The magical word to raise money

In Fundraising by Sébastien FluryLeave a Comment

Doing a startup is quite hard. And growing it is harder. And raising funds probably even harder!

You may have heard that there are investors out there who write a check to cool founders with « just » a great idea. It’s time to get back to reality. Don’t dream, it doesn’t happen like this in the real world. Or it is extremely rare. It may have been possible some years ago (I’ve never seen it myself), but I think it is not possible anymore. Or at least in Switzerland. This belief is unfortunately wide spread among wannabe founders. I think it has to be corrected.
In 2014, it has never been easier to “do a startup” (in the web or mobile space), technically speaking. There are so many resources and open libraries you can use to build functional prototypes! Therefore, having only a wonderful paper project (a great business plan, on paper, but nothing built)  doesn’t make you a startup, even not really an entrepreneur… You’re just a smart guy (or gal!) who can make clever strategies and innovate… on paper. I’ve done this years ago. Dream it, but don’t go for it. Fail ;-)!
But let’s go back to funding. If you’re not able to build at least a functional prototype, you probably have no chance to raise any funding. What does it demonstrate, to have a functional prototype?
  1. First, that you’re serious about your project and differentiate yourself from 98% of people who have a « revolutionary » idea but never start anything.
  2. Secondly, that your team can work together.
  3. Third, that you can execute a plan and deliver some results.
  4. And finally, if you’re really able to build something of quality (even a Minimum Viable Product now has to be qualitatively high enough).
Now you have a MVP. Great. Did you talk to customers before or during the process of building the product? If no, you’re just a team of geeks (or nerds?) having fun pretending to do a startup.
Most of the time, it is not enough.
What you need is some customer validation, some market proof. For this, you have to go out of your comfort zone and go meeting customers. OK, you have 1-2 customers (or a few hundred if you’re in a B2C mode), even ready to pay?
Amazing, really. Congratulations! Most startups never reach this milestone. You’ve bootstrapped like crazy (OK, you’ve taken money from your family or from friends – which is not always a good idea) and now it will be easy to raise enough money to scale up your business. You have plans to scale, so it is just a matter of financial means… Really? You may have found 1-2 early  adopters, but you still don’t know if the sales process is really repeatable (and cheap enough) or not. Many investors will tell you one simple, but desperately frustrating, thing:
We want to fuel the motor, not helping to build it.
Well, how do you raise money then? You have to show the beginning of
imageWhat does it mean? G-R-O-W-T-H. You’re signing deals, it is accelerating. You’ve struggled during months, but now you seem to have reach product-market fit. But how does it happen? Virality? This is another buzz word too often used as a strategy. Virality is not a strategy, it is something you dream about to happen. Everybody recommends you or spread the word and you don’t have much to do to encourage it.

You can continue dreaming it. Or you can engineer it. You may have heard about the “Growth Hacking” movement. Invented by Sean Ellis, this expression means a marketing technique using creativity, analytical thinking and social metrics to sell products and gain exposure. For Sean, a Growth Hacker is “a person whose true north is growth. Everything they do is scrutinized by its potential impact on scalable growth”.

How do you learn it? There are of course plenty of blog posts you can find on the web. And from 2 months, there is even a book (Traction Book, written by Gabriel Weinberg and Justin Mares) gathering interviews and sharing tips and examples from over 40 successful Growth Hackers, like superstars Andrew Chen, Noah Kagan, Dharmesh Shah, etc.

It is a must-read. Discover the Traction Book. You can have it on Kindle, audio or get your hardcover (however, it is already the second printing). What are you waiting for? Go learning how to get traction!