Starting and growing a business is never easy. Commence fundraising, and things can quickly become overwhelming. During our recent "Lunch with Angel the Angel," we responded to a commonly asked question amongst startup founders: As a pre-revenue company, how do we fundraise from investors to get the money we need for marketing?
The short answer is, “don’t.”
Like all general questions, the answer requires more specific details and depends on a number of factors, especially what kind of business you’re building and within which sectors and geographies. Generally, pre-revenue startups should avoid fundraising solely to secure a marketing budget. Instead, focus on building your story, securing early customers, and gaining momentum. Investors want to see that there is a big problem that needs solving, that there is demand for the solution you’re offering, and that you are creating value without spending heavily on marketing. Future marketing efforts will amplify your organic growth and hustle. Here's how you can raise funds while you’re building demand with a no-cost or low-cost go-to-market strategy:
1. Develop a Compelling Story
Investors want to believe in you and your vision as much as they believe in your product. A compelling and clear story backed up by a formidable plan demonstrates your passion and commitment to the business as well as your capability as a founder and team. It should outline not only what your company does but also the problem it solves, the impact it aims to have on the market, and why you’re likely to win. Highlight your unique perspective, experience, and value proposition and how it differentiates you from competitors—there are always competitors of some kind, even if it’s just competition for attention.
Narrative is powerful. Craft a story that connects with investors on an emotional level. Share your journey, the inspiration behind your startup, and the challenges you’ve overcome. A relatable and engaging story can make your vision more tangible and memorable.
2. Build a Strong Team
Investors invest in people as much as, if not more than, they invest in ideas. Showcase the strengths and experiences of your founding team. Highlight each member’s expertise, past successes, and their role in driving the company forward. If you have advisors or board members with notable backgrounds, include them in your pitch and share how they’re impacting the business. Show that your team is deeply committed to the startup’s success.
3. Showcase Market Potential
Even if you're pre-revenue, demonstrating a deep understanding of your market can instill confidence in investors. Conduct thorough market research to show the size of the opportunity, the demand for your product, and the growth potential. Use data to back up your claims and present a well-rounded picture of the market landscape.
Share insights from potential customers, pilot programs, or market tests. If you’ve conducted surveys or focus groups, present the findings to show there is genuine interest in your product. Testimonials, even from beta users, can be persuasive.
4. Present A Solid Go-To-Market Strategy
Investors want to see that you have a clear plan for how you will acquire customers and grow your business. Your GTM story for investors should:
Demonstrate a willingness to pay for your MVP, even if you haven’t received payment yet, and experiment with securing pre-sales.
Show you know what the minimum viable segment is that you need to focus on and capture and how you will do that. Identify which initial segment—a subset of the minimum segment—you will focus on for GTM and why they are the best ones to focus on.
Provide data insights to back your focus areas. Share results from tests comparing different marketing strategies, such as organic LinkedIn campaigns versus email outreach. Show where you directed traffic (e.g., landing page, free trial, scheduling a call, downloading a lead magnet), and track conversions into leads, qualified leads, opportunities, and customers.
Explain how your early customer profile differs from your ideal customer profile and why. Generally, early customers help you learn and are easier to acquire, whereas your ideal customers may be harder to onboard and may require more proof or time in the market, but are likely bigger revenue generators for the business.
A solid go-to-market (GTM) strategy should include:
Target Audience: Clearly define your target market segments.
Marketing Channels: Identify the marketing channels you plan to use and why they are suitable for reaching your target audience.
Customer Acquisition Cost (CAC): Estimate your CAC and how you plan to optimize it over time as it grows.
Revenue Model: While you may be pre-revenue, outline your revenue model, pricing, and how marketing will drive sales.
When developing a comprehensive go-to-market (GTM) strategy, it’s crucial to tailor your approach based on your target audience and product type. Here’s a simplified guide for startups and entrepreneurs:
Selling to Consumers or Prosumers
Product-Led Growth (PLG): Focus on letting your product drive user adoption and growth.
Community Building: Foster a loyal user community early on to generate organic growth.
Partnerships: Establish strategic partnerships to expand your reach.
Fundraising: Secure funding once you get early signals of product-market fit to scale operations.
Paid Marketing: Amplify your reach with targeted paid marketing campaigns after you’ve proven demand through organic and free growth motions and gained insights to invest wisely.
Selling to Small and Medium-Sized Businesses (SMBs)
Inbound Strategies: Create valuable content to attract SMBs and build awareness.
Outbound Strategies: Proactively reach out to potential customers to foster relationships.
Digital Marketing: Use paid digital marketing to accelerate pipeline generation as you refine your Ideal Customer Profile (ICP) after you’ve earned your first customers without paid ads and marketing.
Selling to Enterprises
Founder-Led Sales: Initial sales should be driven by the founder/s leveraging their passion and vision.
Account-Based Marketing (ABM): Focus on personalized marketing efforts targeting specific enterprise accounts.
Partner Ecosystems: Build partnerships that can help you penetrate large accounts.
