How to attract venture capital

Raising money for your startup can be tough, but understanding fundability will help you attract venture capital. Fundability means how appealing your business looks to investors, like those from venture capital firms. It includes things like your business plan, your team, and how well your idea works. Here’s how to improve your startup’s fundability and get the venture capital you need

1. Show you will be a homerun investment

Before asking investors for money, make sure your business is ready. Equity investors look for:

• Proof Your Idea Works: Have a product or a service that’s been tested, like a Minimum Viable Product (MVP), or show positive customer feedback.
• Clear Business Plan: Show investors where your business is headed and how it will grow.
• Strong Team: Having experienced people on your team makes investors trust you can make your business succeed.

Making sure you have these things in place will help you stand out to equity investors. You can learn more in this OpenVC guide on fundability.

2. Understand equity investment means shared ownership

When raising venture capital, remember that you’re not just getting money—you’re also giving up part of your company. Investors expect:

• Shared Decision-Making: Investors will want to have a say in how the business is run.
• Returns on Investment: They expect to make money within a certain amount of time.

Organized investor relations will make you stand out from the rest. This starts the moment you decide to launch your capital raise: if someone says “No, but keep me posted” put them on a list for prospective investor updates or connect them to your business on Capwave. This will set you up for success in your next raise. 

3. Use negotiation to your advantage in capital raising

Negotiating with investors is a big part of raising money. A key question to ask is, “Who needs this deal more right now?” Knowing this helps you get better terms. To increase your chances:

• Create Demand: Make your equity offering attractive to multiple investors, so you can choose the best deal.
• Understand What Investors Want: Investors want to lower their risks and increase their rewards, just like you.

Follow the state of the market on Carta to know your negotiation power. 

4. Balance fundraising and getting traction

While you’re raising money, don’t forget about running your business. Fundraising takes time, and that can slow down your company’s growth. To avoid this:

1. Delegate Tasks: Ensure key team members take charge of business operations while others focus on fundraising. Effective delegation keeps both processes moving smoothly.
2. Prepare Materials Early: Have all your fundraising materials—pitch deck, financials, and data room—fully prepared before starting, so you’re not distracted by last-minute updates.
3. Focus on Key Metrics: Track and optimize your business’s key performance indicators (KPIs) throughout the fundraising process to maintain growth and demonstrate business health to investors.

Balancing fundraising and business growth is essential to attract the best investors while keeping your company moving forward.

5. Get help from angel networks and experts

You don’t have to handle the fundraising process alone. Experts can help you make better decisions:

• Advisors and Angel Networks: Find mentors who have raised money before to guide you.
• Legal and Financial Experts: Use professionals to help you understand deal terms and make smart choices.

By working with experts and angel networks, you’ll be more likely to secure funding and build partnerships with venture capital firms.

Conclusion: boost your fundability to attract the best VC firms

Improving your startup’s fundability is about making your business a good investment for venture capital firms. By proving you’re funding-worthy, understanding shared ownership, using negotiation wisely, balancing your business and fundraising efforts, and seeking expert help, you’ll increase your chances of securing venture capital.

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