22 October 2016
Startups seeking money should make sure that they approach the right VC funds and also explain why they deserve special attention. Photo: Xinhua
Startups seeking money should make sure that they approach the right VC funds and also explain why they deserve special attention. Photo: Xinhua

Surviving the funding chill: Tips for startups

Pessimism surrounding the global economy has made the venture investing community turn more cautious. This has led to many startups facing difficulties in raising funds.

So, what should the startups do to overcome this problem? 

Well, let me share some fundraising tips here that should be of help to Hong Kong startups.

A young entrepreneur recently told me he sent his business plan to several funds via personal channels, but didn’t hear any feedback for a long time.

After taking a close look at the startup, I realized that the company has potential but it needs to undertake some optimizations if it wants to achieve its goals.

Firstly, the startup actually sent its business plan to the wrong VCs.

Generally, VCs will prefer projects in certain industries, depending on the specialization of the investors. I know some VC funds which only invest in environmental protection businesses in certain regions or focus on business-to-business companies only.

Hence, it is important for startups to ensure that prior to making their pitches to VCs, they should first learn about what the VC funds are interested in.

It’s also better to know whether the funds are actively searching for targets, among other things. Founders of the startups should devote lot of effort to get updated information.

I once met a startup which did quite good “due diligence” on the funds. The founder was even aware of the personnel changes at fund houses and the bosses’ investment style and preferences.

Another thing that startup entrepreneurs need to bear in mind is that they should hone their presentation skills.

I notice many founders spend too many slides solely to discuss the industry fundamentals. For example, an online payment startup used one-third of its presentation time to talk about the online shopping and payment businesses.

Frankly speaking, the investment team may already be more knowledgeable about the industry than the founders, as the VCs may have reviewed hundreds of thousands business plans in the sector.

So rather than explaining too much about the market, it is wiser to point out what will make your company different or how you plan to disrupt the existing market, or give more information about the background of your team members.

Investors are human beings. They scan the business plans and tend to quickly junk proposals from those who fail to explain their business in a simple way.

So while raising funds for your startup, focus more on making the highlights simple and clear in the presentation slides.

And make sure you make your pitch to the right funds.

This article appeared in the Hong Kong Economic Journal on March 17.

Translation by Myssie You

[Chinese version 中文版]

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Director at Spring Capital

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