AI Startup Blueprint

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Module 6: Getting Funded

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1.Identifying Aligned VCs and Initiating Conversations

Quickly identify venture capitalists (VCs) who align with your vision and values.

Start conversations with potential investors as soon as possible.

Leverage ChatGPT or other tools to craft effective emails for reaching out to VCs.

It may take around 80-120 conversations to find a lead investor during the pre-seed VC stage.

2.Pre-Seed Level and Lead Investors

The main goal at the pre-seed level is to secure a lead investor.

Having a lead investor can create leverage and generate interest from other VCs.

Aim for institutional VCs rather than individual angel investors, as they provide stronger backing.

3.Main Steps to Reach Investors

Warm introductions through connections are ideal and always the best for reaching investors.

Do you have anyone you know who can introduce you to investors right now?

Email reply rates will not be as high as a warm intro, but they still work! You can still get responses.

Cold emails can also be effective, although reply rates may be lower.

Remember the investors want to be in front of you!

Cold introductions can eventually lead to warm introductions, and many successful connections trace back to an initial cold email.

Ex. A startup entrepreneur team identified a target Pre- Seed VC he wanted to speak to, but they ended up talking to another VC not in their field, who was not interested in investing in their product. However, this VC that said “no” is the one who led them with a warm intro exactly to the VC they originally wanted to speak to, and they were able to get funding from them!

4.Accelerators

Accepts companies solely on ideas!

Consider joining accelerators like Antler or Y Combinator ($150k+ investment) to gain support, validation, and access to a network of investors.

5.Pre-Seed VCs (Institutional/Angels)

These are investors who don’t have an accelerator program, but you can just reach out and pitch to them your ideas.

Pre-seed VCs (institutional/angels) can be approached directly with your pitch.

6. Reaching Out to VCs

Obtain contact information for VCs from platforms like Fiverr, potentially industry-specific lists.

Engage in cold outreach

The misconception is that this is bad, but this can be great and effective with a well crafted email!

Optimize for the lowest possible outcome- even if you only get 10% response rate that is 1/10 VCs that are willing to have a conversation with you

Don’t get discouraged if you see a low response rate. Even 10 responses out of 100 outreach emails is great! That is 10 conversations getting you closer to your goal!

Conversations with VCs can result in various outcomes, such as investment, valuable feedback, or referrals to other potential investors.

Many possibilities from just a conversation (All can help you!):

1. They could invest in you. The best case scenario is they say yes.

2. They might not invest in you and you will learn from your conversation to better the next one. The worst case scenarios is that they say no, but you can turn this around!

3. If they are not interested, you can still ask them if they know anyone who could be or who is willing to talk to you and this will get you MORE opportunities

Even if they say “no,” you can ask them to make the next connection for you. Ask them if they know another VC or investor who may be interested and if they are willing to introduce you.

Having this cold outreach end up in a warm introduction is incredibly beneficial and powerful! This is also a great case scenario even from a “no.”

So always have the conversation!

7.Angel Investors

Consider targeting angel investors as they may be more accessible and easier to raise money from compared to institutional VCs.

Angel investors can provide valuable early-stage funding, industry expertise, and networks.

Craft a compelling narrative and demonstrate your passion and expertise when pitching to angel investors.

However the drawback is that they are not backed up by an institution. This means the next investors will be harder to get than if your lead investor was institutionally backed.

8.Pitch Deck

Prepare a minimal pitch deck of around 10-12 slides.

Focus on showcasing your product, market opportunity, business model, and team.

Include information about your traction, competitive landscape, and financial projections.

Tailor your pitch deck to highlight the unique value proposition and potential of your AI startup.

Need to have an idea on how much you want to raise.

This has to do with who you want to hire- keep this low: “I want to hire X, Y, Z to help me do A, B, C”

You need to tell the VCs where their money will be going this is most important for the first one!

9.Individual Narrative

This is Most important: Develop a compelling narrative highlighting your industry experience, skills, and previous successes.

Who are you are as an individual? Why you? Why are you the person to solve this problem/ build this? Why should I invest you? What is your authority?

They need to know you are someone who understands industry and can adjust accordingly.

They know you’re going to need to Pivot, so you must show you are adaptable enough for this.

Come up with your story: industry experience, skills, previous background.

Tie all of this into your credentials to instill confidence in potential investors..

10.Locking in Deals

Lock in deals by optimizing for the lowest possible outcome and determining how much funding you need to achieve your milestones.

Once you have some funding locked in you have two options:

Option 1: take the money, and think you're still bootstrapping.

How long can I stretch this money? How can I optimize it?

Ex. I Raise $150k and optimise it to last 1-2 years, while building product/ features fast and improving my offer quickly.

Option 2: Raise more money, which means more dilution.

You now have more money for the rainy day fund.

More money in the bank could be better.

Raise more money, give up more equity.

You can scale faster with more funding.

11.Different Funding Rounds

Different funding rounds, such as raising a larger round or optimizing with less money, come with trade-offs and potential dilution.

People are scared of dilution (getting too much funding) (who you are sharing your business with), but more money is never bad.

Don’t be greedy. Sometimes you may need to dilute.

You just need to know your goals to know how important dilution is to you!

Understanding different fundraising rounds:

https://visible.vc/blog/startup-funding-stages/⁠

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Action Items

Develop Pitch Deck: Create a concise and compelling pitch deck to communicate your startup idea and value proposition to investors. Include key sections such as problem statement, market analysis, business model, and financial projections. Use the template below to create your pitch deck or check out some other templates in the bonus section:

9. Pitch Deck Templates⁠

Build Investor Relationships: Focus on building relationships with potential investors through warm intros, cold outreach, networking events, industry conferences, and online communities. Seek feedback and advice from investors to refine your pitch based on the insights gained.

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