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How can one attract investments for their project? Insights from those who successfully raised a round in 2023

fundraising

Fundraising is a current business process that's on the radar for many entrepreneurs and startups. It's not just about laying out your idea; it's also about convincing investors of its potential.

Hey there! I'm Mykola Pryndiuk, currently serving as the Social Media Manager at MetaLamp. Back in 2021, I jumped on board with Game Inn, an international startup in the GameFi industry. By then, Game Inn had already pulled in over $500,000 in investments and had plans to scoop up an additional $1.5 million in 2022-2023.

During that time, I was actively involved in the fundraising hustle. Still, we faced a few challenges along the way. So, I decided to dish out my personal experience in this article.

I reached out to a few experts in my investor and venture capital network. They shared their own stories, experiences, and mistakes and answered my questions. I'm confident that this will be beneficial for those just starting out in fundraising and for those who have run into specific challenges along the way.

While there's a ton of pre-made content, communities, projects, and courses online about fundraising for startups, many of them come off as more like promotional material or "do this right, avoid doing it wrong" guides.

In this article, I won't be going over the basics of fundraising, like pitch decks, datarooms, or where angels get their wings. Instead, I suggest taking a look at a series of genuinely helpful tips from real people.

Also, towards the end of the article, I'll share a list of useful services for attracting investments.

Get to know the experts:

Denis Issaulov, CEO and founder of OTCMarsBase.io, brings 6 years of experience in the crypto sphere, boasting 3 successful product launches. He raised $505,000 in 2023 over a period of more than 6 months for MarsBase and aims to secure $1.6 million by year-end.

Edem Appaz, Product Owner of DeGuard, led his team to raise approximately $5 million in a seed round for the Game Guild project.

Artem Ovchinnikov, Co-founder of Fractal Accelerator, pulled in over $16.1 million in business investments.

Planning

The initial groundwork for attracting investments was our first topic of discussion.

Planning is a key piece of the puzzle, and every founder needs to grasp not just the why but also the how of allocating funds in each fundraising round—step by step, stage by stage.

Fundraising is a pivotal element of the broader business development strategy. In the realm of venture investments, a long-term perspective is always critical, emphasizing the strategic aspect.

When I embark on a funding round, what are the specific objectives? Why am I targeting this particular investment amount? What are the key subsequent steps?

The investor's decision hinges on your responses. Hence, adopting the Joker's approach of 'I'm a dog chasing cars, I wouldn't know what to do with one if I caught it' simply doesn't cut it in the world of venture capital.

Alexandr Belov
Co-founder & CEO of Prosto VC

During my discussion with the experts, I shared an interesting concept I picked up from the international venture club, Prosto VC.

Every founder seeking funds should always be ready to answer the question: "Now that I've secured the requested funding for my project, what are the next steps I'll take?"

I asked each of them to provide insights on the accuracy of this statement, drawing from their own experiences.

It's crucial to pose this question to yourself even before you kick off fundraising, and the goals can vary depending on the development stage of your project.
Denis Issaulov
CEO and founder of OTCMarsBase.io

I'll also throw in that it's just as crucial to map out different scenarios for the future development of your project. In other words, a founder should have not just Plan A and Plan B, but also C, D, E, and beyond.

I've got a clear plan for every dollar when I'm fundraising. The thing is, when you reflect on the journey later, you understand: it could have been done this way, spent less here, invested more there, and so on. But that's just an inherent part of entrepreneurial activity, experience, and progress...
Denis Issaulov
CEO and founder of OTCMarsBase.io

As I mentioned, everyone has their own path and level of awareness. And for some, this may seem like a fairly obvious piece of advice.

It's pretty hard to believe that a project founder could pull off a successful round without having a grasp of the milestones, roadmap, burn rate, and scaling operations they're about to face. It's also unlikely that a sensible investor would jump into an investment round without sensing this confidence in the founder's eyes.
Edem Appaz
Co-founder & Product Owner at DeGuard.io

Based on my personal experience, I can confirm that such investors do exist, particularly among angel investors. However, assessing their adequacy is a complex task—human relationships, emotions, and the trust factor play a more significant role in this context.

