When to know when you’re ready for VC funding and how to get it
GUEST COLUMN | by Ariel Diaz
When your edtech company is ready for takeoff—game plan set, team on board, and engines revving—it’s time to get some funding behind the idea. The type of startup funding your edtech company requires can range anywhere from self-financed to huge outside investments. These are generally where edtech startups find financing:
- Bootstrapping: Finance your startup idea solo or with co-founders
- Friends and family: Reach out to your network of friends and family members for small amounts of cash
- Angels: Connect with angels investors for larger sums of cash; these men and women are in the business of making private company investments
- VC: Approach venture capitalists (VCs) when you need large amounts of money quick and know your startup can deliver a return.
When you’re ready for that large sum of VC dollars and are confident you can deliver a return in your edtech startup, gear up for lots of storytelling and networking. When you network with VCs, be confident and knowledgeable about your industry. VCs generally under-invest in education, in proportion with other industries, because of the perceived challenges of disrupting this industry. Before you approach investors for venture funding, you’ll need a great story, killer plan, and firm process.
A Great Story
When you approach VCs, prepare a unique and unbeatable story that explains the vision behind your edtech startup and why your team is the best group to reach your goals. In an environment where VCs have invested significantly less in education than they have in other industries, your edtech startup needs to catch the attention of investors fast. For Boundless, our vision was clear: create free, educational content with great learning tools and market directly to students.
A Killer Plan
VCs want to know how you’ll use the money they invest. When you pitch them and ask for funding, assure that your plan addresses exactly what you plan to accomplish with these new funds. Of course, you’ll also need to have longer-term goals, but for the short-term assure investors you know exactly what you’ll do with their investment. When we set out fundraising for a seed round, my co-founders and I said we would use the money to:
- Determine if there are enough open resources available that can be organized cost effectively into free textbooks
- Build a true textbook alternative that suits what students need and want for class
- Reach students directly in a market that has historically been disadvantageous for their demographic.
These clear goals made it easy for our investors to see what we would do with our seed funding. Your edtech company’s goals will be unique – but make sure you know what goals you need to achieve in order to raise your next round of venture funding (or what goals you will have to hit to become cash flow positive with your first investment.)
A Firm Process
The number one way to network your way into VC funding is to start networking before you need cash. Investors will be receptive to meeting you and hearing your ideas if you’re connecting and not asking for money up front. When you start out networking, seek out warm introductions from the connections you already have or attend relevant events. Look for VCs you think will be interested in your company by looking at their portfolios.
When you’ve built a solid network and are ready for funding, gear up for your startup’s fundraising process. You’ll need to communicate your story and goals and be prepared to meet with lots of investors.
For entrepreneurs looking to learn more about the fundraising process and venture capital, I recommend two great blogs covering these subjects: VentureHacks or Both Sides of the Table.
Ariel Diaz is the co-founder and CEO of Boundless. Boundless is making education more accessible and affordable for students everywhere with its an innovative learning platform that curates the world’s best open educational content. Follow Ariel on Twitter @arieldiaz.