If your start-up business is growing, you most likely will want to seek out venture capital at some point. Whereas angel investors will typically lend $10,000 to $100,000, venture capitalist are able to issue multi-million dollar checks. That means that venture capitalists are able to support growth for start-ups from seeding up through much later stages.

Since large sums of capital are deployed by venture capitalists who expect significant returns on their investment, attempting to raise money from these institutional investors is in no way a trivial process. In this article we will be discussing some of the most important things that you need to be aware of when you are attempting to raise venture capital.

Make Sure Your Business Is Well-Suited For Venture Capitalist Funding

A majority of founders think that they have amazing ideas that are well worth investing in. However, the reality is that although a majority of businesses are worthwhile to invest in, most are not well-suited as a venture investment.

In other words, various businesses have different potential so the amount of capital that is worth investing into them will vary. A small business, like a restaurant, can obtain a bank loan. However, since the upside tends to be small, it isn’t a very good venture investment.

Venture capitalists deploy millions of dollars at a time. They are looking for investments that will earn them multiple times returns on their capital. That is why venture capitalists have a heavy focus on market size as well as the founders. They won’t invest if they don’t think the market is big enough. Here is some insight.

There isn’t anything wrong with getting a business started within a smaller market. You will still be able to obtain capital, it just won’t necessarily come from venture capitalists. It is important for you to understand the size of the market you will be operating in before you attempt to raise money.

Understand the Fund Cycle And Pacing

The fund will be completely spent at times. All of the capital will have been deployed by the partners and they are raising new funds but not taking on any new investments. It is a tricky time, since partners will still be taking meetings and speaking with business owners, but won’t be making any new investments.

Funds also have a certain pace for deploying capital. A fund might do two A-series deals every quarter, for example. If the fund has done four A-series deal that quarter already, then the chances of them funding another one are very unlikely.

Neither of these situations are obvious for business owners. As a founder, it is important for you to always find out how many investments are usually funded every year or quarter, and what has been done already this year or quarter.

Getting A “Warm’ Introduction

Venture funds run a basic litmus test on founders, which is whether he or she can get introduced through a network to the fund. Stalking venture capitalists or sending cold emails are not typical ways of getting introduced (although occasionally it does happen). Venture capitalists these days expect founders to utilize their networks in order to get introduced.

Why is this? Because three boxes are checked: how well the founder understands how venture capital works, the person’s ability to get an introduction, and most importantly, having a trust connection with someone who knows the founder already.

Successful founders realize that funding takes place when venture capitalists see their business as an exciting opportunity for them, and they are able to check enough boxes off in order to mitigate some of the risk that comes with funding their business. Some of the risk is also reduced by getting a “warm” introduction.

Venture Capitalists Want To Become Really Familiar with You

It might sound like a real cliché, however obtaining financing from a venture capitalist is similar to dating in many ways.

Venture capitalists want to become familiar with the founders, and observe them making progress and executing before making a commitment to invest. You won’t be getting a check after meeting for the first time (unless you happen to be a serial entrepreneur who has a lot of success in the past and the venture capitalist is concerned he will lose the deal).

Venture capitalists are searching for ways to reduce their risk. For first-time founders, the way that risk is reduced is through the venture capitalist becoming familiar with you and observing over time how you execute. The risk will be lower automatically if you happen to be a serial founder and the venture capitalist has worked with you before.

Due Diligence and Term Sheets

When investors are interested, the founder is offered a term sheet. It is a document outlining all of the investment’s key governing and economic terms. Some of the things that are typically included are voting rights, option pool board composition, investor rights and company valuation.

A term sheet’s purpose is covering all business terms that are important. A good term sheet will spell everything out so that surprises are avoided after the full documents have been drafted. You need to have a lawyer to review and negotiate term sheets, since they are complicated and highly nuanced documents.

However, it is also very important for founders to understand what key terms mean and what they are precisely signing up for. Reading Venture Deals by Jason Mendelson and Brad Feld can help you obtain a thorough understanding of term sheets.

After a term sheet has been agreed to and signed, it is followed by a process where the actual financing documents are drafted and due diligence is performed.

