Raising Startup Money: How To Generate Funding To Get Your Business Off The Ground

One of the most important roles as a startup CEO is to raise money to get the business moving and off the ground. Investing the right amount of time in generating funding is critical, and like most things in life, hard work and thoughtful preparation are paramount to increasing the chances of success.

When initially setting out to raise money, executives will be in one of three situations. If the company is in a huge space, all of its charts are up and to the right and it is not looking for a high valuation, it will be relatively easy to raise money. It will be moderately more difficult to raise money if the business is in its seed or A-round and the principals have a solid background. These individuals might have either come from a top college; served in a senior role in a hot, relevant company; or have successfully sold a company in the past. In the last situation, the CEO has none of the above and it will be very difficult for them to raise funds.

Until 2014, when my last company was acquired, I always found myself faced with the third situation, and it was never easy. Raising money, like any project, requires a list of tasks and a timeline to complete them. I turned to a plan that I have used successfully many times. It has two main components: preparation and pitching.

The first and most important element is preparation, so CEOs need to invest enough time to do this properly. If you dedicate most of your time and energy to preparing, you can have a good pitch ready in one month. However, this is not an overnight task.

The second key element is pitching. Start with the “guinea pig” pitches. The idea behind these meetings is to learn whether the message is clear, to get more questions to add to a master Q&A list and to learn about any objections to a pitch/product/company. I found this step to be critical in the fundraising process.

Now for the pitching roadshow. You will hopefully have several meetings a day to pitch to investors. All of these meetings will be largely the same, so if you prepared well, you will rarely be surprised. Keep in mind that this can be a challenging time for two reasons. First, this process is very important for you and your company and the stakes are high. Second, you are mostly hearing “no” after “no” from prospective investors, and it’s not easy to receive persistent rejections. During this time, remember what my old chairman always told me: “You only need one to say yes.”

Once you receive a term sheet, there is still a long process before signing a definitive agreement — and that’s another topic entirely. But if you’ve made it that far, rest assured that your chances of closing a deal are very high. The process of raising money takes a lot of time and energy. But if you put the necessary time and effort into it, you will significantly increase your chances of success.

Guy Goldstein is the CEO of Next Insurance, a California-based insurtech company.