If you are reading this blog, you are most likely thinking: how should I raise money for my startup? At Kiwibot, we’ve asked ourselves this question many times, and this year raised $7.5 million in Pre-Series A funding from five investors. We also expanded our deal with Sodexo, a foodservice management company, to further expand our robots’ reach across college campuses and cities.
You may have proved your model and products, grown due to the generosity of friends and family (or bootstrapping), and been rising through the ranks of your competitors. But what next?
Every successful startup has reached that point where they’ve outgrown their initial success, and it’s time to raise capital through rounds of external funding.
Startups often engage in "seed" or angel investor funding from the very beginning, as we did at Kiwibot. But these funding rounds are followed by Series A, B, and C, which allow outside investors to invest in a growing company in exchange for equity or partial ownership.
Here’s how you know it’s time to look for investors and how the process works.
You know you are ready for funding when you have a fast-growing customer base and business operations are expanding across the globe. For example, at Kiwibot, we went from one product – delivery – to several new developments, including city mapping. And with 200 employees, we knew it was time.
Now, look back at your company over the last 12 months. What do you see? If you have a valid business model that can scale quickly, funding might just be the icing on the cake. And by valid business model, we're talking about defining the target audience and market segment, the value of the product, market size and share, and doing alpha and beta testing.
Your startup needs to prove financial stability and generate enough revenue to entice investors. Ideally, you’ll want a triple income increase from the previous year. The faster and more consistent your growth, the more open venture capitalists will be to fund you.
Now, the stages of investment – series A, B, and C – are necessary ingredients for a business that realizes bootstrapping or surviving off friends, family, and the depth of their own pockets will not suffice. These stages of startup funding can turn an ingenious idea into a global company ripe for an IPO.
However, before any round of funding begins, analysts undertake a valuation of the company: Key distinctions between funding rounds are associated with the valuation of the business and growth prospects.
Felipe Chávez, our chief executive and co-founder, has found that initial investors often come from founders’ own networks. It's more cost-effective as people close to you are more likely to offer advantageous deals than an investor or bank.
However, when looking for larger chunks of funding, you could participate in competitions.
Forbes suggests searching this in Google: “sector + startup + funding.” This combination of words will lead startups to relevant competitions, accelerators, or incubators.
Then, try and attend major conferences and events for your sector or even large national startup events. For example, look for the Y Combinator events and bootcamps focused to help startups to really take off and be in better shape.
At these types of events, you can meet venture capitalists: investors who provide companies with capital in exchange for an equity stake, a place on the board of directors, or a percentage of company profits. They can be individuals or large venture capital firms who tend to choose startup companies with high growth potential.
To speak their language, you must have your finances in order, a clear business plan, and graphs and images at the ready. In our case, we also knew we wanted to find investors who showed a clear interest in advancing safe and equitable mobility with zero-emission solutions.
When you are pursuing a round of venture capital (VC) funding, the presentation is called a pitch deck.
For the ultimate pitch deck, you may be imagining 20 slides with excessive information about your company background, growth, finances, and business objectives.
Although all those resources will be needed, you also need to start with the basics: Have a 30-second pitch ready. Practice it in the shower, while you brush your teeth, or as you walk your dog, and make sure you follow a no-fluff, no jargon structure. Even practice in an elevator to see how much time you have to create a connection with someone.
Then, when you’ve nailed that, you can expand on the problem you are solving, why you are unique or different from competitors, your return on investment (ROI) and financial projections, and specifics about the management team.
If you clearly show investors the potential of your startup, you’ll be surprised how they jump at the opportunity and get on board with your mission – it takes an emotional connection. For example, Sarosh Mistry, chair of Sodexo North America, recognized the vital need for autonomous delivery and expressed how they are “pleased to be at the forefront of this emerging market” alongside Kiwibot.
Kiwibot’s co-founders want this message to stick with you: Investors from venture capital firms want to support entrepreneurship and believe in your business goals – but they also want to gain a profit. That’s why you must learn how to pitch your startup idea and be in the right place at the right time to land your next funding round.
For more information about funding rounds or Kiwibot’s personal journey, keep an eye out for our next blogs!