Due diligent may be significant for a later stage company and can take two to four weeks to complete. Everything needs to be disclosed.

Just provide all of the information and don’t panic. Be prepared with all financials, option plans, employment agreements, intellectual property materials, contracts – literally everything that you can possibly think of will be asked for as part of the due diligence process. It is very typical, and isn’t anything specifically regarding your business or you. That is what it takes when you are attempting to raise millions of dollars from venture capitalists.

This has been a high level overview covering some of the major things you need to consider in the venture capital process. When it comes to your actual experience, it may turn out to be more varied and nuanced. Raising venture capital definitely is not a simple process. However, it definitely helps to know what is involved.

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1. “Customer point of view. Always. Filter everything you’re doing, saying, and pitching through that and you’ll improve just about every metric you care about today.” – Matt Heinz, President at Heinz Marketing

With the growing emphasis on stage-based marketing, which involves catering your content and marketing messages to your prospects’ stage in the sales cycle, keeping your customers’ preferences in mind is going to become even more important in 2014.

2. “Garbage data in, garbage results out. Whether you do inbound or outbound marketing, the quality of your database and lists has a huge impact on your results. Obtaining better information about prospects and where they are in the buying process is one way to improve the quality of sales-ready leads.” – Brian Carroll, Executive Director at MECLABS

At Pardot, we recommend sorting through your data on a regular basis to make sure you’re not clogging your database with outdated or bad information. Not only does this impact marketing communications, it also impacts your sales team when bad leads get passed from marketing to sales. Take a look at this helpful list to see a few recommended data-cleansing tools.

3. “Today’s buyers do a tremendous amount of their purchasing research long before they ever speak to a salesperson. Ultimately, this age of the hyper-educated, constantly connected consumer requires that marketing and sales work more closely together than ever before.” – Mick Hollison, CMO at InsideSales.com

According to SiriusDecisions, 70% of the buying process is now complete by the time a prospect is ready to engage with sales. In 2014, make sure your sales and marketing teams are working together to provide your buyers with the information they want, when they need it.

4. “Build advocates and mobilize them.” – Mark Organ, CEO at Influitive

Customer advocates, or brand evangelists, are some of your most effective (and cheapest!) marketing assets. If you can build up a following of brand advocates through great customer support, active outreach, and an overall positive client experience, these customers can start selling your product for you. Remember: never underestimate the power of a positive customer testimonial.

5. “Webinars, as a form of content marketing, are a great vehicle to educate and inform potential buyers, and the real goal should be to make sure they are engaged in the webinar so they are inspired to want to have a conversation with you after the event.” – Mike Agron, Author of WebinarReady

There are several benefits to having a webinar program at your company. Not only are webinars helpful for thought leadership and client retention, they’re also a great platform for lead generation, making them an important marketing and sales tool (take a look at thisMarketing Webinars Handbook for more information on webinar planning, preparation, and follow-up).  

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Apple product launches have become the stuff of legend.

The iPad sold 300,000+ WiFi-only units on launch day. Within three days, the iPhone 4 sold 1.7 million units. The iPhone 3G sold over a million units on its launch weekend.

Clearly, Steve Jobs knows how to launch a product for maximum sales. You might even wonder if you can capture a bit of his magic to kickstart your own promotions.

And I believe you can. While Apple’s reputation and sometimes-rabid fanbase obviously plays a large part in the success of their launches, there are also a number of strategies virtually any company can employ to make their own product launch a huge success:

1. Put the Focus on the People, Not the Product

Rarely do you hear Steve Jobs talking about the various features of Apple products. Standing on stage, he doesn’t push the speed of the iPhone’s processor or the screen resolution, for example. He knows most people don’t care, and the ones who do can easily find that information on Apple’s website or product literature.

Instead, he goes out of his way to emphasize how the product affects you. He talks about how annoying it is to carry both a phone and an MP3 player and how, with an iPhone, you’re condensing them down to one easy-to-carry device. It’s about simplicity, productivity, style — all things he knows people are interested in.

