Unlocking VC Funds: Advice From 20 Industry Leaders For Tech Startups

Launching and growing a tech startup company takes a lot of time and sweat equity, and eventually, it nearly always requires outside investment. Market research, development and iteration, testing, and marketing are all costly steps, and in a tech company, they happen on a “rinse and repeat” cycle. Fortunately, in a tech-driven marketplace and economy, there are investment dollars to be found—venture capitalists are always looking to get in on the ground floor of a promising technology company.

However, to gain the confidence of VCs, tech entrepreneurs have to know what they’re looking for and learn to speak their language. Among the members of Forbes Technology Council are successful startup founders (some several times over). Below, 20 of them share their advice for new tech entrepreneurs who are testing the VC waters for the first time.

1. Pitch Your Strong Fundamentals And Long-Term Potential

In today’s economy, investors have a more critical eye than ever for strong business fundamentals and long-term market potential. Businesses looking for investors should emphasize these aspects in their pitches and continue to find ways to sharpen them over time to showcase the potential ROI. – Gregg Johnson, Invoca

2. Pilot With Customers Early And Often

Focus on building a viable business by piloting with customers early and often. The presence of engaged, paying customers will be your largest asset. Avoid diverting all of your time and attention to fundraising alone; ensure fundraising is a vehicle and catalyst for growth rather than the destination. – Kevan Yalowitz, Accenture

3. Be Wary Of Diluting Your Ownership Stake

Don’t raise more capital than you need. It can dilute your ownership stake because the more money you raise, the more you’ll have to give away. Also, it can create unrealistic expectations—investors will be expecting big returns on their investments. Further, it can make it harder to raise follow-on funding, as investors may be concerned that you’re not using your capital wisely. – Shelli Brunswick, Space Foundation

4. Focus On The Basics

Through founding three startups, I’ve learned that the best approach focuses on the basics. Tell venture capitalists how you’re uniquely solving a big problem for businesses today (not tomorrow). Speak to how large your market is, and demonstrate that you have a credible team with the confidence to execute your vision. – Varun Badhwar, Endor Labs

5. Brace For Numerous Rejections

Navigate VC funding as a mix of numbers, optimism and discipline. Brace for numerous rejections, and understand that those rejections are often about investor fit, not your shortcomings. Meticulously refine your pitch, conduct in-depth research and use Crunchbase for precise targeting. Embrace the process: Present, learn, refine and repeat. Resilience and discipline are key; the right funding match will emerge through persistence. – Greg Salvato, TouchPoint One

6. Favor A Sound Foundation Over Rapid Expansion

Maintain a clear focus on long-term growth when pursuing VC financing. While financing is necessary, don’t favor rapid expansion over a sound business foundation. Seek investors who value consistent, scalable growth and share your goal for long-term success. Balancing expansion and stability is critical for navigating the competitive landscape and making a long-term impact. – Neelima Mangal, Spectrum North

7. Think Through And Document Critical Processes

Having structure and organization in how you operate is as important as the value of your product or service. Being able to showcase that you have thought through the legal, ethical and operational processes that are a part of your organization will be necessary and will help your case when you’re seeking investment. In addition, be sure to write things down. Documentation is always critical to share. – Gregory Todd, DXC Technology

8. Craft A Compelling Story

The key to impressing investors is a good story that amplifies your unique value proposition. Focus on tangible, relatable real-world problems that will be solved faster, better and in a more sophisticated way with your technology solution. While telling the story, don’t glorify the problem; focus on the solution, and keep corporate BS at bay—this isn’t a “fake it until you make it” situation. Money sits tight, and due diligence seeks out the best! – Koray Köse, Everstream Analytics

9. Ensure You Have A Solid GTM Strategy

Focusing solely on technology without a solid go-to-market strategy leads many startups to fail. Successful companies identify target customers, understand customer reach strategies, engage partners for market delivery, generate revenue and build resources for the entire value chain. – Larry Walsh, Channelnomics

