On the 26th of May, I put together an event (Unpitch) that matched 23 investors with 69 startups.
Most conversations between startup founders and investors tend to be formal discussions, where startups are given limited time to pitch to investors or trying to catch investors at a hallway during an event, with the power dynamic being skewed towards the investor.
Unpitch is the antithesis of this relationship. The aim of the event is to connect investors and startups in an informal setting, with a focus on providing feedback and building relationships between the founders and investors. Below is a short clip from the event
To provide more value to the participating startup founders and investors at the event, each investor was matched with 3 startups that met their key investment criteria (stage of development, vertical/ industry etc). During the event, these investor — startup matches met in designated areas during the breakout session to help connect relevant startups and investors in smaller groups.
Putting this event together allowed me to work closely with investors in terms of who they were interested in meeting and what made particular startups/ founders stand out to them. I wanted to share some of these pieces of advice and perspective from the other side of the table.
The selection process
Thankfully, due to Startup Victoria’s strong relationships with investors, getting 23 investors to the event was not an issue, however — to make the event work we needed to match the investors with high quality startups that would offer value to the investors as well (potential investment opportunities that they otherwise may not have come across for a few months).
We opened up Expression of Interest (EOIs) from startups who were interested in participating and we received over 200 applications to the event — roughly double the number from the previous year.
In our EOI form, we asked interested startup founders everything from their key team members/ background to their stage of development and traction to date. The average time to complete the application was 50mins. The application is intentionally thorough — if someone can’t be bothered completing an application to meet with 20+ investors (for FREE), they are probably not the right people to have at this event.
Curating 200+ applications down to 69 startups (that meet specific criteria) is a very lengthy process. I followed the following criteria to filter through the 200 applications and curate and select the startups for the event:
- Remove startups that could not attend the event — Seriously some people applied to the event even though they couldn’t attend that evening!
- Eliminating startups that are too early stage (i.e. have not launched or have not progressed further than creating a concept)— more on this below.
- Categorise startups based on industry, business model and level of traction/ stage of company development
- Match startups to investor requirements
Why early stage is too early to meet with investors
The reason why an event like Unpitch works is because we can provide value to both startup founders attending the event, as well as the investors who make the time to participate in an event like this.
If you are still at the concept or development phase of your business, there is no doubt that you will get value from meeting investors — but the value of that meeting is (generally) one sided. The advice that investors will give you is similar to advice that an experienced startup founder can provide.
For the type of event that we were putting together, we saw more value for investors to match them with founders who had already launched or at the very least demonstrated some basic form of traction for their business. This helped to change the dynamic of the conversations from “can this idea work” to “what you need to grow/ scale/ raise your next round of investment”.
Who was selected
Here’s some insight into who was involved in the night:
What the investors were interested in
There was a fairly wide spread of interest within the investor group at Unpitch with many investors being interested in multiple industries, with the most common verticals being Fintech, SaaS and Marketplaces. There was also strong interest in Med/BioTech, Renewable technology and Education.
Stage of startup development
The majority of startups at the event were Pre-seed startups (bootstrapped or <$150,000 in funding). The majority of this group had received some traction and were looking to fundraise within the next 3 months. For many of them, this was their first time meeting with an investor with the majority of this group having generated some form of revenue (or decent amounts of traction)
A third of participants were Seed stage startups (had received approx. $150,000 — $1M in funding, or were close to opening their seed round) and all had generated some form of revenue within their business.
Finally, 16% of startups were at the Series A stage ($1M+ funding raised — most had raised a minimum of $2M), with these startups focusing on international growth and further expansion of their business.
Startups by market/ industry
Melbourne has a strong tradition in marketplaces (large global marketplaces such as Envato, RedBubble and 99Designs were founded and are based Melbourne), so it’s no surprise to see that Marketplaces and B2B companies dominate this list. The rest of the list is fairly evenly spread.
Advice when meeting investors
From going through the Unpitch selection process, talking directly to investors and from my experience running my own startup, here are a 9 things you should know if you are looking to raise funds for your startup
- Investors only want to meet/ invest in their areas of interest:
Getting investors on board is not a numbers game. Investors have particular criteria, that are their specific areas of interest and expertise, that they look for in investment opportunities i.e. stage of company (Pre-seed, Seed, Series A etc) and verticals/models (SaaS, Fintech, Impact, HealthTech).
