A total of $11 billion was invested across 1,222 Series A investments in the United States in 2016, according to CB Insights. The last quarter of 2016 saw the lowest number of Series A deals since Q1 of 2011, and even though the amount invested in Series A rounds has been trending upwards over the last few years, the number of Series A deals is on the decline. View the data chart by CB Insights.
Fewer companies are successfully raising Series A rounds, but those that do are raising more money. If you are planning to raise money in 2017, here are a few things you should start doing now to improve your chances of success.
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Leverage and grow your network: Successful founders need to surround themselves with smart people who understand their industry and its challenges, and can offer the right guidance. These people add credibility to the company and the founding team, and can introduce you to investors and influencers. If you haven’t been able to find well-connected, experienced advisors, you need to do so now. Accelerators and incubators are generally very good at providing access to a network of mentors and investors.
As you build your network, you shouldn’t only be focused on connecting with investors, it’s also important to build relationships with other founders who have successfully raised money. Their experience can be invaluable in helping you decide which investors to target.
While it may appear daunting to grow your network, the age of social media has made it difficult for founders to come up with an excuse—LinkedIn, Twitter and Facebook now give founders a chance to directly engage with investors and key thought leaders. Even if they don’t invest in your company now, they may invest in later rounds, and it never hurts to have a wide network.
Another great way to way to grow one’s network is to attend startup focused events. Most cities that are considered startup hubs have a plethora of networking events that can be fertile ground for making valuable connections. Get out and go!
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Know your metrics and which ones to focus on: One of the key factors investors will consider is whether founders are focused on achieving the right metrics for their business. It is easy to get carried away pursuing vanity metrics, but doing so by ignoring the “right” metrics can make or break your company. For a deep dive into metrics and what they mean, read 16 Startup Metrics and 16 More Startup Metrics from Andreessen Horowitz.
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Align with co-founders: One of the most common reasons companies fail is a falling out among co-founders. Before you decide to raise funds, make sure you see eye-to-eye with your co-founders. What is each founder’s long-term vision for the company? What does giving up control to investors mean for the future of the company, the founders and their roles in the company? These are just some of the questions that you need to discuss. For a deep-dive into these questions, read The Tough Questions You Must Discuss Before You Take the Money.
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Acknowledge your risks, and have a mitigation plan: It is often said that founders have to be wildly optimistic, otherwise they wouldn’t start a company. At the same time, it is important to be grounded in reality. At each stage of development, founders must thoughtfully identify the top risks facing the future growth of their companies and implement strategies to mitigate those risks. These could be market risks, product risks or regulatory risks. A founder who can inspire confidence in his company’s ability to identify and tackle short and long-term risks is more likely to raise funding from institutional investors.
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Get market and customer validation: Although seed and even pre-seed money is more readily available to startups today than in past years, the bar for a Series A round has been raised higher than ever before. A few years ago a pre-product company may have been able to raise a Series A round, but that is less likely today. A company should not only have a built-out product, but also proof that the product is or at least has the potential to be widely adopted by the market. Founders who validated the fact that their products address a genuine need in the marketplace, those who have tested their go-to-market strategies, and those who have some proof that their strategies will work, are most likely to successfully raise a Series A round.
