared for good things to happen. Meet as many people in the startup ecosystem as possible. You never who you’ll meet at what time.
Always be reading. It's a good mechanism to keep your brain limber. Need to get those reps in.
Your job as a founder is to be as prepared as possible at all times. When you see an opportunity, jump on it. Done is better than perfect. Be a doer.