Say Hello to the New Way of Raising Money

by Morten Lund, repeat entrepreneur based in Denmark, the chairman of LundXO and Tradeshift, and a prolific seed-stage investor. Backer of many of the most successful technology startups to come out of Europe, including Skype, BullGuard & Zyb.

Whenever I talk with entrepreneurs in the U.S., I hear about one of the exciting new ways of raising early stage investment dollars: Kickstarter, AngelList, Y-Combinator, and the list goes on.

Many of these programs seem new, different, exciting. No doubt that to a first time entrepreneur, they are. The promise of fast money always is. But each of these programs is the same game with different rules, the same process with a pretty wrapper. The new way of raising money? It’s the same as the old way.

That’s not to say these new methods are not valuable. Indeed, I’ve argued that they open entrepreneurship to people and places that might not have easily experienced it before. But to be successful on these platforms, entrepreneurs have to dance the same dance they’ve always danced.

They have to present a combination that inspires confidence. For all that’s changed in the past half decade, the three pillars of team, technology and opportunity remain constant. The question becomes how to stand out in a field where everyone knows that team, technology and opportunity are important? How do you really prove that you’ve got what it takes to succeed? Whether you’re pitching a venture firm on Silicon Valley’s Sand Hill Road or recording a video for Kickstarter, the principles of a good pitch remain the same.

Here’s what I’ve found works best:

Tell Stories About Your Team

I’ve never met an entrepreneur that didn’t have an impressive resume. Europe, U.S., Asia, Africa—doesn’t matter: the culture of the resume has permeated every corner of the business world. I call it the culture of the resume because it’s based on the shared belief that good jobs are only granted to those with impressive resume. Is it any surprise then that people invest in making their resume impressive?

Resumes, or the brief bios that one more regularly sees in pitch decks, doesn’t give a good idea of how a person can get things done or balance the pressures of running a company. It certainly doesn’t show how well people can work together. And these are the two things I worry about most as an investor: will the team produce results, and can it do so without the founders clawing each other’s eyes out?

Instead of focusing solely on founder resumes and bios, think about telling your potential investors a story that shows how you can overcome challenges and work together. Storytelling is a remarkably powerful way of connecting with people since our brains are wired to appreciate information when it’s presented with a narrative arch.

When I meet with entrepreneurs, I ask them to tell me a story about a time they overcame a challenge. If there’s a team in place already, I ask them about a time when they’ve argued and how the resolved their differences.

These stories help me get a good idea of the people behind the bios. What’s more, it shows me their level of self-awareness and capacity for introspection—two things that are critically important for entrepreneurs in quickly changing industries. Impress me with real-life stories, and we can talk about doing business together.

Show Milestones Met

Talking about technology with entrepreneurs is always great fun. They have a great penchant for seeing around corners and imaging what will come next. It’s like reading science fiction sometimes.

But I can’t invest in science fiction, and I can’t work with a startup that doesn’t produce what it promises.

When I evaluate a company’s technology, I look for a track record of delivering progressive advancements. I look for companies that can set milestones and hit them. Sometimes it’s easy to show this just by creating a timeline of major advances in the product or prototype.

To be sure, some entrepreneurs will say that they can’t deliver on their technology until after they’ve raised money from an investor. That may be the case for companies looking to design an innovative semiconductor, produce an electrical car or develop cold fusion—but even these companies can show progress over time, even if it’s as simple as producing a history of related research papers or iterations of technical design.

Get Specific About Abstract Opportunities

It used to be popular for entrepreneurs to talk about “total addressable market,” or the sum of all the people who could ever buy their product and how much they’d be likely to pay for it. It’s an idea born from management consultants and is supposed to help people make choices among opportunities.

But it doesn’t do much to help me choose which startups to invest in. First of all, I have trouble keeping a straight face when I hear an entrepreneur say that his company is tackling an $8 billion market opportunity, and I can’t help wondering how exactly he or she came up with that number. And how do they guess how much of it they can bite off? It’s a facade of methodology wrapped around something ultimately unknowable.

But the thing that really bothers me about market-sizing exercises is that they favor theories and guesses over empirical observations. I want to work with entrepreneurs who go to where the customers are, find out what they want, and figure out how to give it to them. I’d much prefer to hear about an entrepreneur’s observations and interactions with a large potential customer or client than a bunch of statistics.

Faster, More Efficient

There is one big change that’s come from the new ways to connect with capital: you can fail faster and restart with a new concept quicker. Gaining insight into what the financial markets would support used to be quite costly. It involved taking your pitch door to door in Silicon Valley and then waiting to hear back from venture capitalists.

Just the first step, that going to Silicon Valley part, isn’t as necessary now as it used to be. I’ve seen the effects here in Europe, where it’s become much easier for entrepreneurs to pitch investors via video, next-generation websites, and video conferencing through Skype. That reduces costs and improves entrepreneurial efficiency. It also helps good deals get done and good products come to market.

The Internet has become an integral part of the fundraising process, especially for early-stage entrepreneurs. That’s a big change from how I did business as recently as a decade ago, and I’m proud to say that some of my investments have helped facilitate this change. Yet the underlying principles that make a business attractive to investors haven’t changed at all.

Morten Lund defies easy categorization with a career that’s carried him across industries and into the heart of revolutionary digital transformations. He’s started and run advertising agencies, technology companies and venture capital firms. He’s one of the most prolific startup investors in Europe and has been to bankruptcy and back in the pursuit of world-changing free enterprise.

Morten sold his first company to Leo Burnett when in his early 20s, ran leading European antivirus company BullGuard in his early 30s and began investing in technology startups. His seed-stage investment in Skype helped the company build a prototype of its revolutionary communications service. Morten took over Danish newspaper Nyhedsavisen and turned it into the largest distribution free paper in Denmark before the financial crisis disrupted the global advertising markets. He’s worked extensively on startups since then, most recently founding lundXO, an accelerator and partner for people with extraordinary new businesses. lundXO companies apply digital and social technologies to radically transform large industries such as banking and insurance.