Beyond Traditional Venture Capital: Lessons for Startups
At Startupfest last week in Montreal, we had the opportunity to learn from startup leaders across Canada (and beyond). We even went on a few (informational) dates with startups to hear what issues they cared about. We were particularly engaged by Jenny Fielding, Managing Director of Techstars, whose talk was relevant for every startup founder. The discussion centered around early-stage fundraising, but not in a typical “find a venture capitalist to fund your Series A”-type conversation. It was highly non-traditional!
At KISSPatent, we’re dedicated to providing our community with the latest news on innovation and startups. That’s why we summed up the three most important takeaways from the fundraising talk here (and to save you the trip to Montreal).
Tip #1: Traditional doesn’t mean it’s the right fit.
Your startup is unique—so why should your funding strategy stay the same? Jenny opened her talk by flat-out stating that traditional venture capital funding “may not be right for you.” There are tons of alternative and micro funds out there that may fit better with your startup niche — so why limit yourself to pitching only the Sequoia Capital funds of the VC world? Take a moment of introspection and define your startup’s niche. Then, take a deep breath and start exploring your network to see whether there’s a fund that supports your startup’s niche. In sum — think of the longtail funds, and not only the huge VCs.
Tip #2: Define what type of business you’d like to build.
Not every business is going to become a unicorn, and that’s okay. Jenny shared her own personal experience of building her company and exiting it after 3 years — a success in her eyes, but to others, she was a failure because she didn’t continue to achieve unicorn valuations. Let’s repeat that point: not every startup will be the next unicorn. If your startup isn’t destined to become the next billion-dollar valuation, consider the pace at which you’d like to build your business and the opportunity for growth that exists in the market. From an investor’s point of view (depending on the fund), many are happy to double or triple their initial investment value — which leads us to our third tip.
Tip #3: Consider what drives the funds to which you’re pitching.
Jenny pointed out that the key to success is pitching the right investor the right deal. That’s right, some funds may turn you away, but it doesn’t mean that your startup is worthless. Do your research and dig beyond the funds that are on the front page of Crunchbase. A smaller seed fund could be your next investor, if you’re willing to put in the time and effort into researching other opportunities. Understanding what drives your investors will also make communication far easier when you do secure an investment — a fund may be more or less interested in certain areas of your startup’s progress depending on their personal goals. Regardless, make sure to continue to communicate with your investors through monthly updates (even if the news is bad).
In conclusion, we encourage you to look beyond the big venture capital funds and find your niche. If you’re willing to invest valuable time and money into finding your market niche, you should also consider investing time into finding your investor niche. There are more options available for investment than you may think if you’re willing to do the research.
As you reflect on what the main drivers for your startups’ success are (and we guarantee that a VC will also want to know the answer to this question), we also encourage you to look at your startup holistically.
At KISSPatent, we firmly believe that patents are a key component of startup success. That’s why we put together an entire, free Learning Hub that has even more resources on how to secure funding for your startup, why patents matter to investors, and the top startup trends of 2019.
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