If you’re a startup, chances are you’ve thought about the daunting task of funding–which can be even more of a challenge for hardware startups. In the seventh and final installment of this clever series featuring a behind-the-scenes look at building a wearable tech brand, Karol Muñoz, lead designer and co-founder of wearable tech startup Luma Legacy talks about fundraising, managing relationships with investors when you are an early stage company–and how all of this is different for hardware.
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Nothing makes founders lose sleep like the need to secure funds. For first time founders, fundraising is more about meeting the right people, engaging them with your story and gaining their trust. For hardware founders, it takes a longer time and more work upfront to have a fundable product. We happen to be both. Though we haven’t raised a lot of capital, we have raised some. More importantly, we’ve gone down a path almost all first time founders will have to go down. Here are some insights to help you on your journey:
Seeking out motivations
Much of influencing people comes from seeking out what motivates them and putting their goals front and center. This goes for everyone, not just investors. What’s more, is that not all types of investment come in the form of cold hard cash. When a skilled person agrees to work with you for little or no money, that’s an investment. Getting someone on your team without much of a financial motivator, seek out what they are trying to do. Let them talk about themselves and keep asking them questions until you understand what is driving them. It could be a designer looking to get new type of work in their portfolio or an engineer looking to solve your kind of problem. Pivot your conversation to let them know their growth is also your priority and they can gain what they desire by helping you out. For an investor, the motivation is to give you “x” so they can get “10x” in return. For that they don’t only need to be motivated but they need to trust you.
Get in the right room
Meeting co-founders, advisors and investors takes effort. You have to get yourself in front of them, either on your own or through an introduction. You’ve probably heard this before but it is always worth mentioning: network, network a lot. The answers, funds and people you need, are not all found by sitting in front of your computer. You have to get out, go do stuff and meet people. I met my co-founder at a pub crawl, an unusual place to meet a business partner and by no means was I expecting it. On the other hand, you also don’t want to burn yourself out by going to every meetup group under the sun. Most networking events can be disappointing. The goal should be to put yourself in a room with a high-concentration of potential great connections. Ask peers what is worth attending in your area. Once you gain someone’s interest make it a priority to keep them in the loop.
The art of communication
Communication is not something we’re all born doing with ease and eloquence. Learn to keep everyone up to date. If you are not at least in their peripheral, you don’t exist. Learn the art of the short, bullet-pointed and actionable email and send it to everyone in your network. Angel investor Kelly Hoey wrote a fantastic article about it. Asking for an introduction is also an art. You have to not only make your own intentions clear, but also show how you can benefit the person you’re asking to be introduced to. This way, the person making the introduction feels better knowing that this introduction can be mutually beneficial for all parties involved. Learn how to ask for an intro the right way. Seems like a lot of work? It is. But don’t complain about how much is on your plate when you are trying to eat.
When are you ready to raise?
This is a question that gets asked a lot. At first, you’ll hear a lot about how you are not ready to raise yet. There is no magic time when you will get a “yes.” From what I have gathered so far, investors are looking for traction. What traction means is defined differently for every company, but nothing speaks louder than some paying customers. Hardware is also held to this benchmark even though it is much, much more expensive to get there. In meetings we’ve had, firms who made an investment in hardware have come to realize the long process that comes with manufacturing a product. One associate said about their portfolio company, “the founders are sleeping on the factory floors right now.” It’s the reality of hardware. It’s hard and investors are looking for companies to de-risk their investment as much as possible. To get to a fundable place, consider accelerators, competitions, pre-seed funds, or an angel investor. Focus on getting a product to a paid beta. Learn how to be as lean as possible.
Remember, everyone you reach out to is a human with feelings and a busy schedule just like you, and to be clear, you aren’t just asking them to share a quick cup of coffee. You are hoping to get some of their precious time, valuable insights and hard earned money. They are not ATMs. They will make calculated decisions based on how profitable your market is and they will try to gauge whether or not you have what it takes to lead your company to success. Your ability to keep them in the know and gain their trust, showcases your leadership. So with all that being said, try not to toss and turn at night worrying about dollar signs. Get some rest, so you can get out there and put your best foot forward.
To read the entire awesome series of how to build a wearable tech brand by Karol, click here. Thanks for dropping the knowledge on us, Karol!
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