Fearless Fundraising: 3 Things I Learned Raising Over 3 Million In Under 3 Months

This year, I did something I’d never done before: I took the leap from investing my own money in startups as an angel investor to fundraising from other people and investing their money. Along the way, I learned something surprising: how much I enjoy fundraising. It’s safe to say most people don’t like asking for money. I’ve joked that years working in politics desensitized me to this fear. I say desensitized because that is not to say I had no fear in asking family members, friends, and “formers” (e.g. classmates and colleagues) to invest. But politics helped me feel more comfortable asking for money, and the more I fundraised, the more my comfort grew.

I teamed up with a fellow Y Combinator alum to raise a fund to invest in the Winter 2023 batch of YC companies. My partner had raised two previous YC-focused funds, the most recent in which I was a Limited Partner. I’d gotten to know him through the YC community, and I’d long been interested in venture, so since “experience is the best teacher” and I wanted to learn more, teaming up and getting involved in the fund was an opportunity to grow.

Among the many benefits of being a YC alum is having unique access to the high-quality deal flow of companies participating in YC, the accelerator that’s funded about seven percent of the world’s private company “unicorns” (or billion dollar companies). The roster of YC companies is filled with recognizable names: Airbnb, Coinbase, DoorDash, Dropbox, Instacart, Stripe, Twitch, and many more. But it’s YC’s ability to identify future unicorns very early on that speaks even louder: by its own count, YC has invested in over 90 unicorns, accounting for four percent of its companies. For two thirds of these unicorns, YC’s check was the first money in.

Our investment strategy essentially boiled down to this: start with an elite batch of highly selected companies (YC annually selects two “batches,” Winter and Summer, admitting less than two percent of its 20,000 applicants), curate it further, and assemble a large, diversified portfolio to maximize our number of shots on goal. Think of this as a curated index fund for each YC batch. The approach hinges on the premise that netting just one winner, one of those billion dollar unicorns, can drive astronomical returns for the fund.

I learned an incredible amount working with on the fund, especially from my first experience fundraising from LPs. Here are the three most important lessons I gained:

1. A “No” Was Always About The Other Person’s Situation. If someone said “No” to investing, it was more about the investor’s personal situation than about me. Factors like their liquidity, their current investment portfolio, their upcoming expenses (e.g. having a baby or buying a house), their level of familiarity with venture investing, and even their basic views towards money and risk drove investment decisions. Viewing “No” as more about the other person’s thoughts, feelings, and values than about me allowed me to avoid overly personalizing “No.”
2. A Fast “No” Was Nearly As Good As A “Yes” Because It Saved Time. “Yes” usually arrived quickly and was obviously the ideal response. When someone said “No,” it was much better to get clarity as soon as possible. I appreciated the fast “No,” especially if accompanied by an explanation or a few words of encouragement. In retrospect, I spent too much time chasing responses from slower-to-respond investors who eventually said “No.” Often no answer at all was an answer, so in most cases, my time would have been better spent initiating new conversations. A fast “No” was invaluable: it saved time.
3. A “Yes” Was Based On A Combination Of Track Record And Trust. People don’t just invest in the strategy: they invest in the people executing the strategy. The clarity of the investment thesis and the credibility of previous fund performance were invaluable for establishing an intellectual motivation to invest. But it was the relationships I had with investors and the referrals from our mutual connections that established an instinctual motivation to invest. Being new to investing other people’s money, my “track record” was the trust I earned through my past performance demonstrated in my work and daily life.

Fundraising builds a long term relationship with LPs that may span a decade. In my career that’s taken me to roles as wide-ranging as sales and client management to campaigns and constituent service, I’ve learned I thrive when there’s a relational aspect in my work. I enjoy understanding someone else’s motivations and how my offering aligns with them so we can build something that helps them achieve their goals. With that focus on the other person’s situation and being especially mindful of the salience of time and trust, I look forward to fundraising again soon. I suspect I’ll continue to feel even less fear along the way, too.

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Steve Johnston is an investor, entrepreneur, and advisor who has helped advertisers place tens of millions of dollars in paid media and make smarter marketing decisions for over a decade. Prior to his years as an award-winning sales executive at Google, Steve co-founded GovPredict, a B2B SaaS company that received investment from Y Combinator and went on to be acquired. He also previously served as a digital advisor to the Majority Leader in Congress and worked as a product marketer at Quora in Silicon Valley. Steve received an AB degree in Government from Harvard and an MBA in Marketing and Operations Management (joint major) and Entrepreneurial Management from Penn’s Wharton School. Follow him on Twitter @StevenEJohnston.