Everything I wish I’d known when raising my first Seed Round
Since founding Encore in September 2014, we’ve raised two rounds of funding that would typically be called “Seed” rounds. The first, a modest round in August 2015, enabled us to make our first hires and begin experimenting with paid user acquisition. The second, which closed this month, will allow us to grow our team further and further accelerate our rapid growth. Raising these rounds took six and three months respectively.
The good folks at Entrepreneur First prepared us well for fundraising, in a theoretical sense. We had various concepts explained to us, and went through a few practice investor meetings just before Demo Day, and for that I’m grateful. However, there was a lot that I figured out on my own and from swapping ideas with other founders (We graduated from EF 18 months ago, so a lot has changed and improved since then).
Below is a summary of the information and tricks I wished I’d known when embarking on the fundraising journey.
These strategies can be applied to any type of seed round, but it’s worth noting that we haven’t taken any VC money yet, and that the majority of my time was spent dealing with angel investors.
Streak was the single most useful piece of software during our latest round of funding. Honestly, I can’t imagine fundraising without it.
I didn’t commit to Streak properly last year, but this year I used a Streak pipeline to keep track of conversations with 136 investors and VCs, and benefitted immensely from it. If you take one thing away from this guide, please let it be Streak.
Firstly, set up your fundraising pipeline with the following columns:
- Investment Amount
- SEIS (for tracking how much SEIS each investor is allocated)
- Type (Angel, VC, Syndicate etc)
- Intro by (Name of the person who introduced you)
- Date of Last Email (Magic Column)
Now add the following stages:
- Email Discussion
- Meeting Set
Once you’re approaching your fundraise target, I would recommend adding Termsheet Signed, Final Docs Signed and Money in Bank stages to your pipeline, but don’t add them until you need to.
As soon as you begin emailing or even considering emailing an investor, add a box for them in your pipeline, and make sure you add any email threads to that box. I’d recommend setting up a Sum calculation in the Investment Amount field to easily track your running total.
I’d also recommend adding a Nudge view, to show you which investors have gone stale and could benefit from a follow-up email. The rule I used was:
Bonus: Streak also includes email tracking, so you can know when investors read your emails.
Make yourself accountable to someone
The beauty of Streak is that pipelines can be shared with others, so make sure your co-founder is invited to the pipeline. If you have a mentor or previous investors, make sure they’re also invited. When used properly, the Streak pipeline serves as a comprehensive basis for fundraise strategy meetings.
Rapportive is a simple but incredibly helpful Gmail extension that shows you the LinkedIn profile of the person you’re emailing. This is useful for quickly seeing which of your contacts is connected to the investor you’re talking to, and speeds up the process of requesting references or intros.
Pro tip: if you need to guess someone’s email address, try various combinations (email@example.com, firstname.lastname@example.org etc) until their LinkedIn profile appears in Rapportive. When this happens, you’ve landed on the email associated with their LinkedIn profile. 😉
DocSend* gives you an insight into who’s viewing your Pitch Deck, how long they’re spending on it, and which slides they’re lingering on. You’ll often see names appear here that you don’t recognise, which means an investor has shared your deck with a friend, and you can usually figure out who shared it based on the origin link.
DocSend’s analytics will help you identify patterns in investor thinking. When we were raising our round this year, most people were impressed by our traction and strong growth. A common question we heard throughout meetings with investors was “How big is the market?” and this was reflected in the DocSend stats, with investors spending the most time on our Market Sizing slide:
These stats are particularly useful just before a meeting, and can help you predict which areas of the business an investor is most interested in, and which questions are likely to come up first.
*use my DocSend invite link for a $15 discount.
Take EXTENSIVE notes
After each meeting, try to find a cafe or lobby to spend ~20 minutes noting down everything you talked about (I love Evernote). Meetings with investors are always educational, and the discussions you have about your business will reams of valuable information.
Crucially, take note of any names mentioned, and if you can, try to do this during the meeting.
At the very beginning of our fundraise in May, I had a meeting with two of our existing investors. We spent a good 15 minutes working through a long list of people who might be interested in investing, and luckily, I wrote every single name down.
I was flicking through my notes at the end of August, and came across a name I hadn’t reached out to. That person happened to be one of the most enthusiastic investors we met, and is now an investor in Encore!
Keep emails short
I know myself that I’m more likely to reply to short emails that don’t require a lengthy, essay-like response, and this is even more true of investors, who receive hundreds of emails on a daily basis. Try to get over the preconception that short emails are rude or terse (This took me a while).
Have your intro paragraph ready at all times
When introducing you to new contacts, investors and mentors will usually ask for a short paragraph summarising your business and fundraise progress.
Writing this from scratch for each new intro is a waste of your time. Always have an up-to-date version of this paragraph ready to drop into an email at a moment’s notice.
Pro tip: Streak’s Snippet feature is perfect for this. Assign a keyboard shortcut to your primer text, then drop it into emails using just a few keystrokes without ever leaving Gmail.
Make sure you can edit your deck
We hired a designer to present the content of our pitch deck nicely, and were incredibly pleased with the results.
However, he produced the deck using InDesign, and neither myself nor my co-founder had access to InDesign to edit the deck over the following weeks. Make sure you don’t end up in this position — it’s not fun!
Do not try to raise part time
You cannot raise part-time. Meetings, phonecalls and negotiations take a lot of time, and it’s unfair on yourself and your business to do this in a half-hearted manner.
I spent six weeks raising “part-time” while also dealing with various operational and revenue-generating tasks in the Encore office. My work suffered, and fundraising progress was slow, so we hired a part-time Bookings Manager to handle booking enquiries and customer support. This allowed me to focus all of my efforts on raising investment, and was one of the best business decisions we ever made.
That part-time Bookings Manager is now full-time and an outstanding member of the Encore team!
Don’t raise in Summer
Raising in Summer is frustrating. Most investors take at least one extended holiday, and having your fundraising schedule pushed back for reasons outside of your control isn’t ideal.
Try to avoid beginning a fundraise around April/May, and if you can’t, at least try to schedule as many meetings as possible before June comes around.
Fundraising is Hard
This sounds painfully obvious, but it’s important that you grasp this.
We were warned about how difficult fundraising would be, and heard from other entrepreneurs about the struggles of raising their own rounds, but naively, we thought our situation would be different.
The reality is: raising your first round is tough, and you shouldn’t do it unless you’re absolutely convinced that your product needs to exist. There were various points during our first raise when doubt crept into my mind and I began to crave the stability of a normal job.
One of those points, for example, was renting out my own bedroom on AirBnb and sleeping on my flatmate’s bedroom floor to make extra money and extend our runway… I truly believe Encore needs to exist in the world, and it was this conviction that helped me persevere during trying times.
Even this year, we spoke to 136 investors and VCs, of which only a handful invested in our round. Conversion rates like this aren’t unusual, and so you should prepare yourself for repeated rejection. It sucks, but it’s the nature of the game.
Brexit happened during our fundraise this year, which gave a couple of investors cold feet and definitely made our fundraise harder.
Things will go wrong, but if you roll with the punches and keep a cool head, you’ll be just fine.
Thanks for making it to the end! I really hope you found this useful, and if I missed anything or you have any further questions, please don’t hesitate to email me: email@example.com
Find me on Twitter @jamsusmaximus