With the right approach and strategies, it is possible to secure the necessary funding, even without prior connections.
Jackson Cunningham, the founder of tuft + paw, a direct-to-consumer cat company, discovered effective strategies to secure funding for his startup without any prior connections to venture capitalists (VCs). He emphasizes the importance of reaching out to a network of fellow founders and utilizing other outreach techniques, such as personalized messages. Cunningham advises aspiring entrepreneurs to maintain persistence, patience, and proactive efforts throughout the fundraising process, which often demands more time and effort than initially anticipated.
Raising money for a startup can be a difficult challenge, mainly if there is no established network of VCs to rely on. Nonetheless, it is possible to secure the necessary funding with the right approach and strategies, even without prior connections.
Tuft + paw serves as a living testament to this concept. In 2022, the company found itself in a critical situation where urgent funds were needed to address supply chain and inventory requirements. At that point, Cunningham had not built a network of VCs. Nevertheless, he was determined to secure the capital needed to sustain the business. Ultimately, he successfully raised $2 million in six months by implementing the strategies outlined below.
Recognizing the challenges associated with fundraising without an established network, Cunningham hopes that sharing his story and advice will assist others in navigating the fundraising landscape more effectively. However, he emphasizes the importance of setting realistic expectations, as the process requires considerable time and effort.
Fundraising Requires Time and Patience
Raising funds always takes longer than expected. Even if you are acquainted with investors, it is wise to allocate a minimum of three months for the process. For those starting from scratch, as Cunningham did, it is essential to be prepared for approximately six months. Patience and persistence are vital virtues to embrace throughout this journey. Dedication and consistent follow-ups are crucial. In Cunningham’s case, he spent nearly 50% of his time in meetings and following up with potential investors. Fundraising is an ongoing process that necessitates dedication, multiple sessions, and timely updates to build trust and keep investors engaged.
Give yourself a runway: Ideally, aim to raise funds for a runway of at least 18 months. This ensures a comfortable buffer and prevents the need to constantly chase funding every six months. Raising capital is demanding, and having an extended financial runway allows you to focus on business growth without enduring constant financial stress.
Craft an Engaging Pitch Deck
A compelling pitch deck is crucial for capturing investors’ attention. Keep it simple, direct, and transparent. Extravagant visuals will not deceive investors; they can discern authenticity. Focus on showcasing traction, growth, and your unique value proposition. Seek inspiration from tuft + paw’s online example when creating an effective pitch deck.
Leverage Your Founder Network
Founders often serve as valuable connections to VCs. Reach out to fellow founders and request warm introductions to any VCs they may know. Personal referrals hold significant weight in the startup ecosystem and help establish initial trust and credibility.
Build a Database and Connections with VCs
Create a Google Sheet and compile a list of as many VCs as possible in your industry or category. In tuft + paw’s case, the focus was on direct-to-consumer brands, but tailor the list to your specific niche. Use LinkedIn to connect with these VCs and attempt to secure warm introductions through mutual contacts. If there are no shared connections, there’s no need to worry. You can directly reach out to them using tools like Rocket Reach to find their email addresses. Craft personalized and compelling messages that demonstrate your knowledge of their investment focus and genuine interest in their expertise.
Building Relationships: Remember that developing relationships with VCs takes time. Do not expect immediate results after just one meeting. In Cunningham’s experience, it typically takes at least five sessions with a particular VC before making an investment decision. So, be patient and nurture these relationships. Address their concerns, answer their questions, and demonstrate your industry knowledge and growth strategy. Show them why your business stands out and how it aligns with their investment thesis.
Effective Outreach Strategies
When contacting VCs, concise emails are the preferred communication medium. Craft brief messages that highlight your traction and include a specific ask. This approach cuts to the chase and increases the likelihood of receiving a response.
For instance,
“Hi, Dave,
We’re a direct-to-consumer cat brand that achieved 100% year-over-year growth, with our most recent month generating $1 million in revenue. We’re finalizing a $1 million raise. Any interest? Deck attached.”
The Power of SAFE
When it comes to paperwork and legal fees, utilizing a Simple Agreement for Future Equity (SAFE) is recommended. This format simplifies the process, reduces legal costs, and lets you focus on your business rather than getting caught up in complex legal negotiations. Cunningham strongly recommends using SAFE to streamline the fundraising journey.
Explore Alternative Funding Sources
While VCs are often the go-to option for startup funding, you should pay attention to alternative sources, such as angel investors, crowdfunding platforms, or small business grants. These avenues can provide access to capital and additional support for your business.
Cunningham reiterates that fundraising will almost always require more time and effort than expected. His ability to secure funding for his company was a result of persistence, patience, and proactive actions, even when facing obstacles or frustrations.
Allocate ample time for the fundraising process, leverage your founder network, create a compelling pitch deck, and craft personalized outreach messages. Be prepared for multiple meetings and invest in building relationships with potential investors.
Remember, fundraising is a journey, and by following these strategies, you can increase your chances of securing the funding necessary to propel your business forward. Best of luck in your fundraising endeavors!
Jackson Cunningham, the founder of tuft + paw, possesses over 10 years of e-commerce experience and serves as an expert in direct-to-consumer (DTC) and consumer packaged goods (CPG) industries.
