Many of the 16,000 startup founders across the GAN and GSSN community are wondering how to best raise capital in today’s environment. From our data on where startups are raising money in the current startup landscape, most are raising funding from venture capitalists (VCs) and angel investors.
We shared in a recent blog post that startups coming out of accelerators are raising $414K, on average, from VCs and angel investors after graduating from accelerator programs. More than half of these investments (59%) come from investors who reside in close proximity (within 100 miles) to the startups they invest in. Whereas angel investments made up a larger proportion of post-accelerator funding 18 months ago, VCs now have a slight lead – 38% to 36%.
For startup and venture studios, the companies leaving these groups are raising $2.4M, on average, in the twelve months after leaving the studio. Additionally, 64% of their funding comes from investors who reside within 100 miles of the studio’s offices. And who is funding these startups? 33% of the time it’s VCs, 29% of the time it’s angel investors, and 11% of the time it’s the studio itself.
But what does all of this data mean for you?
For one, capital is flowing! There is ample opportunity for you to raise money, even as we continue to navigate the COVID-19 pandemic. Currently, there is $152B in dry powder from VCs. Dry powder is the amount of money that has been committed from investors to VCs but still hasn’t been used by VCs.
A second key takeaway is that your chances of finding investors for your startup are better if you focus your efforts locally, especially after finishing an accelerator program or studio. The real challenge, though, is actually connecting with the financiers who you want to be involved in your business.
And this right here is the question I get from hundreds of startups a year – how do I find investors in my community? To that end, we’ve curated a collection of resources to help you prepare for and win funding from local investors that will help you grow your startup in 2021.
For Raising Capital from Local VCs
If you’re going to raise money from a local VC, below is what I’ve found to be the best advice in terms of building your knowledge, finding investors, and preparing for meetings.
Building your knowledge:
- The VC fundraising process: This Crunchbase eBook is an easy-to-digest overview of startup financing. Some of the content may be too simplistic for you, depending on your past fundraising experiences. But if you need a refresher, this is where to start.
- Typical VC deals: This Forbes article provides a comprehensive look at how VC deals are typically structured and executed. Beware, it’s dense.
- Resource dump: Compiled in 2019, this Medium article offers a treasure trove of resources to learn anything you’d ever want to know about VC funding.
- Your roadmap: Fast Company put together this thorough step-by-step guide to getting in front of the right investors for your business.
Finding local VCs:
- Crunchbase: Use the platform’s Investors search feature to find VC firms located in your area. On the left side of the screen, you can filter for “Venture Capital” and then type your city in the search box.
- Gust: Create a profile and share some information about your startup so that Gust can provide you with a comprehensive list of potential investors who match your needs.
- NVCA: Search through the site to find resources and data pertaining to VC activity in your region. Many times, NVCA reports will highlight VCs that are especially active in certain geographic areas.
- Ask for connections:If you are having trouble finding VCs in your area through the sites above, just ask your accelerator or studio. They are usually connected to all the investors in the area. You can also ask other entrepreneurs and lawyers who work with startups. I’ve found those two groups to be especially great at pointing you in the right direction – and being able to make great connections.
- Conduct an online search: I know this sounds too easy, but don’t forget to use your favorite search engine. Type “venture capitalists in <your city>” and start digging through search results. But, don’t reach out cold. Go on LinkedIn and see who can connect you to that VC. Even if it requires a connection from a connection, doing the work to be referred will grant you a much, much higher chance of scoring a meeting.
Preparing for VC meetings:
- Building your deck: This Inc article highlights the 8 must-have slides you need in your fundraising deck.
- Examples of successful decks: Piktochart compiled 30 pitch deck examples from some of the most successful startups in history. Use this for inspiration.
- Explanations of key slides: In this article, Kruze Consulting shares successful pitch deck examples and provides clear explanations on how to approach key slides.
For Raising Capital from Local Angel Investors
Here is a similar set of resources focused specifically on approaching local angel investors.
Building your knowledge:
- The angel fundraising process: Again, this Crunchbase eBook is a great place to start on the basics of angel investing.
- Angel investing FAQs: In this Forbes article, Richard Harroch covers the questions he gets most often from startups interested in approaching angel investors.
- Angel investor trends: Search each of the 9 investor platforms listed in this article to see what angel investors are currently funding. You may find specific individuals who appear to fund startups in your niche or industry.
Finding local angel investors:
- Angel Capital Association: Select your region to see if any angel groups exist in your area. This is a great way to start.
- Crunchbase: Use the same search feature described above with the exception of filtering for “Individual/Angel” rather than “Venture Capital.”
- Gust: When creating your profile on Gust, select Angel Groups instead of VCs to find strong matches for your startup.
- Ask around: Bug friends and family for introductions to people who might be interested in investing in your business. Keep in mind that many angel investors prefer to invest within industries that they are familiar with or have expertise in.
Preparing for angel investor meetings:
- Before, during, and after: This practical article from Hack Fundraising tells you how to prepare for and execute a first meeting with an angel investor successfully.
- For VC and angel meetings: Another great article from Richard Harroch at Forbes about the 15 key topics you want to cover in any investor meeting.
- 10 commandments: This is a fun post from Startup Grind that emphasizes some of the points made in other resources mentioned above and lists other “must-dos” when it comes to pitching angel investors.