Raising money for startups is hard. Harder still if you start in Latin America where there are still only a limited number of funding options. This effects how founders should consider the fundraising process.
Founders can focus on optimizing resources of talent, support, advice, contacts and money, in order to maximize future options. You will eventually reach the milestone you seek, but probably not in the way you thought when you first set out.
How to improve your optionality as a startup founder:
Bootstrapping. The hardest, but truest. The farther you can go on your own dime the more you would be able to decide when, or if, to raise capital.
Entering an acceleration program. Many founders self-select out of accelerator programs, thus limiting future options. You may have to give up equity, but the trade off could be worth it. You will learn skills and expand your potential investor base, who won’t typically take the accelerators entry point as a valuation benchmark.
Take a trip abroad to meet more investors. This will open you up to more options and also help you change the paradigm of local market fundraising. You will certainly expose yourself to hearing “no” a lot, but you will open enough doors to eventually get to “yes.”
Take grant money. Apply to Startup Peru or Parallel18, or other grant programs. This will allow you to extend your runway, allowing you to raise money at the optimal time for you. It can seem like a waste of time and not necessary, but it will increase your options for the future.
Give investors deadlines. This may seems counter-intuitive, but if you run an efficient fundraising process you will allow your self to get multiple indications of interest at the same time. Then you can choose among options. If you don’t get any term sheets, at least you will have concrete information to move forward with other options. Anthony Tjan wrote a helpful article along these line for Harvard Business Review called How to get to No.
Choose investors wisely. The investor that provides the highest valuation or most money, may not be the best one. Look to add investors that will help you open doors to other investors.
Start measuring impact. If you have a startup in Latin America, chances are you are making an impact, even if you don’t realize it. Start measuring it and talking to impact-focused investors. You will open up the range of funds that you can seek capital from.
One day you will have the dream round you always wanted, but before you do, focus on maximizing the probability that it will happen.