If You’re Thinking About Raising Money For Your Startup, Read This.

At some point in the early life of a business, its founder(s) will think about whether to take on funding. Many opt to go the bootstrap route, but for those who believe they need to raise capital to scale meaningfully, it’s best not to go into the fundraising process blind.

Below, you’ll find thoughts on funding from entrepreneurs and investors who know a thing or two (…thousand) about successfully raising capital for your business. Read on for wisdom around finding the right investors, engaging them effectively, and taking on dollar dollar bills, ya’ll.


It seems easier than it has been in the past for startups to raise money. Do you think that raising from an AngelList syndicate vs. a more traditional seed VC impacts the ability to attract talent? — David Chie
 
It might be easier than ever to raise seed, but it is getting harder to raise A, B, C, and D. Teams need to to think about the longer-term game...raising seed is like getting to the field and having enough water and supplies to play an inning or two; the game hasn’t really started yet. :) — Aileen Lee, Founder of Cowboy Ventures


Is there any way that a startup can position themselves to be found by VCs? — Steven W.
 
Three ways I would get on investors’ radars would be:

1) Speak at an event they’re at and share something smart
2) Reach out in a way that creates value for them (maybe introduce them to a KILLER startup founder they don’t know)
3) Write a blog post about their firm, highlighting something interesting

BONUS: Run Facebook ads targeting the firm with some great press / news about your startup. I’ve done this A LOT…especially using re-marketing pixels to be even more targeted.

P.S. For everyone else — Fundraising Like a Pro

Dan Martell, Angel Investor & Founder of Clarity


What advice would you give to a first-time entrepreneur raising money? — Emily Hodgins

Make sure that you are deeply passionate about whatever you are pursuing. Regardless of how successful a company is, it’s incredibly difficult. You want to make sure that you have the grit to overcome obstacles and see it through. A good litmus test for this is asking yourself whether you would raise capital/pitch someone that you care about (outside of your parents). So, would you go to your girlfriend’s/boyfriend’s parents and ask them to invest? I’m not suggesting you actually do this; but if you’re comfortable pitching in an otherwise uncomfortable scenario, then you’re probably well positioned for what’s to come. Also, team team team. Be deliberate about who you hire, and don’t compromise. It pays huge dividends over time. — David Haber, Founder & CEO, Bond Street


What advice can you give to other female founders starting out their first fundraise? — Jacqueline von Tesmar

I spent 10 years meeting people in tech and building a reputation before I started my company. That’s certainly not required, but it helps. Build a network and reputation for being a good, very smart, talented person and a lot of doors will be open when you’re ready. If you’re at a big company now, go find a startup to advise on the side or get super active on Twitter or Medium or Product Hunt. Show that you’re more than a biz dev or iOS dev at company X, and people will start to notice. Be helpful; when someone you admire mentions visiting a city and wants recommendations, send them. Tweet “congrats” over nerdy articles or speaking gigs others might have missed. I built my network before Twitter became the force it is now, so I had to do it in person. Now you can do it from your computer anywhere in the world. There’s no excuse for not having a warm intro. — Sarah Kunst, Founder, Proday Fitness


When bootstrapping a service business to create a super related product business, when’s the right time to start approaching investors? — David Smooke
 
The ideal time is never. If you have a good service business, it means you are probably profitable. If your service business is repeatable, then you can develop a product by just abstracting away customer names into variables. Then, you only need money if you want to grow fast. At this point, you should be able to raise money easily because you’ve proven the product out with customer testimonials and the high margins of productizing it. Don’t make Mistake #1: Being in a rush. — James Altucher, Entrepreneur, podcaster, and bestselling author


There’s been a lot of discussion about inflated startup valuations and the venture market drying. What are your thoughts on this, and what advise would you give to startups seeking funding in the next ~year? — Ryan Hoover
 
In short:
1. Keep burn as low as you can, but certainly “cut to scale” for your cash balance.
2. Start raising early.
3. Expect it to take longer (at all stages, but especially later stages).
4. Have the confidence to go for the investors and price you want, but the wisdom to accept a lower price or lessor target investor if the round is too slow. Capital matters more than maximizing price.
— Mark Suster, General Partner at Upfront Ventures


If you’re lucky enough to get an introduction to an investor and you don’t get a reply, is it okay to chase or just let it play out in their own time? — Mike Hince
 
As soon as I get an intro to an investor, I’m always the first to reply all, thank the person for the intro, and suggest a time to talk within the next 3–4 days. If they don’t respond in two days, I follow up. Then I wait another five days and follow up. Then, I might follow up in a week and just give them a quick “Hey, just need a quick reply, something you’d like to discuss (yes), or not now (no)?. — Dan Martell, Angel Investor & Founder of Clarity


What are the dos and don’ts of going into an [investor] meeting? How does a startup inspire investor confidence in a market with huge, dominant players? — Rachel
 
The biggest mistake founders make is hunting for introductions from anyone they know. What they don’t realize is investors are pummeled with garbage introductions all day long. What stands out is when someone recommends someone else. The signal in that recommendation is 1,000x a basic introduction, which are a dime a dozen. Second, when the meeting happens, assume you have one chance to impress the investor. — Semil Shah, Investor at Haystack Fund


What would you say is the best way for a startup to get in front of VCs? — Antoine Martel
 
The very best thing to do is to build a product that people love and use, and then good VCs will come find you. The next best way is to get introduced through people a particular VC knows well or has worked with. The unfortunate consequence of this, obviously, is that it perpetuates the old boy’s network that a lot of industries exhibit. We need better solutions for sure. — John Lilly, Partner at Greylock & former CEO at Mozilla


In reviewing submitted business plans, what kind of submissions get discarded right away, and which ones get the most attention? — Victor Polyushko

Let me save you a lot of time: Don’t spend your time on a business plan! Thirty-plus page business plans simply aren’t read anymore. My recommendation would be to spend time talking to potential customers and solidifying your product/market fit, rather than conjecturing about a five-year business plan. We usually receive ideas in the form of a tight 5–15 page slide deck and/or a two-page executive summary with key details and vision. You can actually hack together a demo product these days in the time folks used to spend drafting a business plan.

In terms of “submission” of the exec summary , find an entrepreneur we have worked with in the past or a friend that can give you a warm intro to an investor at the firm. Cold emails almost never succeed. Part of it is just the sheer volume we receive, but the other part is that networking is critical for your overall success. If you can’t network into a warm VC intro, then it’ll be hard for you to get warm intros to customer prospects, future employees, etc. Warm intros always go a long way, and we read 100% of quality referrals and meet with most of them.  Bryan Deeter, Partner at Bessemer Ventures


What’s your opinion on startups being overvalued these days? — Ankit Minocha
 
Investors can pass, and I do every day, based on valuation. I look at the top 10 Y Combinator companies in every class — I literally do in-person meetings with them — and I’ve passed on the last 20 or so in a row based on valuation in many cases.

Why?

Simple: I see almost all companies due to my reputation/deal flow/social following. If I can invest in 2–3 startups at $3m valuations for every $8–15m valuation from YC, well, that makes great sense for me. This doesn’t mean other folks shouldn’t invest in YC companies, but I can tell you the startups themselves are making a mistake by being 2–3x market rate — they’re losing the elite investors by doing so.

On the late stage the TPG and Fidelity-type folks get their money out first… so they have little downside risk. The valuation thing is always fun to talk about, but in practice, investors get to set the market — and they are very bullish.  Jason Calacanis, serial entrepreneur & angel investor


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