The Problems with Startup Capital Fundraising…
Our company Paperstreet is attending the Techstars Alchemist blockchain accelerator in New York City and we’ve been meeting with companies and investors day and night to discover what their ultimate pain points are, so that we may strategically position ourselves to solve problems no one else is aware of in order to give our company the best long term product market fit. In this article we’re going to discuss our strategy of finding those pain-points and what we ultimately hope to accomplish.
When we refer to pain points we typically categorize them into two solution buckets: advil pains and morphine pains. What we mean by this are solutions to these pains:
- Advil: “I have a headache. I need to go take a nap.”
- Morphine: “I’m dying here please give me anything to make this pain go away.”
What problems have we discovered with regards to fundraising over the past month?
We’ve divided our user base into two sides:
In order to discover these pain points we interviewed dozens of companies and investors to determine how we can be more effective during their fundraising efforts. During this time we discovered and categorized the pain points into the following list:
- Liquidity: Advil
- More Deal flow: Advil
- Following companies I’m interested in: Advil
- Reviewing documents after conversion: Advil
- Consistent updates from Startups they’ve invested in: Advil/Morphine
- Access to the best deal flow: Morphine
- Compliance during fundraising: Advil
- Angel investor cap table management: Advil
- Understanding my investors and how they can help me: Advil
- Feedback from users: Advil
- Control of sensitive data related to their fundraising round: Advil
- Chasing checks: Advil/Morphine
- How to raise capital effectively: Morphine
- Tracking investors interest: Morphine
- Spending time fundraising: Morphine
Granted our business is a two sided marketplace (investors looking to invest and startups looking for investors) we felt it was necessary to understand both sides of the market. We battled for weeks debating which side was the side of the market to focus on. We know that if we can drive massive demand on the investor side we will have a successful product. However, during our interviews we didn’t uncover any unforeseen pain point for investors we could solve easily without being at massive scale. What we found is investors are for the most part pretty fickle. They will jump through all sorts of hoops to invest in a company they want access to. Most of them have accounts with all the popular crowdfunding sites and have no loyalty to any one in particular. There are some ways that we might be able to capitalize in the future to help make investors more loyal to our platform, but there’s no big problems we can solve right now to provide the best deal flow to investors.
On the startup side, we discovered a ton of massive pain points for founders when it comes to fundraising. Attending Techstars also has taught us many lessons on how we as founders, when looking for investors to invest in our company, can be do so effectively. We were lucky enough to have a workshop in person with David Cohen, one of the CEOs of Techstars, where we discussed in detail how the fundraising process should work to be more effective. Before we met with David, the Techstars team shared this video which is basically a recap of the workshop we had in person. I highly recommend watching this video and practicing the techniques he talks about it if you’re looking to raise capital for your startup.
What we’ve discovered during our interviews is that founders of companies are spending countless hours building momentum with their investors. We also discovered they have never raised capital before and have no real idea of what they’re doing.
How can we help them by building the tools they need to start exposing their company to a global network of investors? Investing in companies for equity is a bit like dating and both sides of the market need to make informed decisions before making a commitment.
After many brainstorming sessions and debates we collectively decided on a way to test a new feature we rolled out privately last week. We’re calling it Paperstreet Pulse. Our hypothesis is that if companies consistently provide updates to their investors, advisors, mentors and general community it will allow them to spend less time fundraising and help them generate more interest from the investment community. By focusing on their product and showing the progress they’re making through a platform that makes it easy while exposing them to a large network of investors, they will be more focused on building products and less focused on courting investors. At the end of the day raising millions of dollars is not a recipe for success, but building great products and getting help when you need it is.
We released the first iteration of this idea, which provides anyone who subscribes to the list a way to access exclusive updates from all of the CEOs attending the Techstars Alchemist Blockchain Accelerator. Our hope is that if this is successful and provides value to our growing network of investors our next step is to build specific pages for all companies that will show a timeline of all their updates, provide more engaging content about the founding team and what they’re trying to accomplish. If you’re interested in tracking all of the companies in our cohort please sign-up with this link.