Southeast Asia (among other regions) is experiencing a funding winter. Venture capital investors are changing their priorities, increased interest rates are encouraging low-risk strategies, and startups are suffering because of it. Fundraising campaigns are tougher than ever.
Martin Tang, a partner at Genesis Alternative Ventures, explains that “venture capitalists have shifted their focus from funding new deals to portfolio management” as the region experiences the lowest funding level since 2019.
With a smaller pie to take from, proper startup fundraising campaign ideas have become even more critical. No longer can you sell a dream of success to investors; they demand clear-cut, data-backed roadmaps and solid evidence of potential return on investment.
In response to this changing landscape, here are six key steps to help you run a successful startup fundraising campaign.
Step 1: Prepping for fundraising campaign
Strap on a helmet—you’re now a wartime CFO. Vigilant, detailed preparation is the only way a startup will survive this funding winter. Your team needs to see you staying on the offensive, aggressively pursuing the necessary funding to sustain your company.
Building a strong foundation
Before going on the hunt for investors, a thorough understanding of your company’s financials is critical. There needs to be an end-to-end audit of the business plan, and corrective measures must be put in place before any meetings occur. Have a clear picture of:
- Current and projected cash flows
- Burn rates
- Profitability predictions
Remember, growth on its own won’t be convincing. You need to show capital efficiency, as investors now prioritise sustainable growth over rapid scaling. When they can get a guaranteed 4-5% return on low-risk investments, they will demand hard evidence that your startup can deliver a significantly higher return.
Organise financial statements
A simple but effective demonstration of professionalism and preparedness is having readily available, organised, and current financial statements. Regardless of your startup’s size, you should prepare income statements, balance sheets, and cash flow statements for potential investors.
Make sure that they will feel respected by opening the books, even if you aren’t going to show them everything. Transparency is valued, so be prepared to discuss numbers openly and honestly.
Building investor relationships
No foundation is complete without establishing strong relationships. Networking is a crucial element in this step. Attend industry events, set up meetings, and start conversations.
Connect with other startups, industry professionals, and influencers who can introduce you to potential investors.
Don’t chase a pitch opportunity immediately. Build long-term relationships based on mutual respect, trust, and common goals—even with investors who might not be a right fit—to hone your skills, gather valuable feedback, and widen your network.
Remember that even during this time of limited funding, you’re interviewing investors as much as they are interviewing you. Be clear about what you need from them beyond capital: their experience, networks, and long-term commitment are vital.
Legal and compliance considerations
One of startup executives’ biggest mistakes is ignoring legal and compliance considerations until problems arise. Work with a reliable legal counsel to ensure all legal documentation is in order. That includes things like:
- Registration
- Intellectual property rights
- Employee contracts
Confirm that your startup has complied with all necessary laws and regulations, and be prepared for due diligence processes.
Step 2: Crafting an effective pitch
A pitch is all about storytelling. You need a beginning, middle, and end like a Hollywood blockbuster or a New York Times bestseller. Except over the last few years, the setting for that story has changed dramatically.
Increased interest rates have shifted the focus from vision to cost management. Your storytelling techniques should reflect these changes. Ensure your pitch showcases your startup’s ability to manage costs, thrive despite economic uncertainties, and deliver sustained, efficient growth.
Focus on things like:
- How your business model offers scalable and repeatable sales
- How your product or service addresses a real and significant market need
- The unique qualities that set your business apart from competitors
- Your team’s expertise and experience
Every successful movie has actors that make audiences believe in the story. In your pitch, it’s your team. Show your audience, the investors, why your team is the only one that can turn this idea into a successful venture.
Answering tough investor questions
There’s going to be something you’re not prepared for. Every investor has a trap that they lay for unwary entrepreneurs. It’s a test that gives them insight into how you handle pressure, think on your feet, and confront challenges.
But that doesn’t mean you can’t overcome it. Arm yourself with in-depth knowledge about your sector and market trends, and be upfront about potential challenges and how you intend to tackle them. Remember, investors appreciate transparency and resilience.
Step 3: Setting realistic valuations
Your company is probably worth less than you think. This can be a hard pill to swallow, but it’s an important reality. Unrealistic valuations can be off-putting to investors, who may see it as a sign of inexperience or arrogance.
Valuation methods
There are several different methods to value a company, but the first thing to do is consider the investor you’re pitching to and their standards. They will have a method they believe in, and you must meet those expectations.