And it takes discipline. When you launch a product, everyone in your company is probably excited by the technical specs, and all of the different ways your product pushes the envelope, and it’s easy to assume your customer feels the same way. But they don’t. They care about their problems and how your product is going to fit into their life

So, that’s how you have to frame your marketing. Don’t just talk about what your product does or why it’s superior; show them a compelling picture of how it’s going to make their life better. That’s what gets people excited.

2. Get Opinion Leaders On-Board Early

Apple has a knack for getting bloggers and other thought leaders on board before their product launches. What really sets them apart, though, is they get everyone talking months before the product launches, usually before there’s even a demo for anyone to see. No one is talking about what the product does; they’re talking about what it might do.

Obviously, their history helps. Journalists and bloggers know that Apple has a history of releasing innovative and useful products, and they bet on the fact that subsequent product releases will be just as innovative and useful.

But it’s a strategy anyone can use, even if you don’t have a history like Apple. No, you might not have the New York Times and CNN arguing about what your upcoming product is going to do, but you can start working with the media inadvance of your product launch. Even if it doesn’t get you much coverage, it’ll give you something to build on. The media will know who you are, so come launch day, at least you’re not starting cold.

And that can make getting press a lot easier.

3. Be Revolutionary

When Steve Jobs takes the stage, the whole world watches. It’s not just because Apple is a huge company. It’s not just because there are billions of dollars on the line. It’s not just because Steve is a great speaker.

It’s because they know Apple isn’t afraid to change the world. Their products aren’t incremental advances; they are revolutions. They change the way we think about the entire product category, and whole industries have to shift just to keep up. And people talk about it, not just because Apple decided to stage an event, but because it’s real news.

Can you do the same thing?

I think so. Maybe your company doesn’t have quite the reach Apple does, but every company, no matter how small, has the opportunity to revolutionize their business. Do something none of your competitors have ever done before, take a position that’s bold and imaginative, paint a picture of the future that your customers want to live in, and then put your whole company into motion creating that vision.

It’ll inspire people. Right or wrong, the world loves visionary companies with the courage to lead. Instead of fighting to get people to talk about you, they’ll be chasing you to find out what’s going to happen next.

4. Turn Your Product Launch into an Event

When Apple launches a new product, you don’t see some PR lackey trundling out onto the stage to read a press release. They stage an entire event around it, going so far as to even close their online store, so that everyone knows something important is happening and they need to pay attention.

And who do you have at center stage? None other than the CEO of the company, Steve Jobs. He isn’t so much a speaker as a showman, spending days or even weeks leading up to the launch planning his every word and gesture so that it leaves the audience spellbound.

And it works, not just for Steve, but for everyone. If you have the budget for it, throw a big press event for your product announcements. If not, at least have some kind of online event. If you make a big deal about your product launch, both your potential customers and the media are likely to take it more seriously, and it’ll be reflected in your product sales.

5. Take Pre-Orders

This is probably one of the most overlooked launch strategies out there.

Every company that’s been around for a while has a set of customers who will buy anything they release. As soon as you announce the product, they’ll be lining up in droves, eager to get their hands on the first units to be released.

So why not let them?

Apple almost always offers pre-ordering of their new products, and because of that, it’s not uncommon for them to sell hundreds of thousands of units within a week or two of launch. Pre-orders generally aren’t counted until the product actually ships, meaning the orders that came in over a period of weeks all get counted on launch day.

Of course, it’s not always possible. You can’t offer pre-orders until you know what your final pricing will be, for example. But you can still harness the enthusiasm. Until you know your pricing, make sure you at least have a way for prospective buyers to sign up for updates. Then make sure those updates offer a link to pre-order as soon as it’s possible.

6. Release a Product Your Customers Will Want to Show off

Apple knows their image is vital to their success.

That’s one of the biggest reasons they place such a high value on form. People know and expect that Apple products will be aesthetically pleasing. If Apple suddenly stopped launching beautiful products, they would almost certainly see a huge drop in market share.

Don’t underestimate the importance of your product’s appearance. If it’s ugly, your customers won’t want to share it with their friends and colleagues, hiding it away regardless of how useful it is. At the same time, a professional design makes people want to talk about it, and online or offline, it can have a big impact on your product sales.

