AWS Startups Blog

How to get funded: Seven keys to securing investor backing from a Silicon Valley VC

Mackenzie Kosut & Edith Yeung at the AWS SF Pop-up Loft

The AWS Pop-up Loft in San Francisco filled up quickly on Monday night as attendees from Silicon Valley startups eagerly awaited Edith Yeung, General Partner at 500 China and Mobile Collective Microfund. This would not be a traditional ‘Loft Talk’ about architecting on AWS, or using serverless securely, so why was the AWS Loft packed full of eager startups? The answer is that this session was about to address an issue that keeps many entrepreneurs up at night: how to get your startup funded.

To give you a bit of background on 500 Startups, the group Yeung works for, it is an early-stage venture fund and seed accelerator that has invested in over 1,500 startups to date. Each year, 500 Startups supports four classes of startups, two in Mountain View and two in downtown San Francisco. For every class rotation, the fund receives on average more than 2,000 applications, but can accept only 30-50 of these prospects. In the six years that 500 Startups has been operating, it has invested in three startups that have become unicorns, including Twilio, Credit Karma, and Grab Taxi, in addition to another 37 companies each valued at over $100 million. Yeung herself focuses on mobile and consumer Internet startups, quite often within the China market.

The session was set up as an informal fireside chat between Yeung and AWS Principal Startup Evangelist, Mackenzie Kosut. As Yeung has a special interest in Frontier Tech such as mobile, augmented reality (AR), virtual reality (VR), Internet of Things (IoT), and consumer Internet startups, her guidance trended toward these areas, but her overall message can be useful to startups in any industry looking to get VC funding:

 

1) Iterate constantly and react quickly.

According to Yeung, too many founders spend a lot of time overthinking their product, and not enough time actually getting it out into the market and collecting feedback from customers. It’s all about being able to launch your minimum viable product (MVP) so you can gather metrics and begin making improvements. Good ideas are a dime a dozen, but if you can’t show investors that you’re capable of launching and that you have a clear growth strategy, it is very unlikely you will get funding.

 

2) Know your numbers!

There is nothing more concerning to VCs than a founder who responds “Let me look that up” when asked about their company’s revenue last quarter, or how they are performing against their competitors. A lot of entrepreneurs get really caught up in telling investors how their products works, rather than showing their successes and opportunities in numbers. Once you have launched your product, most VCs are far less interested in learning what your product does than they are in the reporting you present.

 

3) Be vocal about your weak spots.

Investors know that there’s no such thing as a perfect company. Even unicorns can have serious weaknesses, but the difference between a successful and an unsuccessful startup is in being able to identify these challenges, and come up with a plan for how to overcome them. If you can be clear on what your challenges are and where you need the most help, it will give investors confidence in your understanding of the market.

 

4) Make it easy for people to help you.

You probably know from experience that everyone in the startup world is extremely busy, especially investors. Even people who really believe in your startup and want to help have very limited time to do so. You know your startup better than anyone, so make it easy for our fans and advocates to promote you as much as possible. Every founder should have a short blurb about what their company does that can easily be shared by people who are interested in promoting it. When reaching out to investors, make sure you’re emails are clear and get right to the point—bulleted lists are recommended, and don’t forget to follow-up!

 

5) Be able to identify your “unfair” advantage.

Whether you’re an expert in your field, or you’ve surrounded yourself with people who really get the industry, VCs will be looking for the “unfair” advantage you have that increases the probability that your company will succeed. There is nothing less appealing to investors than when entrepreneurs introduce their startup as “the Airbnb” of an industry. Be able to clearly communicate your value proposition, and why you are positioned to succeed where no one else has before.

 

6) Demonstrate that you have some skin in the game.

Investors need to see that you believe in your company, and it’s even better if well-respected individuals in your space have given their endorsements as well. Whether you’ve put your own money into your startup, or you’ve been able to secure backing from someone who really gets the industry, you will give investors greater confidence that you have a strong business model and that you and your team are committed to moving mountains in order to get your startup off the ground.

 

7) Practice your pitch and memorize it. This is your company!

It might seem obvious that you would rehearse your pitch to investors, but Yeung finds that many startups who pitch to her are still underprepared. Know your pitch by heart, memorize key metrics, and anticipate questions that investors will ask you. It’s not enough to talk about the benefits of your product; you need to have a detailed business plan, and good data to back it up.

 

If you would like to watch a full recording of this session “How to Get Funded – A Fireside Chat with Edith Yeung,” check back here in a few weeks and we will have the link posted. You can also watch her live video interview with AWS #StartupsOnAir on Periscope.

Interested in VR and AR? Check out Edith Yeung’s slide deck on 20 VR & AR predictions.

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