Fundraising Tips for B2B Seed-Stage Startups

In this post, we summarize the key takeaways from our first webinar on fundraising strategies and tips for B2B seed-stage startups. This is the first of an ongoing webinar series that will address different topics across venture, startups, and fundraising. As always, if you’re a founder interested in speaking with us, email any of us directly or the fund at buildthefuture@lasolasvc.com. Follow this link to watch the whole webinar and keep your eye out for future webinars:

June 6th: “Magic Numbers”
June 27th: “Elements of a Perfect Pitch”
July 18th: “Tips for Term Sheets”

On targeting the right investors:

1. Start with a manageable number of targets. Only having a few investors on your list reduces the chances of receiving a term sheet that makes sense for you and having too many investors on the list might make you lose focus. A list of ~100 qualified investors is a good place to start.

2. Carefully research the funds you target. Their investment thesis and principles should align with your industry, business model, and fundraise.

3. Write customized emails and find warm intros. This takes time and effort but will lead to much better results than sending blast emails because you will have a higher response rate. Tailor those emails to pass an investor’s screening criteria.

4. Run an efficient process. Don’t start the fundraising process until you have all the materials you will need (pitch deck, financial model, etc.) and you’re ready to start investor meetings. The best approach will be to run a tight 2–3 month process.

On communicating with investors:

1. Address your compelling story. Giving a few sentences on the opportunity that peak investor interest will make them more engaged with your pitch.

2. Discuss product-market fit. It’s important to show proof that your product makes sense in your market and demonstrate some evidence of product-market fit, whether that’s paying customers, strong user growth, etc.

3. Clearly illustrate your metrics. Make sure to be upfront on your metrics and minimize the effort needed from investors to answer metric-related questions. Picking a few metrics and KPIs important to your business and explaining them is a good way to start the discussion.

Common mistakes to avoid:

1. Slow responses to follow-up questions. Investors will assess you based on how quickly and thoughtfully you communicate with them. Being non-responsive or failing to be thorough or prepared may be an indication of how you work with your customers.

2. Evasive answers to investor questions. Always make sure to answer the question asked. It’s okay to add color if that answer isn’t representative of certain details but investors look for clear and concise answers to their questions.

3. Asking for an NDA. In general, VCs don’t sign NDAs during diligence. They review too many pitch decks and speak with too many companies to do so for everyone. That being said, there are rare circumstances where an NDA might make sense.

4. Skipping deck to pitch free form. Not using the pitch deck might make you look disorganized and miss out on relevant topics. Even if you don’t do the whole pitch from beginning to end, using it as a basis for discussion will help facilitate your pitch.

5. Spam fundraising emails. Don’t send emails to mailing lists without carefully researching the funds you target.

6. High pressure “sales tactics”. Imposing deadlines on VCs and scheduling calls without allowing them to opt-in will not win you any favor. Warm intros and customized emails are the best way to connect with investors.

On valuations and term sheets:

1. Let the market determine value. When you’re looking for a professional investor to lead your round, it’s important to discuss that it’s a priced round and the amount you are looking to raise. Giving a valuation off the bat will only limit your potential investor pool.

2. Be clear with your fundraising goals. Discuss how the amount you’re raising will help you reach certain milestones in a certain amount of time, and clearly illustrate your thought process.

3. Educate yourself on term sheets. Knowing specific term sheet details ahead of time will make it easier to speak to specific terms and discuss what’s important to you.

4. Find an experienced attorney. Working with an attorney who regularly does these types of transactions will make your life a lot easier. It’s frustrating when the company counsel doesn’t have much experience with venture capital documents.