Experiences from Southeast Asia.
Golden Gate Ventures is an early stage venture capital firm headquartered in Singapore. The fund invests in consumer-focused internet startups across Southeast Asia. Since 2011 Golden Gate Ventures raised 3 early-stage venture funds and invested in more than 40 companies.
Michael Lints is a partner at Golden Gate Ventures and focuses on strategic partnerships and fundraising. Michael has spent the last 5 to 6 years fundraising for Golden Gate Ventures early stage funds and its portfolio companies in Southeast Asia.
This article is a representation of my personal experience and views.
There are numerous great articles published about fundraising. I am not here to rehash all the tips about investment decks and fundraising strategies. This article is meant to give you some insights into my fundraising experience.
Fundraising has something magical. The ones that are good at fundraising frequently are praised for raking in stellar investors and grabbing Techcrunch headlines. Luckily fundraising is not magic. It’s a skill you can acquire as a founder. Like everything else, it requires focus, dedication, execution, and grit. Tons of grit. Fundraising can turn into desperation fast. So how do you master fundraising and where do you start?
Build a pipeline
I’ll start by sharing my personal experience. The very first thing I learned the hard way is that fundraising is the equivalent of doing sales. Fundraising is a fancier word, but in practice, the activities are incredibly similar. In one of my first jobs as a counter salesman in a PC hardware store I experienced that numbers count, a lot. I was still a teenager, so I didn’t pay much attention to my boss. I do vividly remember that he was always worried about making sure the store had enough foot traffic, and that the sales team would convert that foot traffic into actual sales of motherboards, gaming computers, and other hardware. It was all about converting leads and making sure there was a large enough number of leads to convert.
When I started fundraising, I didn’t take those sales lessons to heart immediately. I assumed I could just hit up a few strong leads (investors in my network) and I would be able to convert them. Why create a large pipeline when you have strong leads? These investors know me, and with their commitment, I should be home safe. Wrong! You have to assume that even your best leads will delay or pass on the investment (sometimes even last minute). If you rely on them to come in or be your anchor, you’ll find yourself in a tight spot if they don’t come through. Building a large enough pipeline of potential investors is crucial. It’s so much better to eventually turn away investors because there is no more room in the round than to be left short of funds.
Your fundraising strategy
Make sure you set up a fundraising strategy before you go out. The first thing we tend to do is make a long list of investors we’re going to send our pitch deck Take a step back. The first thing you want to do is discuss the fundraising strategy with your partners/team. Try to answer the following questions:
- Why are we fundraising? How will the fundraise impact our business and team? Do we want to explore market-appetite for our fundraise first, or do we start our official fundraise now?
- Which investors do we want on board and why? What is our A-list, what does it take to convince them and whom do we add to our long list?
- Does our pitch answer the essential questions investors have (Product, Traction, Team, Market Dynamics and Opportunity)?
- Do we have enough bandwidth and data to reply to questions from investors quickly? One of the worst things that can happen during fundraising is making investors wait for a reply.
- What is our fundraising timeline? When do we need to get nervous or when do we run out of money?
- Are we raising internationally and what does that mean time and travel-wise?
Use the answers to these questions to build your fundraising roadmap.
Make that trip
Fundraising means you will need to start building relationships with investors of different backgrounds. Whether you’re talking to venture capital firms, corporates, high net worth individuals, family offices or institutions, you have to be prepared to be open to a lot of different cultures and make tons of trips. Since I moved to Southeast Asia, I have learned to make that trip to meet potential investors. Do not try to fundraise from behind your desk.
Why is making that trip necessary? I made strong connections over the years after deciding to make a trip to meet an investor, even though my work schedule couldn’t get any busier. These serendipitous investor meetings only happen when and if you put yourself out there. Making the trip also helps you meet other investors in that city/country or region. Actively ask investors who else you should meet.
A meeting is a 100x better than a phone call. Bear in mind that only a small percentage of these trips will lead to actual conversion.
A small tip. Before you go book your flight. Ask the potential investor a few simple questions for pre-qualification:
- Have they invested in a strategy or company like yours before?
- What are some of the previous investment they have made?
- What attracts them in a strategy or company like yours?
A pass is fine. It’s part of the journey
Don’t be scared to get passed on. Whether it’s sales, dating, fundraising, competing in sports or life in general, you will get disappointed. Please deal with it. Get to a point where you can ask the investor to confirm the commitment. There are several ways to get an investor to commit (assuming they liked the pitch).
- Ask them for their timeline. Which steps do they need to cover before they can commit
- Provide significant business updates during the fundraise
- Prioritize answering questions from investors
- Discuss the terms for the investment
- Ask investors for feedback. Why are they considering the investment and what are their concerns. If you ask for feedback, use it!
- If applicable, provide industry updates that are useful to potential investors (for instance regional macros, regulatory changes, etc.)
After doing all this, you work towards asking them for a yes or a no. If the investor ends up passing, make sure you stay in touch. Realize that investors will follow your progress. Send updates, add them to your non-confidential newsletters, etc. For some investors, the timing isn’t right so investors that pass now might become your investor in the next round.
Investors have options, so do you!
At times you’ll feel that you’re pitching away, but not getting anywhere. I can still recall in the first few years of fundraising that I didn’t even get the chance to pitch our fund. We were pitching Southeast Asia and why investors should be interested in that market. When we got over that hurdle, we finally got a chance to pitch the fund. Why did we have to pitch Southeast Asia first? Investors were comparing our fund thesis and opportunity to other funds in other regions such as China and India. We weren’t the only one fundraising and investors look at every investable dollar. How does it come back, does it bring strategic value, does it give me access to more deals, how does it fit in my asset mix, etc? When you go out fundraising, you have to realize that you’re not the only one. Investors have options. Always keep that in the back of your mind when you’re pitching investors. The way you pitch, behave, respond to questions, present yourself and your team, everything will get benchmarked against other opportunities investors have on the table. A few more things to take into considering while you’re fundraising:
- No one will pitch investors saying their business will slow down or will generate negative returns. Realize your competitors will likely pitch a similar story to yours. Find your unique angle and anchor your pitch around it. The way you fundraise tells the investor a lot about how you run your business. Strive for excellence in execution across all aspects of your business.
- Under promise and over deliver. If you tell investors you’ll respond within a week, make it four days. You have to remain on point during the entire fundraising process. Don’t slow down.
- Provide a clear response when investors want to understand what the effect is of their investment on your business. How much more can you do with their capital, which opportunities are you able to proceed, how different will the company’s trajectory be after the investment?
Feel free to reach out if you have any questions or concerns about fundraising.