By Hessie Jones
For founders, raising capital is not about just pitching. The process goes far deeper and takes time. It means outreach, building relationships, and really tapping into what investors want.
A recent fireside chat hosted by Brampton Venture Zone, welcomed Nick Kuryluk, Cofounder of Cosality, Altitude Angels Investor and Holly Gardner, Founder of SoCitty — both Altitude Accelerator Co-Chairs to discuss the investor perspective, and how startup organizations should position themselves for funding.
Nick Kuryluk’s background is in the biotech and biopharmaceutical sector. Having worked in Amgen, a large biotech for more than 22 years, he helped launched and commercialize new products in Canada and globally. He was also a founder, CEO and investor of Cold Block Technologies, a laboratory instrument manufactory startup which is now selling their products globally.
Kuryluk talks about the investor ‘s mindset, which, for him, has been influenced by his peers, and his own experience engaging with early-stage companies. He says that technology alone is not enough, adding
“The success of launching an early stage company is largely based on exceptional vision of a leader, of an organization, who surrounds themselves with a solid board and advisors who can put together a management team that has demonstrated abilities to execute operational plans, because in this world right now, it’s all about execution, and who can demonstrate traction, customer validation, and the ability to raise capital.”
Altitude Accelerator and Altitude Angels, he emphasizes, having fantastic mentorship programs to help early-stage companies become investor-reaaving fantastic mentorship programs to help early-stage companies become investor-ready, and access an engaged ecosystem network to help them explore pathways for growth and capital.
Where Founders May Fall Short
Gardner indicated there was no magic recipe to capital that founders can ascribe to. Many will learn from mistakes. Kuryluk has reviewed hundreds of pitch decks from companies ready to raise capital. Here are some of his observations:
- Quite often, what is missing is the business element. Founders can improve connecting the dots between a solid business model designed for launching a product globally and how it dovetails to the revenue streams —demonstrating the unit economics of those revenue streams.
- Questions they should ask: What is the cost of acquiring a customer? What is the lifetime value of that customer?
- When it comes to the financial operations, how well is the founder at managing cash? Burn rate is critical. Companies that manage this early on are set up for long-term success.
- Investors want to see a defensible moat. Can the big competitors copy what you’re doing?
- Investors will heavily weigh the quality of the leader and the management team in being able to demonstrate they can execute. “Execution is king,” he emphasizes, “The bottom line is that investors are placing a bet on you and they want to know they can trust you with their money.”
Optics are Important: How and When Founders Present Themselves is Key
Gardner argues that while there is an expectation for a polished presentation and a solid answer to every question, transparency also plays a role in building trust with investors.
Founders will not always have all the answers for every question, but Kuryluk argues
“Being honest about what you know, what you don’t know—but more importantly what you’re doing about it such as identifying those market, regulatory, management or technological risks— demonstrates growth, honesty and, that you are the kind of leader we want to invest in.”
Gardner adds,
“Investors’ conversations with founders are part of the vetting process. If you can show good judgement, and you can navigate decisions effectively, and listen to feedback, this is an important part of building trust.”
Kuryluk’s advice, as a former CEO of an early-stage company, is to start earlier in reaching out to investors before you need the money and let them know where you are today. As a founder moves from series A and along the continuum, they will have already laid the groundwork for that later discussion, building awareness of your organization and educating investors on how your solution is are addressing problems. He emphasizes,
“In Ontario, the investment community is small and connected. The cross-linkages with members who also participate in other investment groups in peel, Toronto, Niagara Falls etc. can be leveraged to grow awareness and investment opportunities.”
What are the Most Important Factors for Any Founder Pitch?
Kuryluk immediately pointed to traction and customer validation as he states,
“We have a disciplined process for founder pitches to angel investors. We have a screening committee, which meets with founders, reviews the pitch deck. I like to call it a pre-pitch. From there a decision is made whether that founder moves on towards a pitch presentation. That will be followed by a due diligence session with interested investors. In that screening process we look for the quality of the CEO, the ability of the operational team to execute—we look for that demonstrated success. For all founder pitches, traction and customer validation are the most important elements we look for.”
How is this demonstrated at the pre-revenue stages? He indicates that key opinion leader endorsements, letters of intent from future customers, and pilot participants are great indications of traction. He adds that partnerships and organizations you are working with to launch your products are important. This is a high hurdle that many investors screen for, and it needs to be emphasized.
