How to increase your pre-revenue fundraising chances

• It’s true, this year has been tough. Crunchbase shows that early-stage funding is down 38% year over year and seed funding is down 27%. And that’s left a lot of founders demotivated.

• So it’s no surprise that the same question is discussed: “Can pre-revenue and pre-product founders raise in today’s market?”

• Here are the five things you need to know to raise a pre-revenue round.

1. Early stage investors have dedicated funds for pre-revenue companies

   • There are funds designed specifically for pre-revenue startups. The math is simple. If they exist then it means you can raise pre-revenue or pre-product. Their sole purpose is to invest in companies like yours.

   • If you are a pre-revenue or pre-product company, line up in front of you the investors that are not afraid from such early investments. You’ll increase your chances of raising significantly.

   • Now, don’t get me wrong, securing that funding is harder than it used to be.

2. Your unfair advantage can make up for your lack of revenue

   • Yes, there’s no need to be shy about it. Every founder has a unique advantage when entering a space. So you need to find yours, build on it, and milk it for everything it’s worth.

   • Here are a few great examples:

     1. You were an executive in your industry and know it inside out
     2. You had a couple of successful exits
     3. You have a unique human story behind your purpose
     4. You have specific skills that prove you’re the right person to scale this business

   • Before approaching the raise, ask yourself what about your story gives you an unfair advantage, then use it.

   • Don’t feel obligated to follow the traditional pitch deck template (you shouldn’t do it regardless of the stage you are in). Let your unfair advantage be the focal point of your pitch.

3. Founder-market fit is the next best thing

   • If you’re pre-product or pre-revenue, you obviously don’t have product-market fit yet. In these scenarios, investors often switch focus and start looking for founder-market fit instead.

   • They can’t validate your product, but they can validate you.

   • Your network within the industry. Your ability to connect with industry leaders. Your talent for attracting early adopters. All of these things will be key to your success.

   • If you’re pitching a SaaS company and start talking about your career running hair salons, you’re likely going to raise a lot of eyebrows. And for all the wrong reasons.

   • To dramatically increase your chances of a successful funding round, you need to show investors why you’re the perfect founder for your market.

4. Your team needs to be part of your pitch

   • Investors understand the importance of people. They know that, to get your company off the ground, you need the right team onboard, full-time from the start.

   • If you have a team of talented people that share your vision and have been on similar journeys in the past, your investors will have much more faith in you and your pitch.

   • So, when it comes to your team, don’t compromise, and then make them part of your story. Human capital is your greatest asset in pre-revenue fundraising.

5. Investors love a hustler

   • I kept this one for last because, when all else fails, it’s your winning card. And even if you do manage to nail every other point I’ve covered above, you still need to show that you’re a hustler.

   • Investors want to see that you grinded like no other to achieve the minimal traction you have. They want to hear that you interviewed dozens of leaders in your industry to validate your idea. They want to know that you’ve done your research.

   • Don’t get me wrong, they don’t expect you to know everything. But they do need to get the feeling that you aren’t just waiting for their money to get the ball rolling.

   • Because if you didn’t get things done without investment, you won’t get things done with an investment.

   • That’s the mindset that investors are looking for — that you can do a lot with very little. Show them just that.

6. Final thoughts

   • Pre-revenue and pre-product fundraising is the same as any other investment round. In each round, you have to find the perfect story for that moment, the one that elevates you above everyone and everything else.

   • For each round you’re going to raise, you’re going to come with advantages and disadvantages about you, your business and everything in between. So focus on your advantages — especially your unfair ones.