This is a guest post by Mike Katchen, founder and CEO of Wealthsimple, a low fee online investing platform.
In May, 2014, we raised a $2-million seed round for Wealthsimple. It took us 2.5 weeks to raise from 15 amazing investors in Toronto including David Ossip, Dan Debow, Roger Martin, and Joe Canavan. Here are a few tips based on what I think we did right.
The following tips assume you have a good idea in a massive market and a killer team. Most investors consider those table stakes for raising money.
1. Find your lead investor early.
Most first-time founders I know make the same mistake. They think that fundraising is about convincing investors of the merits of your idea and the strength of your team. Unfortunately, that's not how it works. Angel investors follow the herd. They care more about who else is investing than what you do as a company. When you start to fundraise, laser-focus on getting your first investor. Don't go broad until you have your lead lined up.
I met our lead investor, Joe Canavan, the day we started fundraising. He is an icon in the financial services industry. We got him on board through a combination of special terms (e.g. some sweat equity for advice) and appealing to him emotionally about building his industry "legacy." It took two meetings over one week to get him to sign. Once he was in, it took one and a half weeks to close the round.
2. Your angel investors don't have to be in tech.
We closed our round with 14 angel investors, and only five are from tech. The other nine are from financial services. I see lots of entrepreneurs focus exclusively on local tech angels and VCs like those listed in this great post by David Crow. That's a mistake. Look for successful entrepreneurs and executives in your industry – you're likely to find a sizeable group of potential investors that actually know your business. A few industries with strong local investors include real estate, financial services, professional services and health care.
3. Most decks suck. Make yours good.
A compelling deck, aka presentation, is short, clear and well designed. If you have a solid story, then tell it in four to five pages: (1) what you do, (2) market size, (3) team, (4) growth plan, (5, optional) competition. You can find the pitch deck we used on slideshare. You can also find great examples at bestpitchdecks.com. Keep it short, pretty and exciting.
4. Set a deadline.
Fundraising has a nasty habit of dragging on. As soon as you have your lead investor, set a closing date which is two to three weeks out and use that to drive urgency with other investors. You don't have to stick to it, but you'll find that things move way faster with a deadline.
5. Put some money in yourself (if you can). It goes a long way.
Members of the Wealthsimple team were the first investors in our seed round. If you can afford it, investing in your own round goes a long way. It signals to investors that you are committed, aligned, and will be a responsible steward of their capital. Surprisingly few teams invest in their own rounds, so it can also help you stand out.
Since our seed round in 2014, Wealthsimple has become the largest and fastest growing online investment manager in Canada. In April, 2015, we raised a $30-million Series A from Power Financial, one of the largest Series A rounds in Canadian history, all just 12 months after launching.
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