Jeff Yasuda is the CEO and co-founder of Feed Media Group, which provides music for apps and websites.
For founders of digital health and wellness apps, the current economic climate presents both great challenges and even greater opportunities. Despite Market Uncertainty, Kjartan Rist Recently ‘5 Reasons Why It’s The Best Time To Invest In A Startup’
Most investments have a five to ten year horizon, so there’s plenty of time for economic conditions to pick up as you get your business off the ground. The pandemic is shining a bright light on innovative digital startups looking to make a positive impact in the health and wellness sector, and it could be a favorable time to raise funding if they act quickly and strategically. I have. In this article, we’ll take a look at his eight steps for doing just that.
put your house in order
Just like preparing to sell your home, it’s very important to address as many potential issues as possible before you start raising money. Raising institutional capital through presentation alone is no longer the norm. You must be able to demonstrate a good early stage MVP (minimum viable product) before you go out to raise money.
Solutions like Amazon Web Services have made it easy to build and quickly scale MVPs. Additionally, if you’re a non-technical founder, look for a technical counterpart. Many founders opt for outsourced development teams. This strategy works, but ultimately the core technology needs to be brought in-house, which is critical to the long-term development of the company. Technical He’s not saying fundraising is impossible without a partner, but having a technical partner dramatically increases your chances of a successful fundraiser.
Build a dataset.
After building your MVP, you need to get measurable data that shows your product or service works. Digital health investors are no longer just betting on dreams. Investors want first proof that your idea works.
Qualitative data works, but be prepared to provide quantitative data if possible. A good rule is to include numbers in all statements. The more granular the data, the better. What is not tracked is not achieved.
Research potential investors.
Scale your capital raising appropriately for the type of investor that best fits your company’s stage and profile. More than ever, we need to be able to consider 18- to 24-month runways.
Most institutional investors have to manage their burns to get to their next funding cycle. Hopefully this will be a better market. Given the current market conditions, we should assume that we may not be able to raise any more funding this cycle.
The best entrepreneurs are individuals who have access to resources they don’t own. Build a network of trusted advisors who provide valuable advice and are accessible to potential partners, customers and employees. Get these advisors on your payroll and reward them with stock. Building trust in the company is the key to success in securing the right VC funding.
Get to know your investor.
Few venture capital firms invest exclusively in health and wellness startups. Start investigating venture funds that have invested in health and wellness in the past and may have recently exited. Examine their track record.
In general, most VC firms want a diversified investment portfolio, so if you’re currently working with another health and wellness startup, you may not want to approach that company. The last thing you want to do is share proprietary information with someone who works for a direct competitor.
Watch out for red lights.
This leads to red flags to look out for in the negotiation process. Be aware of situations where you may simply be offering free consulting to VCs. Are they really interested in working for your company, or are they using the conference to learn about the digital healthcare segment and help your competitors? Be very careful about protecting your intellectual property. VCs rarely sign non-disclosure agreements (NDAs), so don’t disclose technical details or the thought process behind them.
Another red flag is breach of confidentiality. If a VC leaks information about another company, it’s natural to wonder how much of your company’s information they intend to share with their competitors. It worries me when an investor says “between you and me” or “you haven’t heard this from me.”
The most important thing is to “know your investor”. Watch them closely during the negotiation process to get a feel for how they handle challenges and difficulties. It’s easy to take it easy when it’s fun, but the party bus always has to stop for gas.
Create a competitive process for closing deals.
Investors have an unfair advantage in this game in that the longer they wait to make an investment decision, the less risk they take. The challenge for founders is to show investors that the time is now and waiting will not bring the same opportunity.
One of the most compelling ways to motivate investors is to let them know that other investors are interested in and appreciate the opportunity. Fear of missing out is an obvious concern for many investors.
Have a nice trip.
It may come as a surprise, but brutal markets are the perfect time to start a company. Dismissed potential employees are available. Budgets have been cut, so vendors may agree to lower prices. That’s good for founders. A smart investor knows that a potential exit or next round is years away. Ideally, when market conditions improve.
And don’t forget that fundraising should be fun. You’ll be interacting with incredibly smart people with extraordinary pattern recognition. Think of this as a way to get actionable advice from industry experts to improve your company. A positive attitude is contagious and inspiring to potential investors.
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