This is how we did it.
A bit of a background
Our company was founded in 2011 in Portugal as an alternative Android app store to Google Play. To date, we have more than 150 million users worldwide, 700,000 apps, and 4 billion downloads.
In early 2015, we reached profitability, a critical milestone, and decided to raise our Series A in Southeast Asia. After a full year, we announced a US$ 4 million round with the participation of Gobi Partners and Golden Gate Ventures.
Here are my top tips and lessons from leading that effort. I do hope these insights are somehow useful to other startups that are currently raising funds.
Show commitment to gain trust
When I spoke for the first time with local investors, most of them had never heard of us or invested outside SEA. For that reason, many passed up our offer. Some even said, “I like your business and traction, but I don’t even know anyone in Portugal that I can call to check on you.”
So we decided it was important to show how committed we were. To achieve that, we raised a bridge round from our seed investor (Portugal Ventures) to support the costs of opening offices in Singapore and Shenzhen. Of course, this wasn’t just about getting the trust of investors—it was part of our plan—but this risky action sent a strong message to our recent investors, and no doubt it helped us secure their signatures.
Always be ready to pitch, but not too aggressively
You never know when you’re going to meet the right investor, so you need to be ready all the time. This means being able to concisely describe your business and why the VC should care. Many people call this an elevator pitch, but you should actually treat it like a sharing effort instead of pure pitching.
That’s what happened to me when I met E.ventures by chance during lunch at the Lisbon Summit. Before I pitched, I asked politely, “Do you mind if I tell you about my startup? I don’t want to spoil your lunch…” (This was very important because VCs were bombarded by pitches and this was his lunch break.) Little did I know that he would ultimately become our lead investor in the round!
Tell your story right and short
VCs are extremely busy people (think of a five-year-old child’s attention spam), so when you’re reaching out, having a long pitch could destroy your chances. My advice is to use a maximum of three points: (1) what you do, (2) most impressive metrics (e.g. downloads, MAUs, revenue, retention, etc.), and (3) how much you are raising. I once worked with a renowned consulting firm and the rule there was: “Two bullets are too little. Four bullets are too much.”
Once you open the door, your pitch deck will become either your best friend or your worst enemy. It’s important to hit the key points quickly (in our deck, the main KPIs are on the first slide), tell a great story about your company, and share interesting observations from running the business. Be prepared to answer tough questions with confident answers and make sure you don’t have more than 10 slides to show (put supporting details in the backup slides instead).
Show me the value, not the money
You’ve heard this before but don’t be tempted to take money from a VC who’s offering nothing but cash. Do your own due diligence before requesting for VC meetings, as this could show that you believe there are synergies (even if it’s just going to Crunchbase and checking whether they invest in your vertical and their typical round/ticket).
Then, when you speak with VCs, it must be a two-way street, i.e. you should also ask about the value the VC is bringing to the table. Our company had limited experience in Asia, so we needed VCs with deep local market knowledge and strong connections to key stakeholders. Gobi Partners and Golden Gate Ventures proved they would be a good fit.
Bonus tip: Don’t look desperate! The analogy I usually use when talking with other startups is that getting the interest of a VC is like trying to get a girl. If you look too easy to get or too desperate, you will hardly get the right one.
Investors invest in lines, not dots
A few months ago, I was in a presentation of the Map of the Money (a must-have resource if you are planning to raise money in SEA) and it was the first time that I heard this expression: “Investors invest in lines, not in dots.” I understand this because it is exactly what I felt during my courting period with VCs.
Try to visualize this: When you meet a VC for the first time, you will give some info about what you plan to do next and the VC puts a dot in his/her mental chart. Then after a few weeks/months, you meet again and you give an update. That is one more dot in the mental chart. So you understand where I’m getting? It will get to a point where the VC can draw a line between all those points, hence supporting his/her investment thesis.
All in all, let your startup do the talking
Ultimately, VCs are going to be impressed by a great company and great people more than a polished pitch. Focus on building one of those rare, great companies that VCs are already looking for.
Then, start building a relationship with them and when the time comes, you’ll be in the driving seat of contract discussions, will get better valuations, and will be presented with opportunities to work with the investors that add the most value.