Inbound Marketing: Use content and SEO to generate valuable visibility.
Targeted Outbound Efforts: Directly engage large enterprises with tailored outreach.
Developer Documentation & Free Tooling: Offer comprehensive resources and tools to support integration and usage, especially for complex or technical products.
Community Support: Ensure robust support systems are in place to assist developers and users from day one.
By tailoring your GTM strategy to your specific audience, you can effectively navigate the market and achieve sustainable growth before and after you raise capital.
Utilize Cost-Effective GTM Marketing Tactics
Instead of focusing on securing a large marketing budget, employ cost-effective tactics to create awareness and build traction. Here are some GTM marketing strategies that require no or low cash investments:
Content Marketing
Create valuable content that resonates with your target audience. Start a blog, write articles, produce videos, and share insights on social media. Content marketing can establish your startup as an authority in your industry and attract potential customers organically. Inbound marketing leverages content creation to generate leads, optimizing for SEO to attract organic traffic.
Example: HubSpot started as a small blog sharing marketing insights. Through consistent and valuable content, it established itself as a leader in inbound marketing, drawing in millions of visitors and converting them into loyal customers.
Social Media Engagement
Leverage social media platforms to engage with your audience. Regularly post updates, share industry news, and interact with your followers. Use hashtags, join relevant groups, and participate in discussions to increase your visibility.
Example: Dollar Shave Club used witty and engaging social media content to connect with its audience, building a massive following and generating significant brand awareness without a hefty ad spend.
Email Marketing
Build an email list and send regular newsletters to keep potential customers informed about your progress, product updates, and industry insights. Email marketing is a cost-effective way to nurture leads and maintain relationships with your audience.
Example: Airbnb utilized personalized email campaigns to keep hosts and travelers engaged, leading to increased bookings and enhanced user experience.
Networking and Partnerships
Attend industry events, join online communities, and connect with influencers and potential partners. Building relationships can lead to word-of-mouth referrals and opportunities for collaboration.
Example: Buffer's networking efforts led to strategic partnerships with influencers and other brands, helping it gain traction and credibility in the social media management space.
Community Engagement
Create and participate in community platforms, organizing events and using various levers to drive engagement.
Example: Reddit's community-driven approach allowed it to grow organically, with users actively participating and spreading the word, leading to exponential growth.
Public Relations (PR)
Craft engaging stories and hooks to build relationships with media personalities, bloggers, and influencers, generating awareness without significant expenditure.
Example: Tesla's PR strategy focuses on compelling stories about innovation and sustainability, earning extensive media coverage and public interest without traditional advertising costs.
Partnerships
Establish strategic partnerships to drive traffic and generate leads.
Example: Spotify's partnership with Starbucks allowed it to tap into the coffee giant’s customer base, enhancing brand visibility and user engagement.
Account-Based Marketing (ABM)
Target specific companies with personalized outreach.
Example: LinkedIn employs ABM to connect with key decision-makers in target companies, offering tailored solutions that address specific business needs.
Product-Led Growth (PLG)
Develop a self-onboarding solution that leverages network effects.
Example: Slack’s product-led growth strategy, offering a freemium model that encourages team adoption, has led to widespread usage and organic scaling.
Flexibility and experimentation are crucial. What works at one stage of your startup may not be effective at another. Additionally, strategies that succeed for one company might not yield the same results for you. The key is to remain adaptable and ready to pivot when necessary.
By employing these cost-effective GTM marketing tactics, you can build awareness and traction for your startup without breaking the bank. Remember, the goal is to be creative, resourceful, and persistent in your efforts.
Ready to elevate your GTM marketing strategy? Start experimenting with these approaches today and watch your business grow!
5. Build Traction
Traction isn’t limited to revenue. Demonstrate progress through other metrics such as:
User Growth: Highlight the number of users signed up or using a beta version of your product.
Partnerships: Showcase strategic partnerships that can drive growth.
Media Coverage: Present any media coverage or industry recognition and the stats that show you’re driving awareness.
6. Leverage Your Network
Networking is crucial in the startup ecosystem. Use your existing network to secure warm introductions to potential investors. Attend industry events, pitch competitions, and join startup accelerators or incubators to increase your visibility and credibility.
Look for investors who not only provide capital but also bring strategic value. Investors with experience in your industry can offer valuable insights, connections, and mentorship.
Remember, investors are not just interested in your current state but in your potential for future growth. Demonstrating that you can generate demand with minimal upfront expenditure shows that you’re gritty and savvy. Focus your initial funds on building your business, securing customers, and maintaining momentum.
As you show good growth signals, investors will be more inclined to support further marketing efforts. By proving your ability to drive demand and growth efficiently, you build their trust and confidence in your business and team.
Investors will see their funds are going toward building a robust team and a valuable product. Once you’ve earned their trust and demonstrated substantial growth, they will be eager to invest more, knowing their investment is in capable hands.
Taking these steps will help you build a resilient foundation that attracts investment, propels growth, and ensures your startup’s success.
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