One key to raising a new round of venture capital can generate momentum. This is how you convince an uncertain investor to move from a verbal commitment to a written commitment. And this is how you create a certain aura around your startup that it is one of the hot new companies worthy of attention by serious VC investors. But how do you pull off this feat?
Leverage current trends
One of the most powerful ways to generate seed fundraising momentum is by positioning your startup as part of a hot new trend. For example, this might be a hot new technology that everyone is talking about (like artificial intelligence, blockchain or the Internet of Things). Of course, you have to be careful, here. Venture capitalists like to invest in hot new trends, but they don't like to invest in hot new fads (Remember when everyone was talking about Bitcoin?)
Create a perception of scarcity
This is just Marketing 101 – the way to get people excited about a particular product or service is by creating the perception that there is a lot of scarcity for that product. It's the reason ticket sellers install countdown meters on their websites ("if you don't get your ticket now, it will go to someone else!"), why late night infomercials are so darn effective ("hurry, order now, supplies are limited!"), and why people line up days in advance to get the next great Apple product. So, you can apply this same type of thinking to your next fundraising round ("Hurry, this round is closing fast!").
Never let them know how much you need the money.
It's almost paradoxical, but venture capitalists are more likely to give money to a company that doesn't do it than to a company that does need it. But, if you think about it, it makes sense. Would you be excited about handing over $1 million to a startup that has burned through its initial capital, is running out of runway, and has yet to deliver a single product to market? Wouldn't you instead invest that $1 million in a company that seems to be just months away from profitability? For that reason, you should always create the impression that you are willing to walk away from any deal if it doesn't make sense for the future of your business.
Always follow-up with investors
Getting to "yes" can be a challenge, even for the most successful startups. That's why you need to be continually following up with investors, giving them everything they need to make a well-informed decision about investing in your startup. Most likely, your fundraising round will consist of a handful of investors, so you need to make sure that you have as many commitments as possible as you reach out to new investors.
The good news is that, once you've lined up your first committed investor, it's much easier to generate seed fundraising momentum. Everything will fall into place, and you can wait for the magic of FOMO ("Fear of Missing Out") to go to work in support of your startup.