Fundraising Tips from the Front Lines

Over the last 15 years in San Francisco I’ve had the opportunity to meet some amazing entrepreneurs and it is fun to watch their companies evolve from seed stage startups through to successful exits. I thought it’d be interesting to reach out to five insightful entrepreneurs, each at a different stage of growth, and get a snapshot of where they’re focused and what they learned during their most recent round of funding.

Here’s what they said…

Tien Tzuo, Co-founder & CEO of Zuora (Series C), on Looking Ahead and Filling Gaps:

A lot of CEOs look at funding as just money. It’s so much more than that. CEOs should also always be looking ahead. Each time we brought on an investor, we asked ourselves: if we were to have to raise money again (even an IPO is a fundraising event!), how would those new investors view the ones we are taking on now?

A fundraise is a chance to bring in someone who can truly help your company and fill in any gaps that you need to get to the next level — institutional knowledge, IPO expertise, regional networks. Our last funding round came at a time when we were looking at expanding into Europe. Index and Next World helped us find great, experienced people in London, Paris, Munich and Amsterdam. We gave them office keys and laptops and set them loose. So far they’ve been absolutely killing it.

Nick Mehta, CEO of Gainsight (Series C), on Longitudinal Relationship-Building:

“Our last fundraising process went very fast (4 business days) and it taught me that the real fundraising process, as you scale, is all about the relationships you build and giving your investors “longitudinal data” so they can track you over time. In our case, Bessemer and Lightspeed, our two new investors, had been tracking our space and our company for a long time so when they decided to move, they could make a decision very quickly.”

*Note that Gainsight has since raised a $50M Series D round

Vik Singh, Co-Founder & CEO, Infer (Series B) on Optimizing for Trust:

“Optimize for trust. Bring on an investor who’s thinking long-haul and who would be in your top three list of folks you would call on for help. Get to know them for as long as possible (like years, not days). Keep them close when you’re just starting out. Then it won’t be surprise when you want to raise from them, and you’re less likely to run into surprises while working with them.

We were incredibly fortunate as I’ve known Satish, who’s our lead investor at Redpoint, for quite some time. He led our A and doubled down to lead our B as well. It was a short process on all dimensions (pitch, terms, legal back and forth, etc.) because we have so much trust in one another. It also ensures continuity and predictability in how our board will function so we can continue to innovate as we have been. It feels so good to go to war with an investor who’s all-in with years of trust underpinning the relationship.”

Chuck Dietrich, Founder & CEO of Mile IQ (Series A), on Candor

“I learned long ago that when you’re out fundraising, you don’t want to be ‘selling. If you find yourself telling investors what you think they want to hear and promising results you don’t know how to achieve, you need to step back and figure out why. What you want to be doing instead of selling is telling a story that you genuinely believe and can convincingly deliver. When you tell a story that captures, conveys and explains your beliefs, you may find investors who understand and share them.

If you do, be sure you maintain the ‘no-selling’ mentality once they back you, and you’ll have investors and board members who are on the same page as you, through the good times and the bad. You’ll be able to have candid conversations with them and get real help when you need it. That’s not always easy, but it’s way better than the alternative, which is the treadmill of overselling — that vicious cycle where you’re always trying so hard to make up for the last ‘miss’ that you never have time to focus on what really matters to your business. Candor with investors is key.”

Chuck Ganapathi, Founder & CEO of Tactile (Series A), on Giving up Control

“Investor relationships are like marriage. You have to choose carefully and be willing to give up some control. I’ve seen founders become overly obsessed with valuation and ownership. Once you take the route of a professional investor, control is an illusion. That’s why it’s important to choose your investors — and most importantly, the partner who will be on your board — carefully.”