Unveiling the Truth In Raising Pre-Seed – 5 things Venture Capitalists Won’t Tell You

Ever wondered what matters when raising your pre-seed? At BlackCrest we’ve got the insider scoop on the five things they don’t want you to know.

1. Experience Trumps Everything:

Forget the glossy business model – Venture Capitalists are eyeing your experience. Your journey matters more than charts and graphs. Share your story, and let your passion shine. We have had an instance where we were advising on a round, the founder product checked all the boxes on market size, early revenue traction, partnerships, and even optimized churn rate, and yet the investor passed on them. When we approached the investors after the round and asked them what the problem was, they said the founders were first-time founders. They explained that founders who had built before were usually less optimistic, and therefore more adaptable to changes in the market. They did not feel confident that the founders would effectively address the future market changes that were bound to happen.

As a founder having domain expertise and experience will give you an edge in fundraising.

2. CAP Table Chronicles: 

A Capitalization (CAP) table is a document that outlines who owns what in your company, including founders, early employees, advisors, and investors.

Having a concise and well-organized CAP table is like orchestrating a smooth, well-coordinated event, and investors appreciate that clarity.

Now, picture an intimate dinner party where every guest has a purpose. Your CAP table is like this carefully curated gathering. Each person brings value, expertise, or a unique connection to the startup. Investors at this party can see a clear narrative, and they are more likely to resonate with the story you’re telling about your company’s journey.

In essence, your CAP table is not just a list of names and percentages; it’s a visual representation of your startup’s inner circle. When pitching to investors, you want your CAP table to tell a story of strategic partnerships, experienced advisors, and aligned interests.

As a founder, while curating your CAP table, think of it as curating an exclusive guest list for the most important party of your startup’s life.

3. Size Matters, But Traction Speaks Louder:

Market size is the market that represents the total potential customers for your product or service.

Investors are drawn to startups that can tap into substantial markets because it implies a broader opportunity for growth. So, when presenting your startup to investors, it’s crucial that you vividly portray the size of the market you’re entering. Are you setting up your stall in a small neighbourhood or in a sprawling metropolis? Investors would love to know.

Traction signifies the real-world validation of your product or service. Investors want to see that your startup is gaining momentum and attracting customers. This could be reflected in user sign-ups, sales, or any other measurable indicators of interest. So, when you’re discussing your startup with investors, don’t just highlight the uniqueness of your product – showcase the tangible evidence that people want what you’re offering.

Remember, it’s not just about having a unique product; it’s about positioning your startup as a compelling opportunity in a market ripe for exploration.

4. Lead Investor Magic:

In the world of startup funding, a lead investor is like the guiding force that paves the way for other investors to join in.

Investors, much like concert attendees, often look to each other for cues. When a lead investor expresses confidence in your startup, it builds trust and confidence among other potential investors.

In essence, having a lead investor is like having a seasoned conductor guide your startup through the fundraising composition. They set the tone, bring order to the process, and inspire confidence among other investors, turning your funding journey into a well-orchestrated success.

We will send you another note on how to attract lead investors for your seed round.

5. Beyond Acquisition – Building a MOAT:

Well, in the business world, your “moat” is the unique advantage that protects your startup and makes it challenging for others to replicate your success.

Think of your growth moat as the special sauce that sets your startup apart and shields it from competitors. This isn’t just about attracting customers; it’s about creating a sustainable advantage that keeps them coming back.

Consider a startup offering a unique software solution. Instead of solely focusing on acquiring users, they invest in continuous innovation, creating features and functionalities that competitors struggle to emulate. This technological moat becomes a stronghold, keeping the startup ahead in the race.

A startup that not only attracts customers but also retains them through exceptional service or unique offerings will have a sustainable advantage in the long run.

Are you ready to start your pre-seed journey? Consider these truths your guide to success.

We are rooting for you,

BlackCrest.

PS: BlackCrest LP was listed in the VC4 Africa venture deal book 2023 for our role in a client’s $3 million seed round. We are experts in investment advisory and would love to speak with you and your team. To reach us send an email to team@blackcrest.africa and we will respond within the hour.