In the venture capital world, the competition for A-round funding is intense. On average, a VC reviews 400-600 companies each year and selects only about 1% for investment. Similarly, large angel investors evaluate between 100 and 200 companies annually, choosing just 1-2 (1%) for funding. What about the remaining 99%? Are they all truly "not fundable"? The answer is a resounding NO.
Most startups, especially in their nascent stages, are primarily focused on product development and technological innovation. As they evolve to the proof of concept stage, they begin crafting go-to-market strategies and investing in sales and marketing. However, the third pillar—finance—often lacks sufficient attention. Many founders struggle to articulate their business value, using technical jargon instead of clear business language. This oversight can cost them their only chance to make a compelling first impression.
"In A-round funding, acting like a seasoned company is imperative," says a VC partner. "We expect them to demonstrate thorough understanding not just of their product, but also of their market and business dynamics."
This is where the 'Matoki Boosting Funding Preparation' process, also known as 'Fundability', becomes indispensable. This 4-6 week structured and proven process is dedicated to enhancing a startup's appeal to investors by validating its fundability from an investor's perspective. It is crucial for startup CEOs to be aware of and engaged in this process, as it not only ensures funding readiness but also significantly boosts the odds of funding success—with more than 50% of participating companies successfully raising funds. Understanding and utilizing the Fundability process stages (see Exhibit 1) is a strategic move for any CEO looking to increase their startup’s funding possibilities.
Meet the Team
The journey begins by deeply engaging with the startup's executive team to examine all major business elements through a SWOT analysis, ensuring every aspect from business goals to internal and external challenges is scrutinized. We play devil’s advocate, ask tough questions, and challenge major assumptions to craft a bulletproof narrative that affirms the company’s potential for success.
Talk the Talk
Since the "money language" differs vastly from technological vernacular, it is crucial to reshape the startup’s story into one that resonates easily with executives and investors. The narrative is coupled with a robust, scenario-driven financial model that encompasses all relevant revenue streams and cost drivers, detailed on a monthly, quarterly, and annual basis.
Show Me the Money
The model also addresses potential funding structures, exploring equity, debt, hybrid solutions, and opportunities for non-dilutive funding. Important considerations like valuation and equity dilution red lines are thoroughly assessed.
Wrap It All Up
We also explore exit strategies, leveraging our extensive experience to provide invaluable insights. The process culminates in preparing a compelling investor presentation, structured to meet investors' expectations and language. The presentation not only communicates the startup's vision and mission but also outlines the company’s potential for growth, profit generation, and competitive advantages in both short and long terms.
Ready for the Game
By the end of the Fundability process, your company will be transformed into a mature, market-ready entity with a professional and passionate team, poised for Series A investment. It’s not just about being ready; it’s about being ready to shine at the big show.
In future articles, I will share insights from various findability processes across multiple industries, technologies, locations, and stages of funding. This will provide a comprehensive view of how these factors interact and influence each other in different contexts.
