Get up-to-date insights into the SaaS ecosystem, the latest fund structures & early stage venture
3 Hurdles to Fundraising as a Founder
It’s no news to anyone, SaaS has been thriving!
The pandemic and the shift towards remote work has forced a lot of companies to move away from on-premise working and adopt cloud-based tools to keep business running as usual.
…And it looks like SaaS is here to stay. Bessemer’s State of Cloud report showed that just the top 5 public cloud-based companies (by market cap.) have grown in the tail of the pandemic, +70% from 2020 to 2021.
There are strong signals of a virtuous cycle in SaaS as there’s more capital than ever in Europe. The early waves of founders have increased confidence in the market by building fantastic companies and having strong exists. They now have the capital, but importantly the insights to support the next waves of SaaS founders in reaching even greater heights. Whether it’s through Angel investing, becoming an LP in established VCs or, even launching their own VC fund.
SaaStock has run large-scale global SaaS conferences for 6 years. These events became reliable meeting grounds for investment in SaaS. Through helping hundreds of SaaS founders raise capital, we’ve seen a handful of common hurdles
Having the Right Insights
The key is to know who invests in what.
The world of early-stage venture capital and investment can be slightly opaque. Many investors (not all) are thesis-driven. This means no matter how good your pitch is, if you’re approaching the wrong fund, they won’t be able to sign a check. The reason is that your company doesn’t fall with the narrow scope of companies the fund is investing in.
It can be difficult to find, in black & white, exactly what their thesis is. But, a good trick is to check out the investor’s portfolio companies. You’ll be able to gauge whether previous investments are at a similar stage, geography, sector, and technology to your start up.
Having the right networks
Relationships are the foundation of early stage investment.
In the past, if you were building a company in a specific area, you were likely to be in the same circle (or 1-2 degrees of separation away from) as someone who invested in that specific vertical.
Now, accessible cloud infrastructure has meant tech hubs can now be distributed. You no longer have to be based in cities like SF to build companies and raise capital. But, you do lose the advantage of being in close proximity to the right people and serendipitously build a highly specialised network.
That being said, you can join online peer groups & for events that focused on exactly what you’re building. You can meet the right people in slack channels like InnovatorsRoom, events like The Giant Health Event, or peer groups like SaaStock’s Founder Membership.
Having the right access
Cold outreach has mixed results.
A more fruitful way to reach an investor is via their network. Investors turn to key operators in a given sector as a reliable way of connecting with the right founders. These trusted people know what the investors’ thesis is and exactly which type of companies they’re looking to meet. Meaning, to start a conversation with a fund, you have to convince the right mutual connection it’s a good idea for them to make an introduction.
The best way to ask is by lowering the risk for the person making the introduction, they don’t lose trust in their relationships. A good way to do this is by showing you’ve done your research. State why you’d like to talk to that fund specifically, and list 2-3 portfolio companies similar to yours as evidence.
We’ve seen these same hurdles over and over again. Which is why we’ve launched Ventroduce – a network-driven platform to support SaaS Founders by increasing their exposure to the investors.
The aim is to help drive the virtuous cycle in SaaS by making connections to best-fit investors that can deliver real value to your company.