7. Draw out the Suspense for As Long As You Can

While Apple always makes a big deal about announcing new products, prior to those actual announcements their product lines are shrouded in secrecy. And Apple will do almost anything to protect that secrecy.

Look at what happened when a late prototype model of the iPhone 4 was found by some bloggers. First, Apple denied they had any knowledge of the product, and then when details were made public, they pursued legal action against the bloggers who wrote about it, setting an example to deter future leaks about other products.

To make use of this strategy in your own company, take your hottest product and deliberately release very, very few details about it. The mystery will drive your customer base into a frenzy.

When the iPad was getting ready to launch, the rumor mill was filled with speculation about Apple’s new tablet, but no one really knew anything about it. People went so far as to create realistic 3D mockups of it, hoping to get more readers for their websites and blogs. By the time it actually launched, its reputation had grown to mythic proportions.

The Bottom Line: Plan Your Product Launch

The point of this article isn’t to imply that you have to have as big of a launch as Apple, or transform yourself into as big of a showman as Steve Jobs. No matter how tempting it is, being a copycat is never a sound marketing strategy.

The point is that you need to think through your product launches. Deliberately plan what information you’re going to release and when, who you want talking about you, and how you can turn your product launch into something worth talking about.

That’s what Apple does. No, you may not have whole departments of marketers and PR aficionados strategizing it for you, but you can plan a launch that will impress people, even if the only person working on it is you.

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1) Interview Prospects and Customers

Cost: $0 – $50

Nothing is freer or more valuable than a conversation. We tried this ourselves a few weeks ago — HubSpot invited four customers into our offices to join us for lunch and tell us what they thought of our software.

We were pleasantly surprised at how willing and forthcoming they were. Prompted by some questions, they gave us priceless insight into what’s working for them and what’s not in the HubSpot marketing platform. That one conversation spun off a handful of different projects that will make us better as a company.

You can’t extrapolate public opinion from four individuals, but you can get a sense of which direction to pursue in future research or your product development. Building an ongoing message-testing program can take some time but it’s entirely achievable. 

How to Set It Up:

How you set up your customer interviews will depend on the kind of company you are. If you are a software company with beta tests running, you can tap that beta group for interview subjects. If not, here are a few ways to find people to talk to:

  • Take to social media: Ask for volunteers to join a conversation to help you shape the next iteration of your website, product or marketing. Tell them approximately how long the conversation will take and any qualifications you have (customer/non-customer, role or industry, etc). Offer a gift card or other reward as a thank you. You only need a handful of people to get worthwhile insights.
  • Ask your customer-facing coworkers: If your company has account managers, support reps, or other staff who work closely with customers, ask them for recommendations of a few who might be willing to give feedback. 
  • Include a link in customer communications: Whether it’s a newsletter or an invoice, you can include a call-to-action to provide feedback through a short interview. Offer a small gift certificate or reward for participation. 

Questions to Ask:

You can customize your customer interviews however you want, but here’s a list of common questions you can ask to help you nail your product positioning and understanding of the market, including ones like:

  • What challenges stand in the way of getting your job done?
  • What are your top three headaches right now?
  • How would you describe this product to a boss or client? How would you describe it to your mother?
  • What other types of [product category] have you tried? What were their strengths?
  • In what situation would you recommend us over another company and visa versa?

2) Run a Content Strategy Survey

Cost: $0 -$50

Which is better: ebooks or webinars? Is it worth writing a 20-page ebook when a 3-page tip-sheet will suffice? What makes someone download or read a piece of content? Analytics can help you get at answers to some of these questions, but it’s good to supplement that with direct feedback from your audience.

Every few quarters, HubSpot will run a content strategy survey to get a sense of what topics and formats interest our audience. What we’ve found is that our audiences is a living and evolving thing. Your interests change over time and we want to be right there to meet them.

How to Set It Up:

We teamed up with SurveyMonkey to create a content strategy survey that anyone can use. If you want to run a content strategy survey you can use our template to start and add in questions or tailor it to suit your needs.