Research their past investments and how they valued those startups to understand their approach better.
Here are some common frameworks to start from:
Method 1: Cost to Duplicate
A savvy investor isn’t going to pay a $5 million valuation for a company they could build for $2.5 million. Cost to duplicate is a straightforward method where you calculate how much it would cost to recreate your startup, including research and development, product development, and software or patent acquisition.
The problem, at least for founders, is that the cost to duplicate often undervalues the company’s potential. In a time of tighter funding, however, it’s a method that could be more acceptable to conservative investors.
Method 2: Market Multiple
This direct method involves comparing your company to similar recently funded or acquired startups. However, finding a suitable standard for comparison can be complex, and it depends on the current market conditions and investor sentiment.
If you are in a sector that hasn’t seen disruption for decades and your startup brings a fresh perspective to the industry, you might be able to command a higher multiple. But to make a convincing case, you’ll need tangible industry analysis that supports your valuation.
Method 3: Discounted Cash Flow (DCF)
DCF forecasts the future cash flow of your company and then applies a discount to find the present value. It’s a more suitable method for startups with more predictable, recurring revenue—but it’s more likely to undervalue a rapidly growing startup.
As investor priorities change, they might be more inclined towards startups with steady growth and returns, making this method more applicable.
Avoiding overvaluation pitfalls
Every executive wants to get the best valuation for their company. But trying to fly too close to the sun can result in melting wax wings.
Overvaluation can result in:
- Failing to raise funds within the required timeframe, causing a significant setback to growth plans.
- Investors demanding a higher percentage of equity, diluting the founder’s stake.
- Triggering a down round—when equity is sold at a lower valuation—in the next funding stage which could have a negative effect on team morale and future fundraising.
The easiest way to avoid overvaluation disasters is to have realistic expectations. Work with your accounting and financial planning team to make honest assessments and develop strategies accordingly.
Negotiating fair terms with investors
Remember that valuation is just one factor. The investor’s expertise and network, your startup’s cash flow needs, and other considerations can influence the final agreement.
Do your homework on standard term sheets and get legal advice during negotiation. Don’t be afraid to push back on terms that don’t align with your company’s long-term goals, but be open to constructive discussions.
Step 4: Due diligence and investor relations
No matter how good your pitch or how impressive your financials are, investors will want to conduct their due diligence before committing. Have your financial statement, patents, contracts, and other key documents organised and readily available to them.
Conducting due diligence on investors
But you’re not the only one on display. Due diligence is a two-way street; you should also conduct background checks on potential investors.
Check their investment history and the experience of other startups working with them. You want investors who can add value beyond just capital, those who can provide mentorship, strategic advice, network access and capable of long-term commitment.
Investor reporting and communication
Before potential investors become actual investors, they may request regular updates on your startup’s progress. You might have to submit monthly or quarterly reports outlining sales figures, cash flow, milestones hit, and potential challenges. This reassures investors of your progress and builds trust and credibility.
Financial analytics platforms like Bunker can assist startups in preparing for fundraising due diligence. These tools help analyze cash flow, compile sales figures, and identify any anomalies or missing transactions that require attention. Founders can regularly review their finances using the platform and leverage its dashboard to transparently present financial data to prospective investors.
Many analytics platforms also generate automated reports summarizing key metrics, which can streamline investor reporting processes.Having a system to consistently track and communicate financial performance allows startups to approach investor meetings with a clear, up-to-date understanding of their financial standing.
Step 5: Fundraising campaign strategies for different stages
Not every company can follow the same guidelines. The stage of your startup will significantly dictate how you fundraise.
Seed-stage fundraising
Typically, at this stage, you’ll rely on funding from friends and family, personal savings, or angel investors. You will probably pitch more on your idea and vision than on data, and the only way to shine at this point is to have a unique, game-changing idea.
Except, angel investment is also extremely low at the moment. More than 30% of angels have paused their investment or stopped altogether as they rebalance their portfolios or mitigate risk.
Securing seed-stage fundraising is going to be a considerable challenge. It will require a unique idea, a competitive advantage that cannot be easily replicated, and a team with the right skills and experience to execute the concept.
Early-stage fundraising
This includes Series A and Series B rounds, typically from venture capitalists. At this stage. startups are expected to have some revenue—enough to prove that their business model works—but not necessarily profits.
