Startup Funding Espresso – Creating Scarcity in Your Fundraise

Creating Scarcity in Your Fundraise Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing. In structuring your fundraise it's important to design scarcity into it for the investors. If you have one raise at a relatively high valuation then there's no incentive for investors to come in sooner. Most will wait to come in later after they see how the business performs. Here are the key steps to put scarcity in your fundraising: Take your overall raise amount and break it into smaller tranches. Price the first round with a fairly low valuation or valuation cap if you are using a convertible or SAFE note. For each subsequent tranche, raise the valuation by 50%. Check to see how much revenue you must have to justify that valuation on each round. Adjust to make each of these tranches reasonable revenue targets for your business. In proposing your fundraise to investors make clear the overall amount you are raising and announce the first tranche with its investor-friendly valuation. Make clear that when that funding is done, you are moving to the next tranche at a higher valuation. This creates scarcity in the fundraising as it limits the amount of investor-friendly priced shares. Show prospective investors the level of interest you are seeing for the first tranche. This incentivizes investors to come in early rather than late. Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding. Let's go startup something today. _______________________________________________________ For more episodes from Investor Connect, please visit the site at: http://investorconnect.org Check out our other podcasts here: https://investorconnect.org/ For Investors check out: https://tencapital.group/investor-landing/ For Startups check out: https://tencapital.group/company-landing/ For eGuides check out: https://tencapital.group/education/ For upcoming Events, check out https://tencapital.group/events/ For Feedback please contact [email protected] Please follow, share, and leave a review. Music courtesy of Bensound.