Week 11 — The Art and Science of Fundraising
DLT: Pratu … Winners of the NTUit.io investment game?
This week was a strange one, with all our efforts culminating to a 3 hour NTUit.io investment game where the founders of multiple different projects from both the ideasinc.veni and venture building programme vie to earn investment dollars from a group of investors.
Obviously, this game was designed merely as a simulation and no real dollars was spent on our businesses and projects. However, it was designed as a way to teach us about the general process of fundraising capital from investors.
The Rules of Engagement
Essentially there are two roles in this game: You either assume the role of an investor or investee.
As an investor, your objective is to spend the $1 million on investing in various businesses in order to make money.
On the other hand, as investees, our objective was to pitch our projects to as many investors as possible, getting them to invest in our projects, and in turn driving up the valuation of the company.
Outcome of the game
The game felt much like being in a chaotic fish market with everyone set up their shops and selling all sorts of different fishes, calling out to prospective buyers, telling them you’ve got the freshest and biggest fish in the whole fish market.
After 3 long hours of pitching, haggling with investors and staring at our screens, our team, DLT: Pratu managed to raise about $5.29 million of monopoly money. We ended up in first place! Yay!
It wasn’t because we had the most swanky pitch or we had the best idea or the most potential for growth.
The reason was much simpler … We just knew the investors!
Don’t hate the player or the game
Guy Ritchie once said: “Don’t hate the player or the game. Love the game because you’re in it mate.”
It was fascinating, going through the game. It was definitely mentally gruelling trying to handle all different aspects of the procress, from pining for investors to enter our room, to conducting pitches and negotiating for the best prices.
After all of that, I began thinking about the whole simulation. If this game was done just like in real life, imagine how cut-throat things would be? People running around trying to steal investors to secure funds.
The investment game works like a game of musical chairs. When the music is playing and everyone is walking about in a perpetual state of happiness, things are fine and dandy.
The moment the music stops, everyone rushes to grab a seat. The last individual without a chair winds up being the biggest loser. So relating to our investment game, as investees, our job requires us to grab as many investors as possible. But as investors, their job is to invest as in the right company as early as possible so that the when the music stops, the last transacted price won’t be that which they bought at and hence would not have made any money from their investment. (Sorry Papertoaster Pte Ltd)
Understand how fundraising works
Thinking through the game and it’s correlation to real life fundraising, I realised that the hardest part about securing lots of funds was not about the novelty of the idea, but rather the ability to achieve scale. Just like how Grab did.
But on top of that, they had a good team. Based on conversations with our own mentors, a strong team is vital in securing early stage investments, more so compared to the idea itself.
If the team is a solid one, they would be extremely profitable for the investor.
Pitching can go incredibly well, or horribly wrong
When we pitch to investors, you really only have one shot. If you go into a pitch thinking you’re ready when you actually aren’t and you try to be-dazzle investors with smoke and mirrors and feigned confidence, you have a reckoning coming for you. If you don’t know your numbers and how to explain them correctly, you’re going to have talons stuck in your back.
As our mentor Edward once told us, if you go into YYY investment Pte Ltd and absolutely bomb your pitch with them, do you really think the repercussions just end there in the boardroom?
It certainly does not, because the people from YYY firm are probably in the same messaging groups with other investment firms. All it takes is just one investor telling every single one of their friends that you’re a clown to bring your chances to acquire an investment down to zero.
One of the pitches we made was to an investor called PSK. She came into our zoom room and we pitched to her about what Pratu was about. After our pitch was done, it turned out that she had already invested in us even before we even pitched to her and more importantly, she had received a tip-off from a fellow investor to invest in us.
Word spreads fast in a simulation, word spreads even faster in the real world. It proves that as entrepreneurs you have to be ready all the time, your reputation is at stake. It is essential to work on the fundamentals of business building. If you are unable to even understand the objectives of the investors and what they need to know, then clearly not enough research has been done.
Being detailed, yet concise is incredibly important because you realistically only have anywhere between 2–5 minutes to capture the attention of the investors.
Although we won the simulation, by no means should that hold any weight towards the success of the project.
We have to improve our pitch by finding the right numbers that pain a serious picture of the problem, it’s essential to condense our pitch in such a way that places key metrics of growth but does not overcrowd the investor with too much information.
There’s so much more to learn …
The journey continues …