8 fundraising tactics that I wish I had known as an early stage founder
As an investor, I have the privilege of meeting with founders every day. I am often struck by how specific tactics make a drastic difference in a company’s fundraising process.
I empathize with the founders I meet because I’ve been in their shoes. I had only fundraised a handful of times and had done so without any coaching, so I know I did not run the process in the most optimal way. I often wonder what a difference a few tweaks in my process would have made. Below are 8 tips that I wish I had known then. I hope founders today can benefit from them as well. If you’re a founder and have any questions, feel free to drop me a line in the comments below.
- A warm introduction is by far the best way to connect with an investor but the quality of the intro matters — As a founder I knew that a warm introduction was important, but I did not realize that who the intro came from made a big difference in whether the investor took the meeting. For example, a reference from a high quality founder, particularly in the investor’s portfolio, would be the highest quality signal — it would yield the quickest responses and most investors would take a meeting. One from an investment banker that a VC has interacted with on occasion would be a low signal — bankers do not engage with companies at their earliest stages and likely do not have their finger on the pulse of the ecosystem like a fellow entrepreneur would.
- Qualifying funds is like qualifying leads—Like in sales, running an efficient process does not mean casting as wide a net as possible and seeing what sticks. It is important to do your homework and make a target list of funds at the outset of your process that align with the stage and sector of your company. Otherwise you run the risk of spending a lot of time and energy with funds are not a fit and therefore will likely not invest, regardless of how exciting your company is.
- An effective VC target list includes the specific investor, not just the firm — VC firms are a partnership, meaning it is a made up of a group of individuals that work together. Implicit in that definition is that investors at the same firm have different preferences and areas of focus. Sometimes one investor will forward information about a company to the most relevant person on her team, but that is not always the case. So it is important to do your homework and get in front of the investor that is most likely to be interested in your industry or use case.
- Timing is everything — Running an effective process is as much about perception as it is about reality. I have made the mistake of talking to only 2–3 firms and if and when those do not pan out, move on to the next set of 2–3 and so on. To create momentum, it is better to schedule similar stage meetings consecutively instead of sequentially. Specifically, do all first meetings in one week, second meetings the following week, etc. This creates a timeline you can allude to in your pitches, and also gives you more clarity on where you stand in the fundraise. Aaron Harris @ YC wrote a great blog post on this topic that I highly recommend.
- Practice — Like everything else, practice makes perfect. Practice your delivery, responses to questions, and flow to get all the kinks out before your first meeting. Practice in front of others to see what it is like and what questions come up. The first VC meeting should not be the first, or even third, time you’re delivering your pitch.
- Use slides in the meeting — Founders often ask me whether I prefer a conversation or to walk through slides. I pick the latter because it almost always allows the founder put his or her best foot forward. I have met a few founders who navigate the conversation masterfully without any aides but most do better with the structure. Decks do not hinder an organic conversation but facilitate a more structured, comprehensive overview. It gives you an opportunity to present your company in the best light by hitting the key points you’d like to get across. It also allows your to lead the conversation instead of reacting to the flow of an investor’s ad hoc questions that may inadvertently derail from where you wanted to take it. Besides, you invested in their production, so may as well use them!
- Know your KPIs — It is important to come across as a master of the key details of your business. Make sure you have a strong grasp of historical trends, projections, current statistics, and goals for each major metric that an investor may ask about during the meeting. If you do not know the answer, it may be taken as a sign that you are not running your company in an efficient, data driven way.
- Follow up — It’s helpful to send a follow-up email after the meeting with your deck and any other pertinent information the investor requested. It serves as a good reminder to the investor to schedule next steps and keeps the process moving, instead of waiting for the VC to follow up with you a few days after the meeting.
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