When you consider that Latin American startups command a mere fraction, less than 2%, of the vast investment pool flowing through Silicon Valley, it becomes apparent that fundraising, as a Latin Founder, can be a grueling and challenging process.
In this milieu, meticulous preparation, the relentless pursuit of investors, the cultivation of a network that transcends geographic boundaries, crafting a compelling pitch, and adopting a tenacious, resilient mindset are keys to instilling confidence when embarking on this journey.
It’s undeniable that a disruptive idea demands capital, time, and unwavering effort. Founders should brace themselves for numerous «noes» before landing that coveted «yes» which can reshape their company’s trajectory.
So, who better to offer insights on this process than those who have lived it?
Paola Santana, hailing from the Dominican Republic, is the CEO and Founder of GLASS, one of the startups in our portfolio. In an engaging Fireside Chat with the Newtopia community, Paola shared invaluable tips on how to raise capital in Silicon Valley, drawing from her own 12+ years of experience, filled with countless pitches and presentations.
GLASS is a Silicon Valley e-Commerce startup revolutionizing how governments buy, fostering inclusivity, sustainability, and compliance through its government-exclusive marketplace, Glass Commerce.
In her discourse, Paola emphasizes essential considerations for Latin American entrepreneurs when seeking investment in Silicon Valley:
- Building Trust and Formidable Connections with Investors
- Cultivating the Right Mindset as a Core Tool
- Navigating Essential Steps, which we’ll delve into later
«Moonshots are the big, audacious ideas that we, as startups, pursue. They’re tough, vast, highly uncertain problems that no one has solved before.»
Paola underscores the importance of founders visualizing and presenting their startups with a moonshot mindset.
«When you adopt this mindset, you speak differently about your idea to an investor, your team, and, most importantly, yourself. You’re no longer pitching a new business model but rather an audacious endeavor with an unclear path, but you’re confident that with their investment, you’ll navigate it faster.»
At 24 years old in Washington, D.C., Paola began pondering the future of political systems and governments. She earned a Fulbright scholarship to explore this, but she hit a roadblock. This led her on a quest to determine if technology, as a system and a set of tools and methodologies, could outpace politics in effecting global change. That’s when she discovered the power of technology in Silicon Valley and co-founded Matternet, a pioneering startup in autonomous drone development for transportation.
«With Matternet, the possibilities were limitless. We were accomplishing what many political systems, governments, and public policies had attempted—creating positive, unimaginable change for all,» she explained.
Furthermore, Matternet was a profound learning experience for her in terms of fundraising. «Twelve years ago, we needed to secure funding for hardware, and we wasted a lot of time trying to sell the entire vision when we could have simply done it in a pre-seed round to showcase a 10% improvement with an MVP.»
Paola also delves into the importance of incrementally enhancing the MVP by 10% and providing weekly updates to investors, thus building the necessary credibility when seeking capital.
Her second major moonshot was GLASS, a Silicon Valley e-Commerce startup now part of our portfolio. Paola pointed out, “Governments are the single largest buyers in the world, spending $16 Trillion dollars annually through paper-based, manual and lengthy procurement processes and software. Small and discretionary transactions under $25k with credit cards and purchase orders account for 30-50% of the work, taking significant time, research, training and documentation. Small procurement is an untapped $3.7 Trillion dollars opportunity.”
With unwavering determination, she crafted Glass Commerce, a pioneering solution designed to power local Business-to-Government (B2G) marketplaces for the purchase of goods, services, software and rentals under $25k, without bids. The ultimate goal was clear: Paola aimed to insert 32 Million Small, Local, and Diverse Businesses into the government market, unlocking a $3.7 Trillion dollar local economy by canalizing small purchases to Small Businesses, pairing local demand with local supply, and directing local dollars towards sustaining local jobs.
The Right Mindset for Raising Capital
Mindset is pivotal when raising capital because, at this stage, confidence and vision are just as crucial as hard numbers and concrete data.
«No one is doing us a favor. We’re seeking the funding our company deserves. If we’re dedicating our entire day to this, it’s because it’s significant. I say this because I often hear people talk about fundraising as if it’s not a big deal,» Paola emphasized, listing one of the key considerations when entering this process.
At this point, Paola mentioned a vital piece of advice for every entrepreneur: «Don’t come to the table hungry. By the time you start seeking investment, you should have at least six months of runway, of oxygen.»
This means that to instill confidence in the final vision and the daily 10% improvement and effectively convey it, you must not be desperate when seeking funding.
4 Key Strategies for Raising Capital in Silicon Valley
Paola shared a series of strategies and advice to consider when raising capital, and here are just a few of them:
Turn your Pitch into a Captivating Trailer
Paola shares a compelling metaphor: an effective pitch is like a movie trailer. If the trailer doesn’t engage, no one may be interested in the movie. Similarly, your presentation to investors should pique curiosity and motivate the audience to hear more. The key is not to overwhelm investors with excessive information.
Paola stresses that it takes approximately 100 pitches to successfully raise capital. These experiences will shape you and help you present your company from multiple angles.
Exclusive Focus for 6 Months
When it comes to raising capital, it’s crucial to focus all your efforts on that goal. Put aside the day-to-day management of your company, product launches, and hiring for a six-month period. This focus will provide you with the necessary time to prepare adequately and concentrate on capital raising.
Paola suggests a structure for these six months, highlighting the importance of connections. Schedule at least five meetings per day and maintain constant follow-up with each investor. Keep your investors informed with weekly updates on progress and innovations.
Power Play and Mindset
Paola underscores that in Silicon Valley, investors have a clear role: to invest. Therefore, your «Power Play» involves providing investors with all the reasons to invest in your company. In each interaction, you must offer one more reason or one less excuse for them to put their money into you.
An essential aspect is the «mindset.» You must convey the confidence that you will achieve your goal, whether with or without their money. You may progress more slowly, but you always have a Plan B.
Prioritize Among Your Top 100 Funds
While it’s vital to conduct 100 pitches, the strategic selection of these investors is equally important. Identify the 30 funds that interest you the most and place them prominently on your list. The first 20 pitches will be a valuable learning experience, while the next 30 will allow you to demonstrate a higher level of sophistication and expertise, increasing your chances of success.
Increase Credibility and Foster New Connections
In the capital-raising process, there is one certainty: you will hear a «no» from 90% of investors. However, this should not be seen as a dead end. Each interaction is an opportunity to build credibility, trust, and create new connections that will pave the way in Silicon Valley.
For example, if an investor does not invest in your business vertical, you can use that interaction as a bridge to connect with another investor by requesting an introduction. Furthermore, you should never leave a meeting without gaining something valuable, even if the response is negative.
It’s also crucial to maintain contact with investors with whom you have an ongoing relationship. Gradually increase their trust through weekly, monthly, and quarterly updates that reflect your progress.
While the path may be challenging, especially for Latin American entrepreneurs, the key lies in generating credibility, trust, and a robust network of contacts, often supported by local investors.
At Newtopia, we are excited to continue fostering a community that thrives on and shares entrepreneurial energy with the aim of transforming Latin America. If your startup is in its early stage and has a strong tech DNA, we cordially invite you to apply to Newtopia VC.