Startup success can often be determined by a founder’s ability to raise capital from investors. 

Now, it’s obviously not quite that simple. A great product, experienced team, and efficient operations all play a major role in building a successful startup. But securing capital gives you the opportunity to extend your runway and invest in meaningful growth.  

When the economy becomes more uncertain, the task of securing VC funding only gets more difficult. Deals take longer to close, term sheets become less founder-friendly, and diligence is more intense.  

The fundraising climate looks like it could be positioned for a rebound. Founders could benefit by positioning themselves to go full throttle on their fundraising efforts when the timing is right. At Fidelity Private Shares ℠, I’m constantly seeking to prepare founders for the fundraising process and to forge connections between startups and the investor community. 

With that in mind, I recently sat down with three panelists for the latest Fidelity Private Shares webinar: “Unlocking Startup Success: Optimize Your Cap Table & Extend Your Runway.” Our panel included three VC investors: 

• Derek Bugley, Managing Director, Accelerator, Forum Ventures, 

• Abigail Risse, Healthcare Investor, Touchdown Ventures, and 

• Brittney Wade, Senior Associate, Alumni Ventures. 

During the webinar, our panelists touched on virtual data rooms, cap tables, and other hot button fundraising topics.  

Let’s recap our panelists’ thoughts on achieving startup success: 

How an organized data room contributes to startup success 

“Having an organized data room is probably one of the most underrated, little things that investors love,” Abigail said. 

A virtual automated data room can provide a secure, online location for a private company’s sensitive information. This data room houses your essential company documents, including your cap table, intellectual property (IP) agreements, and information on previous fundraising rounds. 

A well-organized data room helps to accelerate the fundraising process by enabling easy storing and sharing of important information. Your data room should be a dynamic, automated tool -- not a static cloud folder.  

For example, Fidelity Private Shares’ automated data room works behind the scenes to add important documents as they are completed. It also allows for easier sharing and permissions to improve the communication process with investors. 

Thoughts from investors: How to build a successful startup through the fundraising process 

I love talking about the fundraising process with active VC investors. They provide vital perspective about what can make a successful startup, given that they’re evaluating companies and founders every single day. Here are six insights we unlocked through our discussion: 

Your data room isn’t just for legal documents.   

While legal documents are essential parts of a comprehensive data room, they’re not the only components.  

Derek mentioned that companies advancing to Series B and Series C fundraising might have more legal materials in their data room. Earlier-stage companies, however, can include other types of documents: term sheets, pitch decks, go-to-market plans, sales pipelines, product roadmaps, and financial models.  

“Understand the inputs and outputs of that financial model,” Derek added. “How many employees do you want to hire? What do you want to raise? When do you think you're going to raise? Those are things you should have in there because understanding all those things means you're a good founder anyways.” 

Data room organization = faster fundraising. 

Keeping a well-organized data room isn’t just about making life more convenient. It can actually allow you to close a fundraising round faster. In a world of tight margins and smaller runways, expedited fundraising can be a huge advantage. 

“If your data room is just a bunch of files and not actually organized in folders, it makes it that much harder for the investor to do their diligence and do it efficiently,” Brittney said. “Making things as clear and organized as possible can really expedite the process.” 

Maintaining your data room is a dynamic process. 

Keeping your data room up to date isn’t a “set it and forget it” process. Different investors might be looking for different information, requiring you to upload new documents. Plus, the fundraising process can stretch over months, so the nature of your company might shift from one meeting to the next. 

“Make sure that it’s a continuous process of adding necessary documents,” Abigail said. “Add any materials that are asked for to the main data room, so other investors who are looking for similar answers don’t need to ask for it twice.” 

A general theme that emerged over the course of the webinar was “be easy to work with.” Your data room is often a reflection of the type of founder you’ll be; show that you’re organized, proactive, and thorough. 

Avoid common data room “orange flags.” 

Especially when the investment ecosystem feels a bit sluggish, it’s better to keep your cap table and company documents “vanilla.” That means not having anything out of the ordinary that gives investors the opportunity to waver on your company. 

Here are a few “orange” flags that — while not a total roadblock for company — can plant seeds of doubt for investors:  

• Failing to organize your data room until after you meet with investors 

• “Deadweight” entries on your cap table: i.e. equity granted to advisors or employers who aren’t actively involved in helping the company grow 

• Outdated contact info for anyone who holds equity in your company 

It’s easier to meet with potential investors when you have confidence in the documents you’ll inevitably share with them. 

Remember: investors are always keeping tabs. 

Derek shared an inside tip on investor funnel management for founders: every time you reach out to an investor, your contact info is probably going into their CRM.  

Although it may feel like your cold emails are falling on deaf ears, they might not be. Stay consistent in your outreach, and don’t overpromise on the company milestones you plan to achieve.  

“The minute that you start reaching out to funds, it goes into a CRM,” Derek said. “That CRM is basically a means to judge you, and they'll take notes on your progress. If you haven't made that progress the next time you reach out, you probably won't get an investment.” 

Personalized outreach can be a differentiator. 

An investor might see hundreds of companies appear on their desk over the course of a year. Finding a way to stand out can make all the difference. 

Brittney recalled a story of a founder who customized a product demo to include Brittney’s name and show off functionality that was specific to her. Although this personalization wasn’t the sole factor, Alumni Ventures ultimately invested in that founder’s company.  

“I thought it was very, very cool,” Brittney said. “Research the person that you’re meeting and try to make your pitch personal and specific to them. That just strengthens your connection and can make the meeting go better.” 

How Fidelity Private Shares helps founders achieve startup success 

There’s no one set formula for achieving startup success; every founder will forge their own path. However, these data room and fundraising best practices can provide valuable guidelines on your path to building a successful startup.  

The fundraising process becomes a lot easier when you have the right tools and support. Fidelity Private Shares’ automated data room functionality helps founders store everything they may need to stay fundraising-ready is all in one place. You can kiss the “diligence scramble” goodbye! 

In addition to our software platform, we’re proud to provide white-glove support for startup success, from fundraising strategy to pitch deck reviews to investor introductions.  

Join our startup community to access more insights and continue growing your network. 

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