When it comes time to fundraise for your startup, there are many options. Some entrepreneurs like to use Pitchbook to find funding sources for their enterprises.
In this article, we’ll go over these three things:
- The features of Pitchbook that make it a good choice for startups
- Other ways startups can use Pitchbook
- Additional methods to get your startup off the ground
Pitchbook Data, Inc. is a SaaS (software as a service) company that gives users access to financial data concerning the private capital markets. It's based in Seattle and has regional offices in San Francisco, New York City, Hong Kong, and Mumbai.
John Gabbert founded Pitchbook in 2007. In 2009, it received an investment of $4.25 million from Morningstar and angel investors. In 2006, Morningstar gave it $10 million in additional funding, and in 2016, acquired the company.
Pitchbook uses natural language processing technology and machine learning to collect publicly available sources of information.
The company's primary product is the Pitchbook Platform. This subscription-only database includes analytical tools that help users make sense of all the data it collects.
Using Pitchbook to obtain startup funding
Pitchbook provides you with detailed data on the private and public markets. This way, you can make more informed decisions about which funds to solicit. The platform gives you a dizzying array of intuitive and fully customizable tools to help you successfully pitch to investors.
Pitchbook helps you determine which investors are most likely to fund your startup. With access to detailed investor data, you can create a targeted list based on location, industry, and deal type. Data on a firm's previous investments enables you to precisely show how your enterprise fits into their investment strategy.
Pitchbook says they offer the most comprehensive private equity and venture capital data of any investment platform on the market.
While I can’t vouch for the veracity of this statement, you can identify the venture firms that best fit your organization by looking at over 7,500 investor profiles, including investment history and contact information.
Other ways startups can use Pitchbook
Pitchbook gives you the competitive intelligence you need to perfect your product line. Review competitor profiles of over 86,000 companies to pick your rivals’ brains. This includes complete financing histories, executive teams, boards, and professional contact information.
To better understand the trends driving your industry, set alerts to track your competitors’ moves and see when they get funding.
Pitchbook even helps you be prepared when it’s time to exit. Use the platform to search for potential buyers based on their previous investments, fund performance, and investment preferences.
The downside of using Pitchbook
At $20,000 a year, a subscription to Pitchbook isn’t cheap. That’s a lot for a young startup that might be strapped for cash.
Even though Pitchbook offers a massive database with thousands of venture capital and private equity firms, some say this information is mainly based on data from Crunchbase.
Pitchbook won’t come right out and say which firms you should solicit. You’ll have to use the data they provide to make your own decision.
Other ways to get your startup off the ground
If you don't think Pitchbook is suitable for you, here are some other methods:
A terrific way to raise cash to get your startup off the ground is by having a presale. These are the profits you earn from purchases made before your product or service is available to the general public.
When setting up your presale, come up with some goals, so you'll know exactly when your fundraising is a success.
Make sure your goals perfectly align with where you want your business to go in the future.
Next, translate your objectives into a concrete plan. This plan should include how you'll market your offerings. This could be by social media, online ads, word of mouth, or some out-of-the-box method nobody’s ever thought of before.
Your marketing plan should also include the platforms you'll use, such as Amazon, your website, or a crowdfunding site. Creating this plan beforehand adds much-needed clarity to your efforts. That way, you won't stumble.
If you'd rather not give away your startup's equity shares from the get-go, try crowdfunding instead.
Crowdfunding is a method of funding your startup by collecting tiny amounts of capital from many people. Your company will use this money to make the product you're promising.
Choose one of the many crowdfunding websites, put a pitch together, and offer incentives to those people eager to buy what you’re selling. If your startup doesn’t meet its objectives, the crowdfunding platform will automatically return all the money.
Here are a few crowdfunding statistics:
- The average crowdfunding campaign is $7,000
- Most campaigns have a target goal of between $50,000 and $100,000
- If a campaign gets 30% of its objectives within the first week, it's more likely to succeed
- On average, successful campaigns raise 40% of funds in the first three days of the campaign period
One fantastic thing about crowdfunding is there are zero risks. Simply create a compelling campaign and put it out there for all the world to see. If they love what you have to sell, they'll fund it. If they don't, you won't lose a dime, and you can immediately implement plan B.
Angel investors are people with a high net worth who can provide your startup with a significant amount of capital in exchange for equity. Unlike venture capital firms, angel investors don't usually require immediate returns.
That's because they realize that turning a startup into a money-making enterprise won't happen overnight.
Angel investors usually provide cash during the pre-seed or seed periods of funding. Because many angel investors have had experience as entrepreneurs, they often offer mentorship along with their money.
Angel investors can be anything from family members and friends to groups composed of people eager to invest in early-stage companies.
The terms offered by angel investors are usually much more favorable than what you’d get from venture capitalists. If you’re not ready for a Series A round, angel investors might be a good alternative.
The best way to contact these individuals is by checking out angel investor websites. Here are a few of them:
- Life Science Angels
- Hyde Park Angels
- Angel Investment Network
- On Startups
- Tech Coast Angels
- Golden Seeds
A startup incubator provides tools, training, networking, and seed funding to startups in desperate need of cash. Incubators such as Y Combinator, TechStars, and Excelerate Labs have fueled many entrepreneurial adventures.
Resources that startup incubators provide include:
- High-speed Internet access
- Office space and equipment
- Assistance with accounting/financial management
- Access to bank loans
- Help with regulatory compliance
By being part of an incubator, you’ll get access to an extensive network of successful business partners. A side benefit to exposure to these networks is free PR and marketing for your startup.
You’ll also get to learn from the experience of successful entrepreneurs in your industry.
Mentors such as these will help you avoid making the same mistakes they made as you begin your entrepreneurial journey. The support you receive from them will provide you with the motivation you'll need to push yourself to reach the goals you set for yourself.
Here are examples of business incubator structures:
- ACADEMIC INSTITUTIONS: Many incubators are run by universities or have other academic affiliations.
- VENTURE CAPITAL FIRMS: Some venture capital firms develop incubators as an investment opportunity. These incubators invest in startups in exchange for equity.
- NON-PROFIT DEVELOPMENT CORPORATIONS: Nonprofit and government agencies both use incubators to spur economic development.
- FOR-PROFIT PROPERTY DEVELOPMENT VENTURES: Large corporations start incubators to develop technology, find partnerships, or fund subsidiaries.
The importance of a pitch deck
When pitching your startup to potential investors, you’re going to need a pitch deck. A pitch deck is a short presentation that helps explain a business concept to potential investors. It needs to be simple, easy to understand, and professionally designed.
Use your pitch deck to describe a problem and potential solution to investors. Then, back it up with information about your product and market, how you’re going to use the cash, financial details about your company, and a call to action. 10 to 20 slides should be enough.
Here are four things every pitch deck needs:
- CONSISTENT DESIGN FREE OF MISTAKES: Your slides must have unified visuals with no grammatical errors.
- ALLURING AUDIENCE HOOK: Tell a compelling story with engaging visuals and words that inspire your audience.
- PERSONALITY: Your pitch deck should vividly communicate your brand identity and personality.
- GREAT VALUE PROPOSITION: Show potential investors why your product or service is valuable to customers or clients. Also, what financial returns they can expect.
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