Get Advantages
Typical ways to get advantages that can help during your fundraise including hoarding good news, building an advisory board, doing PR campaigns, and leveraging events.
As discussed in Phase II - Fundraising, the overall key objective during the early stages of fundraising is to create momentum, which in turn allows deeper investor conversations, which hopefully result in a term sheet. Therefore, you can create advantages by thinking about what kinds of things would give you momentum during a fundraise.
Hoard Good News
One example is hoarding good news such as previous rounds of financing, making key hires, signing up big customers, receiving government grants, hitting milestones, releasing features, or forming important partnerships. It is not uncommon to do all or some of these things but not announce them publicly for quite some time, saving them for during the fundraise, when they can help create and maximize momentum.
Build an Advisory Board
One type of good news is worth calling out separately: building an advisory board. If you find true champions that are willing and able to help you in a big way, you should consider adding them to an advisory board. A typical arrangement would be an equity package of 0.25% vesting monthly over 2 years or 0.5% vesting monthly over 4 years. Such a setup can help further incentivize them - although it is worth mentioning that a true champion would help regardless, and treat the equity as a cherry on top.
Advisory boards are helpful in at least two ways. First, you get to leverage the experience and wisdom of your advisors while building the business. This goes beyond the fundraise - advisors can be helpful throughout your company’s evolution. Second, you get to lean on your advisors’ reputation and network, which can help make fundraising rounds happen.
Don’t overdo the advisory board. 2-5 true champions are better than 10 lukewarm supporters.
Plan a PR Campaign
Hoarding good news works especially well when combined with a PR campaign. In a nutshell, you can think of the “list of good news“ as potential headlines, some of which might make sense to announce via the media. If you decide to employ such a strategy, this is the time to start preparing including:
Which of your “good news” is actually newsworthy enough to be interesting to a reporter.
Which are the right outlets for your company / industry, which are the right outlets for your company / fundraising stage, what is the overlap between the two.
Who are the actual reporters that are most relevant and you would want to reach out to.
Whether you want to hire an external PR firm or consultant or rely on internal efforts. Generally speaking, for most early-stage companies, internal efforts trump external help, with the important caveat that it also depends on the skill-set of the founder and any relevant team members, as well as the industry.
It pays off to invest a bit into learning about the media industry and what drives journalists and bloggers. This is out of scope for the Fundraising Lore but the brief summary is that it’s about having something newsworthy. That’s more rare than it might seem, given the busy world we live in.
Don’t be surprised if things go south in the last minute. It is not uncommon for stories that look like done deals to get canceled or significantly altered in the eleventh hour for any number of reasons including editor interventions or competitor obstructions.
Naturally, PR campaigns can go beyond media articles. For example, many Silicon Valley founders have used billboards to boost their startup’s credibility and awareness during a fundraise. That tactic works well in a tightly-knit place such as the Bay Area.
Leverage Events
In addition to press, you can include other kinds of activities in your strategy including speaking at conferences, presenting at a demo day, participating in competitions, or whatever else you might think is effective at reaching your target investors.
Whatever you decide to use, make sure to time things in a way that reinforces your fundraising efforts. Essentially, you want your message to be heard and seen when it helps - that is, once you are out there getting introductions to investors and having conversations with them. That’s how momentum is created and maximized.