10. Prioritize Operational Excellence

My advice to tech startups is to prioritize operational excellence. Investors are not just backing your product; they are investing in your ability to execute flawlessly. A well-oiled operation not only attracts funding, but also ensures sustained growth and long-term success. Make your operations a star player in your funding pitch, and you’ll be on the fast track to capture investments. – Dharmesh Acharya, Radixweb

11. Consult With Outside Experts

Far too often, tech startup leaders believe they have the next killer product or service, but that’s rarely the case. Before you bank on VC money to take your business to the next level, make sure you put your concept through the gauntlet of skeptics and battle-test your path to sustainable profit. If you survive this step, you might just have something. – Leonard Lee, neXt Curve

12. Develop A Diverse Team

My advice is to build a team with diverse skills and experiences. Such a team can enhance your ability to execute your vision and show investors that your company has the depth and resilience to overcome challenges. Remember, investors invest in ideas and the people behind them. Hence, a well-rounded team can play a significant role in securing funding for your startup. – Cristian Randieri, Intellisystem Technologies

13. First, Sign A Paying Customer

Validation and a track record of progress are everything, even if the track record is short. Product-market fit and validation by any paying customer is by far the most interesting detail for investors. Solid knowledge of the “why,” “what,” and “how” communicates confidence and competence, and design customers will usually pay a small amount for guaranteed access for a year. Use that truth to sign as many of them as possible. Then go in. – Jimmie Lee, JLEE

14. Avoid Reliance On Trends And Buzzwords

When seeking venture capital, tech startups should avoid overrelying on tech trends or buzzwords. Genuine, value-driven applications of technology are key, as investors can differentiate between real innovation and trend-based pitches. Overemphasis on trends without a solid business foundation can lead to investor skepticism and undermine long-term success. – Andrew Blackman, EZ Cloud

15. Back Up Your Claims With Data

User testing, both quantitative and qualitative, will get you hard numbers to show to potential investors—data that shows the interest, market size and even potential monetization techniques that you will use to be successful. If the testing indicates problems, you can catch them and adjust before you’re beholden to new investors. – Luke Wallace, Bottle Rocket

16. Choose Investors By Expertise And Network Access

Joining an accelerator can help you prepare, but make sure you’re a good match for both its program and investor relationships. Choose your VCs by expertise and network access, not just capital, and engage frequently to build strong relationships. Understand term sheets and their impact on control. Know that your investors’ involvement can significantly shape the company’s direction and governance. – Filip Dvorak, Filuta AI

17. Time The Market

In the stock market, experts advise that “time in the market beats timing the market.” When raising venture capital, that advice doesn’t hold. You should time the market. Start your raise when you have achieved significant milestones, such as a prototype and initial adoption. Raise with a purpose (for example, to build or scale your product). Raising too early will unnecessarily dilute your equity interest. – Nicholas Domnisch, EES Health

18. Show Your Passion For The Project

One meeting can change everything. Your passion and belief in your project are more important and visible than you might imagine. Keep a positive attitude, as investors notice defeatism. Make as many pitches as possible. It’s all about the math; the more pitches you make, the better you become at pitching, and the greater your chances of finding that one meeting that changes everything. – Robert Strzelecki, TenderHut

19. Consider The Terms And Conditions Carefully

When seeking VC funding, carefully consider the terms and conditions. It’s crucial to look beyond the immediate financial gain and evaluate how investor involvement might influence your company’s direction, culture and autonomy. Remember, the goal is to find a partnership that supports your vision and growth, not just a cash injection. – Alexei Dulub, PixelPlex

20. Build A Robust Independent Revenue Model

Before seeking venture capital, a tech company should focus on building a robust independent revenue model. Rely less on investor funding and more on customer revenue to demonstrate real market demand. This approach can increase company valuation and give you more leverage in VC negotiations. – Rob Tillman, Copy Chief©

Originally published by Forbes.com