Regardless of industry or background, a startup needs to find investors.
We spoke with four founders and recent graduates of the Master of Business Creation (MBC) program at the University of Utah, and they all shared a similar sentiment: “Fundraising can be very challenging.”
Despite this, these founders have all successfully found investors — collectively, their startups have almost $25 million of external capital. They each shared their stories, best advice for founders looking for funding, and ways the MBC program helped them.
Build a Diverse Team
Erik Smith started Board Budder, an environmentally friendly ski wax, before he met CFO Zeke Greer. As they progressed through the MBC program together, they found overlapping interests and differentiating skill sets that led to them teaming up soon after graduation.
“I had been running a necktie company for a little over four years,” Greer said. “I was getting burnt out from being a solo team.”
Smith and Greer were part of the same cohort in the MBC, where startups collaborate, brainstorm, and problem-solve together.
“I knew from these sessions that Board Budder was selling directly to consumers, something I’d been doing for years with my startup,” Greer said. “I could see their vision, and we decided I’d be a good fit.”
The MBC taught both members practical skills that helped diversify their toolbox.
When it came time to attract capital, Greer and Smith were able to divide and conquer – Greer continued to lead revenue while Smith shifted to sourcing investors.
Pitch, Pitch, Pitch
Across the nation – and the world – startups of any size can find pitching competitions and events. At the University of Utah, the Lassonde Entrepreneur Institute hosts a variety of fundraising events, many of which are specific to the MBC program.
“We learned how to put together good decks, and got guidance on how to sell,” said Justin Rae, founder of Cinch.
His marketing startup has raised about $13 million so far, with plans for a Series A double that size in the coming months.
Even if you think your company won’t need investments, practice will still pay off.
“All throughout the MBC program, there were opportunities to pitch to some angels and VCs, or just to practice, but I didn’t think that was relevant to me,” Smith said. “I was out in the van waxing skis, trying to earn revenue. I thought we’d be fine just on product — turned out, we needed investors. Those were very valuable opportunities that everyone should take advantage of.”
Know Your ‘Why’
If you’re able to get an investor’s attention, you need to be prepared for questions — the biggest, Angie Grover, CEO of Metopio says, is “Why?”
“If you’re asking for money, you need to know why,” Grover said.
Metopio just closed its second funding round with $6 million invested primarily from venture capital firms — success Grover credits in part to having that answer nailed down.
“You need specifics,” Grover said. “Explain in very clear terms what you do, what you’re asking for, and what you’ll do with it: you invest this much money, I’ll build out a customer success team. This amount, we add additional salespeople.”
It’s all about risk.
“The more well-formed your idea is, the less risk the investor will feel they’re taking on,” Grover said. “If they feel secure in a return on investment, you’re more likely to get a check.”
Be Prepared for Due Diligence
“Why” will likely be only the first of many, many questions.
Before an angel, venture capital firm, or any other type of large investor decides to fund your startup, you must undergo due diligence. This process is like an audit, where Grover said, “no stone goes unturned.”
“While no one can really prepare you for a due diligence process, the MBC did a really good job of setting us up for success,” she said. “Our professors made sure we knew exactly what we’d need and what to expect, which made our experience a lot less painful.”
Keeping the due diligence in the back of his mind also changed how Rae approached his documentation early on.
“We had future fundraising on our radar,” he said. “For example, we learned that board decks were part of due diligence, so we strategized what went into ours — now, I have two: one that’s closed, and another that’s broader.”
Keep Your Behind the Scenes in Order
Cinch scored its first major investor purely through its books.
“We had a company that was interested in buying us early, and they started looking through our records,” Rae said.
When the company backed out, Rae initially thought the conversation was over. Then, he got a phone call.
“The person who had led the due diligence process had left that company and asked to lead our very first seed round.”
Now, millions of dollars later, Rae said he relies almost purely on his finances.
“We don’t have a formal pitch deck, and we’re turning investors away,” he said. “We have raw Excel files, grant access to our QuickBooks, and let people poke around.”
This level of confidence was instilled in the MBC, where Rae said his professors were “a guiding star.”
“I took a financial modeling class where we walked through all of the levers in my business, the metrics and unit economics,” he said. “I learned to build a model on my own, to really understand my business, and we’ve used that heavily in raising capital. Being able to say, ‘these are the metrics,’ and then quickly change inputs based on investor questions and see the impact has been invaluable.”
Stay Picky
Investors are choosing you, but you’re also choosing them. Getting an offer of investment is exciting, but Rae cautions to take a step back.
“Don’t just take money from the first person who offers,” Rae said. “When you accept an investment, you’re basically picking a board member. You’re selecting someone to be on this ride with you.”
While a cash infusion may be what your startup needs now, picking the wrong investor can doom it down the line.
“One of the major reasons that businesses fail is founder disputes — often because they choose an investor that they didn’t necessarily get along with.”
The MBC program helped Rae and his team discern the type of investors worth establishing a long-term relationship.
“Recognizing what their expectations are, what they want to see from you, how they’d lead a company and the direction they’d want to take, those are things you need to look for,” Rae said. “Cinch was very fortunate that the people willing to give us money were people I felt would make very good board members.”
Keep Your Contacts
While these four founders stressed the importance of the academic and practical value they derived from the MBC program, school doesn’t last forever.
What can, though, is your network.
“An angel investor came to give a guest lecture during the MBC,” Greer said. “We got to know him, and he became a huge resource for us to learn about investors and how to present our ideas.”
Eventually, this angel helped lead Board Budder’s first seed round.
“Leveraging that connection meant so much for us,” Smith said.
Even if you’re being turned down by investors, Greer said to keep names and emails.
“Say you meet an investor who loves what you do, but says you just aren’t ready yet,” she said. “Don’t be discouraged and discard the contact — keep them informed. If they’re excited now, they’ll be even more excited later.”
Outright rejections aren’t an immediate cause for dismay in Greer’s eyes, either.
“There’s no wasted conversation,” she said. “You always have something to learn.”
While Rae isn’t actively fundraising, he said it’s still valuable to talk to potential investors.
“Once you start getting investments, other companies and investors see you, and your inbox gets flooded,” he said. “In my experience, it’s been important to take the time to respond to some of them, to make time to hop on a call. When you need capital, you’ll be happy you set aside the time on your calendar.”
