We love when Australian startups raise big money to realise their ambitious dreams but lest we forget the careful consideration and heavy lifting carried out behind the scenes of deals we celebrate.
StartupSmart spoke with the entrepreneurs banking big in this week’s $36 million investment deals to find out how they did it.
Here’s a round up of fundraising tips that worked and the toughest questions Australian investors are asking startups today.
Secure paying customers before knocking on investor doors
Hyper Anna co-founder and data scientist Natalie Nguyen says her startup decided to take on investors as a means to accelerate growth.
It just closed a $1.25 million round.
“We have always been profitable, and the growth up until this point has been completely organic and funded by revenue,” she tells StartupSmart.
Her sure-fire tip for startups to secure investment is to first get skin in the game and prove there are people willing to pay for what your business offers.
“I cannot stress enough of how important this is,” she says.
“For us, it doesn’t just mean someone saying they like the concept or want the product – It’s the revenue from early customers that is the representation of market and product validation.
“If you can get this, you won’t have a hard time raising money.”
Toughest question asked in this round: How do you sell as a pure tech team?
Is your startup feasible and scalable? Be honest and let the data show
Despite some initial apprehension, 40K Foundation was able to secure a $250,000 grant from Atlassian.
A huge reason for this, says 40K Foundation founder Clary Castrission, is the team set expectations and then met them.
As part of the application process, he says they had to complete a pilot round performing a number of tasks.
“We did what we said we would do,” he says.
During the pilot, Castrission says the team also shared updates when things were not going so well, which enabled them to bond with their prospective investors in a more genuine way and get assistance to stay on track.
“It was just about being really open and honest with them, seeing them as a partner not just a funder,” he says.
Learning from this process, Castrission says it’s also critical to skip the marketing spiel.
You say your startup is great and people will love it, use it and pay for it, but what do the numbers say?
“Atlassian is very keen on good data, it’s displaying that and communicating that properly,” says Castrission.
Toughest question asked in this round: Why is the current focus of the platform English?
Clarify the market opportunity
Better Caring co-founder Peter Scutt, who just closed a $3 million series B round, says articulating the sizeable market opportunity the startup is tackling is what helped it capture investors’ imagination.
“What really resonates is being able to communicate the opportunity,” Scutt tells StartupSmart.
To pull this off, founders must outline clearly who the target market is, explain the business model and show what the technology required will look like.
“It was [also] looking at the team we had here and what we’ve achieved to date,” says Scutt.
“The founders and even the senior staff are very aligned with the investors around building a good business.
“The investors liked that we were for purpose as well as for profit.”
Toughest questions asked in this round: Are you ready to make sufficient investment in building the team to support your growth ambitions?
Bonus tip: Investors are people, know who you’re talking to
Investors are individuals, so learn who they are and speak to their values, says Meta co-founder and muru-D entrepreneur-in-residence Ben Sand.
He tells StartupSmart there are lots of different investors and they range from those looking for traditional financial returns, through to big thinkers drawn to ventures that strive for more than profit.
“There are a lot of rich individuals who want to make a difference in the world,” says Sand.
“It’s really about deciding the kind of company you are and appealing to the psychology of the investor.”
You can help us (and help yourself)
Small and medium businesses and startups have never needed credible, independent journalism and information more than now.
That’s our job at SmartCompany: to keep you informed with the news, interviews and analysis you need to manage your way through this unprecedented crisis.
Now, there’s a way you can help us keep doing this: by becoming a SmartCompany supporter.
Even a small contribution will help us to keep doing the journalism that keeps Australia’s entrepreneurs informed.