Gardner also added that in the earlier stages if you can demonstrate you’ve done deep dives into customer discovery and took away some key learnings from it that helps validate customer need then it shows investors there is movement towards a solution fit for market.
Traction = movement = improvement.
Kuryluk says, investors want companies they’ve invested in to show in the time they last spoke that there is progress in partner relationship, customer growth, adding,
“We may start at a pre-seed stage, then they will come back, and then they will be at a seed stage, and then they will move to a series A stage, a series B stage, and quite often, and we have many examples of Altitude Angels where we have made multiple investments in those organizations that are moving along the commercialization pathway. But those investments won’t happen if you cannot demonstrate the growth in your attraction, the evidence of your customer validation, and demonstrate that your team can consistently execute flawlessly as you move along the commercialization pathway.”
How Important is IP?
Founders at the earliest stages may pursue Intellectual Property (IP) and the costs involved in legal, patent discovery, and filing. They may have limited resources but decide to pursue this as they are growing their company. Kuryluk argues that not all founders in all industries need to pursue IP, stating,
“It depends. I’m highly specialized in med tech and biotech and in these sectors, IP is key. Many investors want to know how defensible the company is, how protected is that asset, what is your picket fence and how well are you protecting that picket fence. But there are other ways to differentiate your product outside of IP.
One of them is a moat. In that space of AI, Kuryluk references an article that creating defensibility is the ability to execute quickly and be the first to market to achieve your beachhead. This “makes it more difficult for someone to throw you off.”
He adds that, outside of IP, in other cases there may be a trade secret like a unique workflow, unmatched to other organizations. Founders must be creative and figure out how they can be untouchable, but also determine their vulnerability to their competitors. His advice,
“Ask yourself, ‘How can I position my organization potentially for a future exit.’ That will determine what you need to do today to reach that goal.”
Bottom Line: Investors Want Value for their Investments
Kuryluk add some important investor insights especially in today’s market:
- “Investors are placing high conviction bets. This means they are placing less volume investments and putting more attention on specific companies where there’s a strong conviction to succeed.”
- Investors are looking for a clear value inflection logic, adding, “If I am going to invest in your organization, what is the going to be the next major milestone that’s going to increase the valuation of your company?
- When you’re pitching to investors, remind yourself, ‘What is their purpose?’ Their purpose is to understand how they’re going to make money? When are they going to make their money back? What will that look like dividends or M&A? They will want to know what the company is valued at today.
- In summary, “if you can create the conviction with investors, show the clear value inflection logic, de-risk your product with data, traction, customer validation, demonstrate solid management team execution, and show your path towards an exit, you will have a high likelihood of raising capital.”
Does AI have a Moat these Days?
Many founders capitalizing on general purpose systems can quickly develop products that can be ready for market in less time than before these generative AI systems were introduced. The competition is fierce. Beforehand, the companies who made it to market first had a competitive advantage; today getting to market quickly to garner early feedback before rolling out full product is easier. Is innovation no longer a moat these days especially with advanced AI models?
Kuryluk responded that in his organization, Cosality Executive Partners, which specializes in fractional executives, to help early-stage companies manage their management team gaps, they use customized proprietary AI agents to help augment their human talent. He believes that adopting AI is critical,
“If you’re not working with AI, you’re behind the times. Let’s be fair, we’re not faster than AI, but we’re wiser. And we have a real-world experience of successes and failures and how to navigate them in a kind of environment. But what I do know is that when some of these AI tools are created, it is mind-boggling at how rapid this industry is moving where in 24 hours there will be a better product and smarter product.”
He reiterates the importance of operational excellence; the founder’s ability to execute is part of your moat; how fast can they move… and react to another product coming? More importantly, how sophisticated they are in this AI environment. Investors look at these traits for companies developing AI tools and solutions.
For founders, adapting to the times — economic volatility, technological innovation and the investor mindset — are important considerations for growth and resilience. Demonstrating the ability to marshal through these hurdles and exceeding expectations is the path towards success.
Altitude Accelerator provides founders with resources and tools to accelerate their growth. Check out our Market Readiness programs, for founders ready to go to market, and Investor Readiness, for founders ready to raise capital.
Altitude Accelerator has also developed an AI Readiness Series to provide founders and entrepreneurs with the necessary knowledge in an increasingly AI-embedded world. Contact us info@altitudeaccelerator.ca .
