From first call to first close — VC raise!

Observations on raising our Pre-Seed led by Lightspeed India Partners

“Raising venture capital is the easiest thing a startup founder is ever going to do.” — Marc Andreessen, a16z & Netscape.

Contrary to conventional wisdom, as a 1st time founder, I felt our fundraising experience was very positive. 20 days — from ‘first call’ to ‘first close. Marc’s statement above resonates deeply — running a remote engineering team has been more challenging (and rewarding) than raising funding.

Raising our 1st round; pictures speak louder than words.

Setting the scene

At the outset, I recognize that most of you have got ‘VC gyaan’ from someone on LinkedIn or Twitter. This post is slightly different — my observations as a 1st time founder.

Disclaimer: My background may be different from yours

1. I have a Master’s degree in Statistics from the UK and I have worked abroad; this opens doors.
2. My newsletter — ‘InsurTech Tribe’ ranks #1 on Substack in InsurTech and my LinkedIn posts on the subject have ~1M views over the past 2 years; this opens doors.
3. I have a large network within Engineering & Product in India; we were a team of 5 in a week of starting BimaPe: pre-revenue, pre-launch and pre-pitch deck.

3 key observations

I. There is no sweet spot

• Perhaps, this is the ‘Sequoia Surge’ effect? *every* Tier 1 institution I spoke with highlighted that they are comfortable (or already have) written pre-launch cheques in the ~$150K range.
• Anmol has written an extended piece on this matter titled ‘The Seed Adjustment’

My takeaway— Don’t assume ‘we’ll be too early for them’ and even if you are, build a relationship for the next round.

II. Varying degrees of transparency

• I spoke with five Tier 1 multi-stage institutions: average time between follow-ups was 2–3 working days & I received a clear commit or non-commit (with their valid questions on the business) in under 1 week from the final call.
• I spoke with a couple of micro-VCs and smaller funds: The processes here varied widely — from short duration calls to extended hour long discussions on product roadmap, team construction etc.

My takeaway — Big isn’t bad — larger partnership structures can move very fast due to internal process optimization.

III. Thorough vetting process

• Whilst there were a common set of questions (e.g. competition, market etc), some investors drilled down on the 1st principles thinking, customer research and unique insights.
• Our leader investor conducted a thorough due diligence process — primarily reference checks; keep these handy (it slowed us down!)

My takeaway — Don’t fall for “investor herd think” bullshit — prepare for questions (I used Supernova’s YC interview question list).

Did I use any strategy?

“The essence of strategy is choosing what not to do.” Michael Porter

The Lopsided Barbell

Again no gyaan, only what I did:

• I started by finding a strong ‘anchor’ Angel investor — this provided ‘subtle leverage’ since every fund brought up ‘who else has committed?’ Quite often this technique is known as the ‘lopsided barbell’ (image above).
• I did NOT create FOMO (fear of missing out) by name dropping investors in emails. In general, I feel this is a poor strategy since it makes investors conscious of their ‘FOMO’.
• Sending thank you emails at the end of each conversation — I was surprised to note this isn’t normal behaviour. However, several investors appreciated the note (where I also highlighted one or two questions asked by them which I felt stood out!)
• Display forward momentum — We were running customer discovery (& later usability tests) during our raise. I made sure to show the ‘updated’ wireframes in each follow-up call to indicate how fast we were learning.

Where did I mess up?

• Lack of clear communication — Our Pre-Seed was oversubscribed x2 in aggregate and roughly x4 on the ‘follow’ component. My follow-ups with some micro-VCs was slow; investors tend to treat their ‘written commitment’ as a ‘guaranteed allocation in the round’.
• (Debatable) Negotiating on price — As a 1st time founder, I felt uncomfortable going back to our lead for a valuation increase (to accommodate “value-add” investors). I’m not 100% sure whether this works; happy to be corrected.

I learned the communication lesson the hard way — please don’t repeat my error! I may have burned some bridges here; I don’t want you to.

Closing thoughts

I hope this short piece provides other Founders with an on-ground perspective on raising their 1st round. I am happy to answer any questions you may have— please feel free to reach me @Rahul_J_Mathur.

Depending on your feedback, I am hopeful to spend an hour each week to write up an “Indian Founders Field Guide” — chronicling lessons from a 1st time Founder (me) in the Indian startup ecosystem. Do let me know if you are interested in the comments section.

About BimaPe

Our product, built on the India Stack, allows 45M+ working professionals in India to manage their family’s insurance seamlessly.

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Disclaimers

Views expressed here are my own — these are NOT reflective of those of BimaPe Inc, its management, its customers or any other related party.