Securing seed and even pre-seed funding is usually top-of-mind for many early-stage tech founders, and 2024 has introduced new challenges for securing funding as the landscape has changed. Due to rising interest rates, the backsliding of the economy, and changing priorities within the tech industry, investors have been more tight-fisted when it comes to seed rounds (average $500k to $2M), with over a 30% decrease compared to 2023. Pre-seed rounds (average <$300K) have increased since last year by over 50% according to VC Cafe. Investors are willing to invest in pre-validation and building a solid foundation for growth, and are looking for experienced, highly-capable leaders with a proven track record of execution.
Due to the factors named above, venture capitalists aren’t writing $500K+ checks quite so readily these days, but that doesn’t mean that tech founders can’t attract the capital that they need to continue to build and grow their startup; it just means that founders need to implement actionable strategies with a focus on traction and profitability.
TEAM EXPERTISE:
Investors are looking for founding members who not only have the necessary experience and capabilities (operating, fiscal and technical), but whom also have a proven track record of success; highlight your success in previous ventures, such as leadership roles, achievements/awards, and any exits. Demonstrate your understanding and expertise in this particular market to show that you understand the needs of your target market. Investors are seeking founders who have the understanding, technical prowess and business acumen to actually build a viable business.
If the new product/venture was formed in response to work that the founders were previously doing and they discovered the need for this product (which is often the case), highlight this in your pitch deck, and make it a part of your ‘why’ back-story. Investors are seeking founders that are capable, passionate, dedicated to their startup’s success, and prepared-that they have a a strategic, data-backed plan on how they plan to grow their client base and revenue (Playbook). Investors want to know that the team has a plan of exactly how they will spend the money they are seeking, and that they have done their due diligence in validating the market. Founders should network regularly with VCs, angels and incubators and leverage their own personal and professional networks for introductions. Lastly, seek out the right investors-those who have a history of funding pre-seed or seed ventures and are not only focusing on your specific tech sector, but who also share your vision.
Having a strong Pitch Deck is crucial, and for it to actually captivate investors’ attention, it needs to include the following:
VALIDATE YOUR STARTUP
Partner with an experienced tech CMO who can help you gain the necessary insights through market and competitive research to illustrate precisely the need that exists and how your startup fills that need. Investors are seeking data to gain the insights need for them to make an informed decision, but rather than just show market size, weave this data into how many your particular product/solution can help and exactly how it helps them.
Just as each of us have our own “Hero’s Journey,” your startup does also. Just like you and I, investors are humans too, and we all relate to one another through stories. By thinking of your startup as the hero that solves a major problem, you can better integrate actual numbers into a story that investors can relate to and understand. Too many founders focus simply on their product, rather than the crucial ‘why’ it’s so important. You want those you are pitching to feel the weight of the problem in the market and realize that you are the one to solve it- because of your ability, your passion, and your plan. You want investors to be excited about the problem(s) that can be solved by your product and what this will mean not only for their bottom line, but for the future. Start by focusing on the industry itself, the problem, and the existing solutions that exist (if any), and who you are targeting- what are the specific pain points of your target market and how will your startup solve these?
Outline your roadmap for success- include key milestones and how the funding will be used to meet these milestones (both short-term and long-term- you want them to see your company’s long-term potential); what is your specific plan on how you will attract investors, and customers? Include your founding team’s ability to build and execute the vision (leadership roles, past successes, exits).
TRACTION AND PROFITABILITY
With pre-seed rounds, you are focusing on the opportunity and the team. When seeking seed capital, founders need to be able to illustrate ‘traction.’ Rather than just showing financial projections, investors are seeking early signs of success. Founders can demonstrate this by presenting data on waitlist sign-ups, preorders, even high conversion rates from landing page engagements (downloads, e-mail signups, video or webinar views, etc.). If you can provide investors with not only your plan to attract users, but also show how it led to the acquisition of new users, that’s gold, as it helps demonstrate consistent and sustainable growth. Even if you don’t have a ton of customers just yet, if you can include data on daily/monthly active users, time spent engaging with your product, repeat purchases/loyalty and how it has increased over time, this provides investors with insight into your brand’s growth. Ideally, you can include customer acquisition costs (CAC) and show how these are less than the customer lifetime value (CLV), if your startup has been converting users into paying customers; this illustrates a sustainable business model. At the pre-seed and seed stages, investors aren’t expecting a massive customer base, what they are looking for is a clear path to profitability and engaged, satisfied users. Showing steady growth in user base, engagement and/or revenue helps prove that your startup has gained traction in the market. Include statistics to show this growth and any glowing testimonials in your pitch deck, along with your roadmap to success as mentioned above, and you will have a much greater chance of attracting funding in 2024. Been featured in any key industry or tier one publications or spoken at any conferences about your startup? Include this as well, as this adds credibility!
Looking for a fractional CMO who is experienced in helping tech startups through every step of the journey, one who can partner with you to help you validate your startup with extensive market and competitive research, differentiation and a help you strategize a roadmap for acquiring customers? One who has helped clients with their pitch decks and helped them gain press coverage in VentureBeat, Business Insider and other tier one publications? I have been working as a fractional Chief Marketing Officer since 2017 and have helped clients in Fintech, social networking, online games, and high tech. Schedule a chat today, I’d love to learn more about your startup and how I can help you as a strategic marketing partner.