In addition, if you use both SurveyMonkey and HubSpot you can actually create email segments based on the responses and serve up only the content that matters to each. Regardless of the survey tool you use, below are some of the questions we like to ask about our content strategy.

Questions to Ask:

  • How often would you want to receive information from our company?
  • When reading content from companies, which tone do you appreciate? (Select all that apply)
  • When you share information about companies and the products or services they offer, which of the following do you use? (Select all that apply)
  • In what format do you prefer to read your content? 

3) Run User Testing on Your Website

Cost: $0-$50

Whether you’re heading into a redesign or maintaining your website through small tweaks, ongoing research into what’s working and what’s not can help you raise the productivity of your site. You can get a lot of information about your site performance from basic analytics about which pages are converting the best or garnering the most consistent traffic.

In addition to basic analytics though, there are some free and low-cost tools out there to help you run user testing on your website. These tests will get you feedback on more nuanced elements of your site — things like the design, copy positioning, and/or layout are all great elements to test.

How to Set It Up:

There are a number of tools out there that you can use to get feedback on your designs or positioning. In the past we’ve used both UsabilityHub and UserTesting.com to help us test out assumptions on our site before a redesign or homepage refresh.

Questions to Ask: 

  • What is the first thing you look at on this page?
  • Where would you go first if you wanted to take the next step?
  • Is this page trustworthy?
  • How likely would you be to explore this site (rating scale)?

Small investments in market research can go a long way in your marketing. In addition to these basic approaches, there are a few tools you can use to research major shifts in buyer demographics or trends, including: 

  1. FedStats: This site publishes government statistics, like statistical profiles of states, cities, and counties.
  2. The Census Bureau: This site gives you access to census data.
  3. The Census Bureau’s Quick Facts: This site gives quick facts about people, businesses, and geography.

The moral of the story here is that market research doesn’t have to be expensive or time consuming — with the right tools, you can have get great insights in a short amount of time.

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Intro

When it comes to acquiring customers, many businesses aren’t sure which marketing tactics they should use to fill the sales funnel. A successful lead-generation tactic has to meet several criteria:

  • It generates large numbers of qualified leads for your company;

  • It helps you reach a specific audience of your target customers;

  • It tracks the number of leads you get; and
  • It measures the costs and ROI.


There are seven marketing tactics that meet these criteria. They are proven tactics because they are the best ways for producing large numbers of actionable leads.

 

Search engine marketing (SEM) involves setting up ad campaigns on Google and Bing. When your target customer searches for certain search terms (e.g., “golf shoes”), your SEM ad will appear at the top of their search results

Display ads (aka banner ads) are the most widely used form of digital marketing. They are used on websites that are frequented by the ad’s target audience and are used to generate leads. Also, marketers are now getting high response rates with interactive mobile ads on customers’ iPhones and iPads.

Social media advertising uses banner ads to target users on Facebook and LinkedIn (e.g., a “honeymoon cruises” ad will appear on the Facebook pages of users whose status is Engaged). Even Twitter now offers social advertising through Promoted Tweets.

Email marketing is another effective online lead-generation tactic. Many businesses are reluctant to try it, because they’re afraid their marketing emails will be mistaken for spam. But if you use targeted, permission-based mailing lists and follow the 2003 CAN-SPAM Act guidelines, you can help to ensure that your emails will get through to your target customers.

Before the digital era, these three tried-and-true tactics reigned, and they still bring in thousands of leads for companies that use them:

Direct mail is a great tactic for explaining the benefits of a complex product or service in detail. But it’s an expensive tactic, so use it only if you’re selling something that gives you a high return on marketing investment (e.g., cars), or if your customer has a long-term lifetime value (e.g., insurance) through a renewable contract or repeat sales.

Cold calling works best today if you’re selling products or services to other businesses. In cold calling, you use a targeted call list of customers (e.g., business executives) who might have a need for your products or services.

Trade shows are still a great way to collect leads, because they bring you face-to-face with customers who may be looking to buy your products or services.