If the product development, employee hiring, and marketing processes are already planned and underway, I would allocate a portion of the funds raised to continue the fundraising process. It's a process that can't be halted, much like sales.
Artem Ovchinnikov
Co-founder of Fractal Accelerator

Contemplating the search for investments when a project has already run out of funding can have a devastating impact on its existence. Naturally, this doesn't apply to cases where a startup is just starting from scratch.

The Most effective strategies for attracting investments

According to Forbes, only 1% of startups manage to secure venture investments, with over half of them (57%) relying on personal loans and credits, according to Fundable.

Considering the immense number of startups and the continuous growth in their ranks, the competition to be among that exclusive 1% is incredibly fierce.

So, how do you capture investors' attention for your startup and ultimately nurture your own "unicorn"?

There are countless methods and marketing strategies for initial fundraising: cold outreach, offline and online events, pitch sessions, demo days, accelerators, onboarding partners with their networks—these are just a fraction of what project founders employ.

I asked our experts which of these methods proved most effective for their projects and compiled a TOP-9 list with their comments. In one way or another, all the points are interconnected.

1. Networking and partnerships

The most effective approach for fundraising was networking, combined with an agency distribution and pitching system tailored for our fundraising efforts. We set aside a significant chunk of our intended fundraising as a 'rais fee' or 'ref-share fee' for agents and brokers with diverse expertise. This strategy enabled us to delegate tasks and essentially amplify the impact and reach of our efforts.
Edem Appaz
Co-founder & Product Owner at DeGuard.io
It's essential to forge connections and cultivate partnerships with founders and projects in your industry, particularly if they've already secured investments.
Artem Ovchinnikov
Co-founder of Fractal Accelerator

2. Event presentations

Demo days, pitches, and speaking engagements at events (including as an expert speaker) proved to be the most fruitful. The aim of online events is primarily to build strong project recognition, a goal we successfully accomplished. Overall, it's great to make an effort to become a speaker at different events and pitch your expertise.
Denis Issaulov
CEO and founder of OTCMarsBase.io
One out of three presentations (expertise-based, not pitching the project) closed a deal worth $90,000.
Artem Ovchinnikov
Co-founder of Fractal Accelerator

3. Referral and Partnership Programs

Strategic partners and venture 'facilitators' yielded impressive results. One of them generated over 60 chats with VC.
Denis Issaulov
CEO and founder of OTCMarsBase.io

Diving into this strategy, exploring its pros and cons, deserves a dedicated article. If you want us to delve further into this topic or if you have insights to share, reach out to us in the 'Submit Material' section, and we'll be sure to get in touch!

4. Warm introductions

Securing an introduction to an investor through a founder in your industry who has already attracted investments. The chances of the investor checking it out more promptly are significantly higher than with a cold outreach.
Artem Ovchinnikov
Co-founder of Fractal Accelerator

5. Consistent communication and reporting traction to existing and potential investors

A content investor brings new investors your way. For this to be effective, your initial investors should stay informed about what's happening in your project. Therefore, maintaining regular communication and even providing weekly traction reports would work exceptionally well.
Artem Ovchinnikov
Co-founder of Fractal Accelerator

6. Accelerators

A solid option, but not all are a good fit. You should primarily focus on those accelerators that have launched Tier-1 and Tier-2 projects.
Denis Issaulov
CEO and founder of OTCMarsBase.io

7. Effective traffic utilization

The most straightforward method for attracting investments. You just need to learn how to attract or buy this traffic and use it effectively: target it, leverage search engines, optimize for SEO, engage in seeding... Make sure your pre-registration form is consistently filled out. After that, everyone has their own approach—some close deals for a chat, some for investments, and some simply to network and expand connections.
Artem Ovchinnikov
Co-founder of Fractal Accelerator

8. Cold outreach

Well, you can't go without cold outreach 🙂 But compared to demo days and pitches, the latter yielded much better results.
Denis Issaulov
CEO and Founder of OTCMarsBase.io

9. Project development and reputation

To avoid stagnation, always keep developing your project. Establishing a robust traction is one of the indisputable rules of a successful product. If a startup finds itself in a state of stagnation, it turns into a zombie company.

