1/ Fundraising is more about finding alignment first and foremost – and doing this before you “enter into a process” with any investor. If you’ve heard back a NO from an investor after a long process citing basic reasons like market, TAM, supply, etc. then you know what I mean.
2/ One way to do this is to share with investors key insights around which you are building your company and what has driven your choice of product direction. This helps represent your fundamental thinking so investors can look at you with the correct lens.
3/ Then encourage investors to spend all the time they want to understand those insights, validate/invalidate with their own methods and research, form an opinion, and be clear of conviction is the basics of TAM, market, supply, etc. before they want to spend more time with you.
4/ It is incredibly costly for founders to be part of the investors’ process of validation/invalidation of the insights and the basics – it takes a lot of time and founders have no clue if investors will have clear conviction in the basics of their market/opp.
5/ Now imagine doing this with multiple investors in *their own different styles* — its weeks of efforts on founders’ part to help investors validate the basics because remember the rejection comes back with a lack of conviction in the basics. It’s super hard and expensive.
6/ A better idea is to lead with a process wherein you create plenty of data and material for (1) validation of insights/basics (2) evaluation of the business & team (3) funding ask & plan for use of capital & future. Set this upfront internally.
7/ As you meet investors, share your process and say that you’d prefer to find deep alignment on (1) to mutually decide to go to (2) and THEN to (3) if there is mutual alignment on (2). This means, many will stop at (1) and some will stop at (2). A couple may end up at (3).
8/ This process will save an incredible amount of time for the fundraising founder, save you from sharing data with investors where there is no alignment and run a time-optimized process.
9/ It is a misconception in founders’ minds that the more investors they speak with the more their chances of getting to a termsheet. Remember the “herd mentality” applies to a NO as much as it applies to the FOMO YESs. Your time is the most precious.
10/ I personally do this at Better – I first focus on insights and if they align with my thinking (which may be wrong too) then I proceed else I don’t. I’ve rarely aligned on insights & not gotten to a YES, especially since I am very market-first.
11/11 Lastly, founders should consider the above and takeaway what they feel aligned with. While I am a passionate believer in all of the above (as a former long term founder), it may not be for everyone or every situation 🙂 Good luck with your raises!