When you’re raising venture capital for your startup, there are so many critical things you need to do right.
I should know: I founded Adventure Capital, a venture capital firm focused on introducing new technology platforms to developing nations. We’ve invested and received investment for transportation startups in Nigeria, Bangladesh, and Colombia.
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Along the way, I’ve learned plenty about how to successfully fundraise—and a lot of it, I would never have known to ask about.
How to raise Venture Capital abroad
Here are some pro tips to make your venture fundraising abroad go more smoothly.
1: If your startup will be based in a developing nation, set up a holding company in a highly trusted jurisdiction like the United States, Singapore, or Dubai.
If your startup already exists in a well-known, safe market, skip to number two.
But if you’re creating a startup in Nigeria, for example, potential investors outside the country may be wary of funding you. They’re probably unfamiliar with the laws and possibly uncertain of the market.
The easy way around this is to set up a holding company elsewhere, like a Delaware C-Corporation. The holding company would own the local company—your startup. Then all shares in your startup are distributed by the holding company.
Photo Credit: Crunchbase News, The Q3 2018 Global VC Report
This way, your venture will be governed by the laws of whatever highly trusted jurisdiction you choose, rather than those of the developing country you’re actually based in. I’ve structured three motorcycle taxi startups in Lagos, Dhaka, and Bogotá this way, and it’s made investors far more comfortable with getting involved.
2: Keep your investor outreach information highly organized and updated.
Serious investors will expect you to be able to provide all the necessary data and information upfront—so always be ready to present it.
Keep your financial models, income statements, profit and loss statements, corporate filings, employer contracts, and any other investment documentation up-to-date in a “data room” —a digital location where you store all your business-centric information. Basically, after viewing your data room, an investor be able to make an informed decision on whether they want to invest or not, without asking many questions.
For your own purposes, keeping detailed spreadsheets with potential investor profiles is also imperative.
Using Google Docs or a similar program, store investor contact information, track the stage each potential investor is at in the investment process, make notes about them, and create reminders to circle back on given dates.
Good investors are usually highly OCD, so having an organized set of information about your company is always appreciated! It’s also indicative of a diligent entrepreneur.
3: Avoid common traps with your pitch deck and make sure to include vital information.
While your blind faith may be enough to fuel you, it won’t be nearly enough to gain the trust of investors.
I’ve known far too many founders whose entire pitch was based on an empty statistic such as: “If we manage to gain just 10% of this $100 billion market, we’ll be a $10 billion company.” But investors want to know how you’re going to acquire 10% of your market.
Ask venture investors the right questions
So here are some questions you’ll need to answer:
- How much capital you want to raise
- How you’re going to spend your capital
- What your competitive advantages are
- What your timeline looks like
- How much traction you’ve gained so far
- Who your competitors are
- What the market opportunity is
- What you have accomplished so far
- Per-unit economics of your userbase
- What your future plans are
And those are just the items you should address up front. You must also consider the barrage of follow-up questions you’ll be expected to answer. So, at this stage, you should have the answer to every possible question in your back pocket.
4: Take advantage of the many software and online tools available.
There are many intuitive, powerful digital tools that can help make your life as a founder easier—and many can save you money in the long run.
For example, DocSend is a life-saver for organizing, storing, and securing your data room.
After you’ve done your first raise, Carta (formerly eShares) is a smart first spend.
It does cost a bit of money, but it’s a great tool to help manage your capitalization table. Managing your capitalization table can cost up to $5,000-$10,000 for lawyers to handle. My favorite feature is the ability to upload an entire cap table showing each shareholder and their respective stakes in the company.
HelloSign makes signing contracts a breeze.
Through “eSignatures,” sign virtually any contract digitally. Plus, it allows you to create contract templates. This means you won’t have to review or redo the same contract each time you use it.
Visible.vc is incredibly helpful when sending investor updates.
And not only can technology be helpful once you’ve found potential investors, but it can also help you connect with them in the first place.
With this software, you can link your API so investors are automatically sent metrics and other information you want to share with them. This feature immediately increases your transparency—something investors always appreciate.
5: Have someone at your company who speaks English and presents well.
Being a great businessperson doesn’t always mean you’re a great presenter.
It’s imperative, however, that you have someone who is—someone who speaks English well, who projects passion and confidence, and who understands your business inside and out so they can work alongside the founders to pitch it to potential investors.
That person doesn’t necessarily need to be a founder. In the early days of Pathao—the motorcycle taxi service I created in Bangladesh—the CEO didn’t instill the most confidence in investors. I handled most of our initial fundraising as the director of the board. But we needed a long-term solution. We tested the waters with a few different candidates before landing upon our current CFO. Today our CFO handles most fundraising conversations.
Just make sure the person isn’t all talk—they need to bring in real results. I’d recommend vesting them so their cliff (the start of vesting) is 6 months after they join. That’s more than enough time to see if they can walk the walk.
In sum: fundraising is tough. But by taking a smart, well-informed, well-equipped approach, any founder can come out the other side funded and ready to scale.
Fahim Saleh is a serial entrepreneur and founder of Adventure Capital.