 

In our case, the deals themselves (our product) helped us attract venture funding the most. Initially, you turn an investor into a customer and partner, and then you sell them investments in yourself.
Denis Issaulov
CEO and Founder of OTCMarsBase.io

Certainly, it's all highly individual, and a lot depends on the industry where you're growing your project, market competitiveness, and several other factors. Therefore, utilize the methods that align best with your situation, considering all the nuances.

 

Critical mistakes

Looking at the numbers, approximately 67% of startups face setbacks at some point in the venture process or struggle to secure subsequent funding. According to Cbinsights, only 1% of startups that have successfully raised a seed round go on to achieve "unicorn" status.

What might be the reasons behind this?

In reality, the reasons for failure can be numerous. To save you from an exhaustive list and to get the cream of the crop, I've asked our experts to share their experiences in making critical mistakes that should absolutely be avoided in your own project!

Edem Appaz:

  • The most significant mistake is dealing with dubious funds and investors in the initial stages out of desperation. There is an abundance of scams in the fundraising and investment market at large, ranging from investing in "black bitcoins" to falling victim to standard fraud schemes like "send a certain amount to our account as proof of readiness."

Artem Ovchinnikov:

  • Never halt the fundraising process, even if you don't currently need funds. Maintain a queue of investors. Assemble a waitlist, establish a network, gather the best offers, and carefully select investors based on the most favorable proposals, etc.
  • Avoid accepting money immediately when it's offered. If funds are proposed, finalize the deal without waiting for a "tomorrow" that could bring changes, be it shifts in the market or fading emotions tied to a particular deal...

Denis Issaulov:

  • There were hundreds of such mistakes... — Engaging with funds without formal confirmation (term sheet).
  • Blurring the lines between clients and investors into a single entity.
  • Overemphasizing the business aspect. "A startup should be capable of generating revenue! Technology should take a back seat" — and indeed it should. However, it's essential to recognize that revenue can be generated through various means. Identify a product positioning that facilitates scalability.

However, technology should contribute to scaling earnings; otherwise, what's the purpose? Initially, we dedicated more time, focus, and funds not to scaling income through technology but to scaling income through human resources. This proved to be a mistake as we lost valuable time.

Yet, on the flip side, we cultivated an extensive networking network during that period.

In essence, each mistake serves as both an error and a stepping stone in the project's development.

  • A mishandled product presentation. For our product launch, we invited around 600 clients to a presentation. With a host, someone transmitting the image, and a guest, there emerged a considerable communication delay between them. The outcome was a prolonged presentation riddled with awkward pauses 🙂

The takeaway for the future: always enlist the expertise of event managers. On another note, it transformed into a quintessentially startup scenario: "The more embarrassing and awkward the launch, the more closely it resembles a genuine startup swiftly pushing boundaries."

These mistakes highlight the crucial importance of being clear, transparent, and adopting a strategic approach in the fundraising process. Understanding and mitigating risks, steering clear of fraudulent schemes, and presenting your project effectively all play pivotal roles in successfully concluding fundraising efforts.

Conclusion

Navigating the landscape of startup fundraising is a multifaceted challenge that demands a strategic mindset, meticulous planning, and a thoughtful utilization of available resources. Experts underscored the significance of initial groundwork, strategic foresight, and a diverse range of methods to achieve success in the fundraising arena.

Drawing from the wealth of expert insights and data analysis, one can deduce that a triumphant fundraising journey for a startup necessitates not only a groundbreaking idea but also strategic acumen, perseverance, a realistic risk assessment, and adept process management. All of this must be tailored to accommodate the unique attributes of the project and respond to the ever-changing dynamics of the market.

Keep an eye out for forthcoming articles on this and various other subjects by subscribing to MetaLamp Magazine and following our social media channels:)

P.S. As promised, I'm sending over a list of 40 services that can assist in attracting investment. Fill out the form to receive the list in your inbox.

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