The new year offers everyone a great opportunity to reset and renew. For startups seeking investment this could be the perfect time to evaluate your approach and see if it needs tweaking.
After all, we are in a very different climate in 2023 and investors are being far more careful with the deployment of their capital. To boost your chances of a successful raise, ensure your strategy is tailored for now, not last year.
So what key resolutions should startups focus on in 2023?
1) Revisit your elevator pitch
The life of any startup is varied, stressful and relentless, wearing so many hats and juggling so many balls. All the while, trying not to let any drop or run out of cash. However in this maelstrom of activity it remains crucial to not lose sight of the eureka moment that led you to quit the day job and come up with the idea in the first place. The start of the new year offers a great chance to refresh your core pitch for investment as clearly and articulately as you can.
According to AIN co-founder Mike Lebus: “One of the key mistakes entrepreneurs make is not explaining the concept clearly enough. Entrepreneurs are often too close to their own business, so don’t give enough information for a stranger to understand exactly what their business does.”
Why not start with a blank piece of paper and make sure you can get the pitch down to a paragraph? A clear articulation of a real world problem, how your startup solves it and what it actually does. You need to be able to story tell.
Having the right credentials, the perfect team and a beautiful pitch deck means nothing if you can’t explain to a stranger, simply and convincingly, why your company needs to exist. Test it out on more critical friends and contacts who you trust to give some honest feedback. Is it as straightforward as it could be?
2) Critically review your pitchdeck/ pitch materials
The new year could also be the perfect time to review your pitch materials and pitch deck. According to Lebus: “A common thread running through unsuccessful pitch decks is startups not focussing on their core product/service. Some business plans say “we plan to do this. and this, and this, and this…”, which can become very confusing for potential investors. Feel free to mention your long-term product pipeline towards the end of your pitch, but the main initial focus should be on your current/initial offering to keep things as clear as possible.”
Another reason many pitch decks fall down in Lebus’ view is the failure to differentiate what they do from the competition and how they’re going to gain market share.
Use this time at the start of the year to review your pitch deck and ensure there is a clear narrative, focus on the core product and how it stands out from competitors. Investors will want to see that your nascent business is learning to walk before it can run and that the promise of a decent future return is tangible.
3) Consider a lower valuation in the current climate
In the current climate many businesses are needing to alter their plans and potential funding pathways. Early 2022’s valuations already seem like a different era with layoffs in the tech industry and an uncertain medium term economic outlook. What was 8x early last year may now only be 5x.
According to Alexander Caparros, analyst from the AIN brokerage team: “We are seeing a lot of pushback from investors, less willing to back companies whose valuations are based on the uncertain promise of future revenues. It is vital that valuations are rooted in fact and not fantasy. Proof of concept is now a must have. You will be far more likely to gain the interest of prospective investors with a more realistic approach.”
It could be time to consider whether you might change your strategy and raise a smaller amount at a lower valuation. You will still be giving away a similar amount of equity but are more likely to get the investment.
4) Traction, traction, traction
With investors less willing to bet on unproved models, fabled traction is more important than ever, particularly in a more restrained climate for investment. Xavier Ballester is an experienced broker who has worked with AIN for 15 years and works closely with investors across the globe.
He says: “Evidence of traction is always critical for startups seeking funding, but in 2023 it is king. With investors less willing to bet on unproven concepts, it is crucial startups can demonstrate the viability of their proposition through evidence of success. All the more hard won in recessionary territory. If you can show there is appetite for your proposition now, this will show a clear pathway to future profitability and investor returns.”
Take the time to revisit your traction points and make sure they really stand out and are relevant.
5) Re-appraise your communication strategy with investors
January is a great month to connect with investors with a fresh update on your business. If you are reaching out cold, think how succinct you can be while covering off some vital points.
According to Matthew Louis from the AIN brokerage team: “Investors are busy people and likely to be inundated with pitches and proposals. Make sure yours gets to the point quickly with the information they need. Think top level information about the company and what you do, the problem you are solving for, why it is different, the traction, team, how much you are raising, the valuation and what you are planning to do with the investment.”
For investors already on your database is this the time to give that perfect ‘nudge’ on what has been going on with the startup. Perhaps it is a new product launch? New staff hires, new clients or traction point such as a revenue milestone. Perhaps something has happened in the news that provides a reminder of the need for your business. Something with context and relevance will ensure this isn’t just spam and likely to get your startup noticed.
The new year is a good time to plan a content pipeline for your investors and outreach strategy for new potential investors.
Following these five resolutions could help you supercharge your fundraising in 2023. Perhaps there are others you would add to this list. The key things is making sure they are realistic and that you can stick to them. Happy new year from the AIN team and good luck!
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