Getting a rejection from an investor does not mean that your startup will not get investment, but that you may need to be more targeted with your approach. Find investors that are interested in your market by looking at their previous investments and how much money they put in. You can check platforms like AngelList, Crunchbase and even their LinkedIn profiles to see their previous investments. You can check how much money was raised by startups through various publications (most startups put out a press release when they raise funding) - Execution > Concept
One thing that was evident from the 200+ applications that were submitted is that there is no shortage of great ideas and products that startup founders are working on. However, ideas are meaningless without some form of execution behind them. Without receiving any validation for your product and early product — market fit (or at the very least talking to some potential customers), your startup is still just a concept. Although an investor can provide valuable feedback to help you take your startup from a concept to a validated product, their expertise is more valuable when you have something demonstrable to show. You can also receive feedback and guidance from experienced startup founders and mentors. Startup Victoria runs an initiative called Open Office Hours, where we ask experienced members of our community to take meetings with startup founders. - Not every startup needs investment
After the breakout session at Unpitch, I spoke to one of the VC’s and asked him what his thoughts were on the 3 startups that he was matched with. His response was that he liked all of them and there was one in particular that stood out for him — but he had recommended that startup founder to focus on driving additional sales for their product rather than to seek investment. He felt that the startup would have bigger success by focusing another 6 months on driving sales, then using that additional traction to raise a bigger round of funding at a much higher valuation than they would get right now.
Too many founders view investment as a validation for what they are doing. Startups need to keep in mind that the investment funding that they use is to grow and scale the business. Once you take on investment, you are diluting your stock (as well as any other shareholders/ investors). Not to mention bringing on another stakeholder that needs to be managed. Just because you can get funding now doesn’t mean you should - Do your research
Most startup founders on the day, took this into account — but I was still surprised that startup founders would come along to an event like this without doing their research on the 23 founders that were attending the event (the full investor attendance list was available on our website) or at the very least doing research on the investor that they were matched with. The startups that took the time to do their research on who they were arranged to meet (and who they were likely to bump into on the night) were able to get the most out of the event as they were able to have some background information and context to how they could get the most out of the event. - Network and mingle
Another surprise for me was the 1–2 founders that sat on their own, staring at their phone for the majority of the networking session. You are in a room with 20+ investors! Make the most out of the opportunity. Network and mingle not just with investors but with other startup founders in the room — there’s no telling what you may be able to get out of a conversation. - Know your audience
Investors follow their own processes when making investment decisions, as a result, no investor was going to drop money on the spot at the event without doing their due diligence first. Knowing this, don’t focus on selling your business for funding to the investors the first time you meet them. Use the opportunity to build relationships, take follow on meetings and gain valuable feedback. A good way to do this is to ask them where they think your weak points are or particular channels that you should focus on. - Investors invest in lines not dots
Following on from the last point, investors will invest in your traction and growth over time rather than a single point in your development. Your traction timeline provides investors with some context of your growth and the likely impact that their money, contacts and expertise will help in scaling that growth even further.
If you are still in the early stages of your traction development, use the opportunity to ask them what they would expect to see your growth metrics like over the next 3–6 months. Use this as a guideline and a follow up when you have reached (or hopefully exceeded) these metrics. - Investors look to invest in founders not ideas
Investors receive hundreds of emails, introductions and pitch decks each year. Although you might think your idea is ground breaking, chances are that someone has come to the same investor with a similar opportunity before. With any type of startup, there are a lot of reasons and factors that may prevent the idea from working.
This is why investors place such a large emphasis on the team aspect of any ideas that come to them. A great idea may work on it’s own if all other factors including timing, market conditions etc come together, but a great team will be able to cope with changes to external factors and give their investment greater chance of success than on a good idea on its own. - Know your business inside out
Be prepared to answer questions about your business and the industry you operate in. Questions like: Who are your competitors? how are you different? What’s your distribution/ marketing strategy? What do your key metrics look like? What is your business model? and Why now? are all questions that most investors will ask when they are interested in your business
Thanks for reading. I would love to hear your thoughts, feedback or any other tips you have for startup founders when meeting investors by commenting below or by tweeting me.