Investors at this stage want evidence of customer traction, monetisation, and a scalable operating model.
This is a demanding stage. Venture firms aren’t just looking to increase their capital; they’re looking to decrease risk. They want to continue seeing investment returns, so you must demonstrate strategic thinking and execution capabilities in their business plans.
Growth stage fundraising
Late or growth-stage funding took the biggest hit in 2023, dropping 64% year over year from 2022. Crunchbase expects they will be last to rebound, too, as venture capitalists focus on supporting their current portfolio instead of making new investments.
That doesn’t mean it is impossible to secure funding at this stage; it simply means more due diligence and practically proven forecasts. Companies at this stage must show that they’re not only surviving but thriving, with exquisite capital management programs, tenable burn rates, and scalable growth plans.
Step 6: Leveraging technology in fundraising
Despite all the forces working against startups, there is one major positive: technology. The world is in the midst of an Age of Acceleration, where technological advancements happen rapidly.
While traditional venture capital funding may be scarce, alternative fundraising ideas are becoming realistic options, and tools have emerged to maximise the efficiency and effectiveness of fundraising efforts.
Crowdfunding platforms
Numerous platforms exist that allow startups to raise small amounts of money from a large number of people. Popular crowdfunding platforms include:
- Kickstarter
- Indiegogo
- GoFundMe
If a startup can generate enough buzz around its product or service, this can be an effective way to raise funds while validating the business concept.
Online investor portals
Online platforms like AngelList, Gust, and SeedInvest have simplified fundraising by connecting startups directly with investors.
With detailed profiles of both parties, they help companies quickly find potential partners. The investor discovery feature allows startups to filter investors based on investment preferences, desired industries, and geographical locations.
FP&A software
As a founder, you need to know what are your biggest variances month on month, vs budget. Seeing the numbers in excel is one thing & having a conversion with the stakeholders is another. You need to find out why and what’s missing. This is where a financial planning and analysis tool comes in handy. Financial planning and analysis (FP&A) software can be invaluable to startups preparing to fundraise.
By offering comprehensive financial planning, analysis, budget planning, and profitability analysis tools, a solution like Bunker can bring a high level of proficiency to your finance function.
Raise Capital with Confidence Using Bunker
Comprehensive Financial Visibility
As your business matures, and you go for later and larger fund rounds funding rounds, the greater financial sophistication you’re going to have to demonstrate. The more money you’re raising, the more demonstration of fiduciary responsibility.
Bunker provides a clear, real-time view into your startup’s financial health through intuitive dashboards and reporting.
Due Diligence Preparation
As a founder, your focus is often on driving immediate sales and profits. However, neglecting your financial operations can be a costly mistake in the long run. Establishing robust finance functions, maintaining optimal data hygiene, and understanding how to strategically grow and scale are crucial upfront investments.
Identify inconsistencies, missing data, or cash flow issues before investor meetings through Bunker’s comprehensive financial dashboards. Bunker helps identify financial anomalies and maintain accounting hygiene.
Compelling Data Visualization
Present key metrics like sales, expenses, runways, and more through Bunker’s data visualization capabilities tailored for investor communications.Get intuitive exportable waterfall charts that explain your narrative.
Navigate effortlessly through your financial data, from color-coded, sortable variances to accounts, vendors, and transactions.
Automated Reporting
Save time by leveraging Bunker’s automated reporting features that highlight critical financial KPIs in a streamlined format.
Save time spent on manual analysis with Bunker’s Profit & Loss drill-down capabilities
Build Investor Confidence
It’s important to help investors build a case for you. Give your investors ammunition. You need a mix of external validation and market research. Every piece of data should help tell the story.
Approach fundraising talks armed with accurate, transparent financial data cultivated through Bunker’s robust toolset.
Surviving the funding winter can be a daunting task for any startup. However, a careful, diligent, and strategic approach to fundraising can make the difference between success and failure.
By setting up your financial systems from the start, you avoid the headache of building from scratch or backtracking down the line. Every data migration, every setup – the longer you wait, the more difficult and time-consuming it becomes.
The alternative? Allocating just 10 minutes a week to review your finances can save you hours of work at the end of the month.
Tools like Bunker can be invaluable in this pursuit. Bunker’s financial analytics platform helps you stay on top of your metrics, identify anomalies, and present a clear, compelling financial narrative to potential investors.