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Crowdfunding at a Glance

Crowdfunding is a method of raising capital through the collective effort of friends, family, customers, and individual investors. This approach taps into the collective efforts of a large pool of individuals—primarily online via social media and crowdfunding platforms—and leverages their networks for greater reach and exposure.

How is Crowdfunding Different?

Crowdfunding is essentially the opposite of the mainstream approach to business finance. Traditionally, if you want to raise capital to start a business or launch a new product, you would need to pack up your business plan, market research, and prototypes, and then shop your idea around to a limited pool or wealthy individuals or institutions. These funding sources included  banks, angel investors, and venture capital firms, really limiting your options to a few key players.  You can think of this fundraising approach as a funnel, with you and your pitch at the wide end and your audience of investors at the closed end. Fail to point that funnel at the right investor or firm at the right time, and that’s your time and money lost.   

Crowdfunding platforms, on the other hand, turns that funnel on-end. By giving you, the entrepreneur, a single platform to build, showcase, and share your pitch resources, this approach dramatically streamlines the traditional model. Traditionally, you’d spend months sifting through your personal network, vetting potential investors, and spending your own time and money to get in front of them. With crowdfunding, it’s much easier for you to get your opportunity in front of more interested parties and give them more ways to help grow your business, from investing thousands in exchange for equity to contributing $20 in exchange for a first-run product or other reward.

The Benefits of Crowdfunding

From tapping into a wider investor pool to enjoying more flexible fundraising options, there are a number of benefits to crowdfunding over traditional methods. Here are just a few of the many possible advantages, which we’ll cover in greater detail later in this guide:

  • Reach – By using a crowdfunding you have access to thousands of accredited investors who can see, interact with, and share your fundraising campaign.

  • Presentation – By creating a crowdfunding campaign, you go through the invaluable process of looking at your business from the top level—its history, traction, offerings, addressable market, value proposition, and more—and boiling it down into a polished, easily digestible package.

  • PR & Marketing – From launch to close, you can share and promote your campaign through social media, email newsletters, and other online marketing tactics. As you and other media outlets cover the progress of your fundraise, you can double down by steering traffic to your website and other company resources.

  • Validation of Concept – Presenting your concept or business to the masses affords an excellent opportunity to validate and refine your offering. As potential investors begin to express interest and ask questions, you’ll quickly see if there’s something missing that would make them more likely to buy in.

  • Efficiency – One of the best things about online crowdfunding is its ability to centralize and streamline your fundraising efforts. By building a single, comprehensive profile to which you can funnel all your prospects and potential investors, you eliminate the need to pursue each of them individually. So instead of duplicating efforts by printing documents, compiling binders, and manually updating each one when there’s an update, you can present everything online in a much more accessible format, leaving you with more time to run your business instead of fundraising.

Types of Crowdfunding

Just like there are many different kinds of capital round raises for businesses in all stages of growth, there are a variety of crowdfunding types. Which crowdfunding method you select depends on the type of product or service you offer and your goals for growth. The 3 primary types are donation-based, rewards-based, and equity crowdfunding (this guide will focus mostly on rewards-based and equity).

Donation-Based Crowdfunding

Broadly speaking, you can think of any crowdfunding campaign in which there is no financial return to the investors or contributors as donation-based crowdfunding.  Common donation-based crowdfunding initiatives include fundraising for disaster relief, charities, nonprofits, and medical bills.

Rewards-Based Crowdfunding

Rewards-based crowdfunding involves individuals contributing to your business in exchange for a “reward,” typically a form of the product or service your company offers. Even though this method offers backers a reward, it’s still generally considered a subset of donation-based crowdfunding since there is no financial or equity return. This approach is a popular option on platforms like Kickstarter and Indiegogo, because it lets business-owners incentivize their contributor without incurring much extra expense or selling ownership stake.

Equity-Based Crowdfunding

Unlike the donation-based and rewards-based methods, equity-based crowdfunding allows contributors to become part-owners of your company by trading capital for equity shares. As equity owners, your contributors receive a financial return on their investment and ultimately receive a share of the profits in the form of a dividend or distribution.

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