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A Ridiculously Detailed Fundraising Guide

A Step-by-step system to help secure venture capital

Founder Collective
Apr 23, 2019 · 6 min read

Even for strong startups, fundraising is a marathon that requires near constant attention for 8–12 weeks. The process is punishing, and riskier than you might imagine. You need to prep for it as seriously as you would a race.

Prepare for rejection. A lot of it. A promising startup will get 17 or 18 “no’s” for every “yes.” These brush-offs often have less to do with the startup in question than idiosyncratic context or concerns for each VC. Still, it stings. Don’t get demoralized.

To make matters worse, the stress level will ratchet up every week as inevitable “passes” pile up. Many deals are closed sub-optimally simply because the founder is ground down by the process, slightly panicked, and wants to be done with it. You can avoid this fate!

There’s been a lot written about how to prepare a deck, less about the mechanics of running the process. Here are a few thoughts, with a special focus on how to use your current investors for leverage during this taxing time:

📝 Build a list

Create a Google Sheet/Airtable. Populate it w/ all the firms you want to pitch. Then step back and ask *why* you’re pitching these firms? Do they do deals at your stage? In your space? Any portfolio conflicts? Figure out which partner would be the best fit.

✂️ Curate the list with your VCs

Founders often want to meet with celebrity VCs. An angel might push for a few friend’s funds that aren’t a logical fit. Cut these out of the list. Meetings with “bad fits” will create more work and lead to extra stress + more rejection.

👉 Fixate on leads

This is very important: Don’t set up meetings with firms that don’t lead rounds. If you find a lead, you’ll have no trouble filling out a round. Conversely, a lot of lukewarm interest and no lead makes a deal seem weak and process seem endless.

🔬 Focus on this round — Only this round

You may feel pressure or have intros to meet with growth firms who are more likely a fit for future rounds. Accept the intro, but only with the understanding that you’ll schedule these meeting *after* you close this round.

🔪 Make one more cut

“It’s just one more meeting…” you’ll say about each less likely intro. Multiply that times ten and you’ll waste serious time and invite more demoralizing rejection. Important not to get distracted or create needless noise.

📦 Prep an intro package

Write a “forwardable” email that includes:

  • A 1–2 paragraph teaser about your startup
  • 5–10 bullet points about your company: traction numbers, press clips, notable milestones
  • A deck/Docsend link

🗝️ Choose the best intros

Choosing who will make the intro is important. You need to balance closeness to the target with cachet. E.g. An intro from a successful entrepreneur is better than one from your VC. But your current VC is a better intro than a service provider.

🗓️ Schedule ~10 Meetings

Send invites out in batches by order of preference & try to fill 10 slots as a first wave. Send out further tranches as you get “no’s” from potential investors. More isn’t necessarily better — it’s often worse and it can make a focused process hard.

🛴 Pad the schedule

You don’t want to cut a productive meeting short because you’ve got to rush out to your next appointment. Likewise, don’t create a bad first impression by being late to a meeting because of a traffic jam or your previous meeting running over.

⚾️ Practice your pitch

A middle-school production of Mary Poppins will rehearse for weeks to impress a group of parents. You won’t impress the best VCs in the world with an unpracticed pitch. Set up 2–3 dress rehearsals of your pitch with friendly investors and advisors.

🎭 Dress Rehearse

Treat these practice sessions seriously. Avoid “yadda-yaddaing” as you walk through the deck. Ask your VCs to bring some fresh ears to the pitch. Even practice things like talking while getting your computer connected and, of course, handling objections.

🥉 Sequence investors

Pick a few of your lowest ranked investors and make those your first meetings. Your first pitch shouldn’t be to your dream investor. Even with plenty of practice, nothing beats live feedback. You’ll likely need to burn a few meetings to get in sync.

🍻 Employ the buddy system

Impressions are subjective, so it’s helpful to have at least two co-founders at the pitch to discuss the feedback from the meeting. Make sure both of you contribute to the pitch and the vibe between you reflects the positive energy at the company.

🚫 Embrace “Objection Response”

Be methodical about addressing critiques of the deck. Incorporate pushback into your deck. If a point won’t fit in the main flow, build an appendix slide. Every objection should provide data that gets you closer to a “yes.”

👂 Report objectively

After you’ve done a few pitches, reconvene with your current VCs. Use this opportunity to rejigger your deck/reconsider your narrative. Remember, try to provide as objective a report as possible — your VCs’ advice will only be as good as your account.

🛡️ Shield your team (and VCs)

Inevitable rejections will alter the way the startup is perceived by employees and investors (and even yourself). Be honest, but spare your team the ups, downs, and gory details. Stay positive. Even the best companies face tons of rejection!

🕵️‍♂️ Use backchannels

Ask your VCs to check-in with the investors you pitch. You’ll rarely get straight feedback, but there will typically be some actionable insight that the VC wouldn’t share directly with an entrepreneur.

👶 Nurture all interest

Make every potential investor feel like a VIP, even those lowest on your list. It’s often surprising who ultimately does the deal. Nothing is worse than ghosting a VC and coming back when no one else shows interest.

🏎️ Race to a term sheet

This is the least helpful advice, but the most important. Once you have one term sheet, everyone is on the clock and has to make a decision. If you sense someone is close, figure out what you need to do to close the deal. However…

🤥 Never ever mislead …

If you tell a VC you have a term sheet, or a verbal commitment, and you don’t, you can destroy credibility and the possibility of a deal — also, your broader reputation will take a major hit.

There are a million nuances and edge cases, and no tweetstorm can come close to preparing you for the exhaustion of fundraising. That’s why it’s important to have aligned VCs and to prepare as you would for any other endurance event.

Managing Partner Eric Paley recently shared this as a tweetstorm. We collected the tweets as a post for your convenience. Please share it with entrepreneurs you know who are preparing to pitch VCs!

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Founder Collective

Written by

Our mission is to be the most aligned VC for founders at seed. #ProudInvestor in @Uber @TheTradeDeskinc @Buzzfeed @Cruise @Diaandco @PillPack @SeatGeek & more.

The Startup

Medium's largest active publication, followed by +685K people. Follow to join our community.

Founder Collective

Written by

Our mission is to be the most aligned VC for founders at seed. #ProudInvestor in @Uber @TheTradeDeskinc @Buzzfeed @Cruise @Diaandco @PillPack @SeatGeek & more.

The Startup

Medium's largest active publication, followed by +685K people. Follow to join our community.

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