A few days ago I mentioned I’ve invested $2M in 30 companies over the past year. Over that same time frame I’ve seen 300+ companies fundraise. With a few tweaks – a lot of these Founders could raise a lot more. Here are 20 tips for fundraising
Tip 1: Tell a story, don’t recite facts. The best pitches are immersive conversations. Storytelling and narrative brings your business alive. It creates a discussion arc that pulls Investors in and creates opportunities for engagement.
Tip 2: More ELI5, less industry jargon Investors are not all knowing. Don’t assume your investors know the nuances of your space. Simplicity is best when establishing a baseline (and in general). Establishing common ground quickly, allows you to go deeper together.
Tip 3: Balance long term vision with short term execution Vision doesn’t matter if you don’t survive the next 18 months. Use the A-Z-B framework A: This is where we are today Z: This is where we want to be B: $ will help us specifically do BLANK to progress towards Z
TIP 4: Be realistic about market dynamics The old “If we just get 1% of the market we’ll be a billion dollar company” line never happens in practice. Generational companies aren’t built off of 1% market share. You either become a major player or exit as a small participant.
Tip 5: Pressure Test your 2×2 Matrix If someone asked your customer (and competitors) how they would draw a 2×2…. 1. What would they say? 2. Why would they say it? 3. Where would they place you? This is a good exercise to think about your market position more deeply.
Tip 6: Focus on the business model There are 4 components of a successful pitch:
Is this a big problem?
Do we have the right solution?
Is this a viable business?
Why are we the team to do it?
Investors are investing in a business, not just a great idea.
Tip 7: Overweight team, underweight advisors Your advisors don’t build the company. Too many Founders focus on the “impressiveness” of their Advisors as a shield to their credentials. Credentials don’t matter. Traction, vision and your clarity of thought do.
Tip 8: Don’t make faulty X for Y analogies These analogies often break because of nuances in biz model, industry, etc. Make sure you understand X and Y. Side note: Most X for Y have defined ceilings. Unlike the “X’s”, these startups aren’t category creators.
Tip 9: Bottom Line Up Front Figure out what is *uniquely* awesome about your startup. Whatever that is, make sure it’s up front in the deck. Why? Investors spend <3 min on avg. per deck (according to Docsend). That’s it! Don’t bury the lead. Build instant credibility.
Those are the most common missteps I see on the pitch / deck. Here are some of the more common missteps around the actual process….
Tip 10: Create a target Investor list Investors have different strengths. – Industry: They now your space – Business Model: They know how to make $ – Judgement: You trust their perspective – Capital: You need their $ Everyone should bring something to the table.
Tip 11: Prioritize your list I like keeping it simple with 3 categories: (a) Yes I would work with them no matter what (b) Yes, if the stars align (terms, valuation, etc.) (c) Yes, if my top choices don’t work out (no shame in this) Fundraise in the inverse order (c-b-a).
Tip 12: Send the deck ahead You have ~45 min. Don’t spend 50% of the time trying to align. Make the meeting as worthwhile as possible. It’s also an easy test to gauge interest. Some VCs show up with thoughtful questions, others won’t have a clue. Speaks volumes.
Tip 13: Maintain a FAQ You’re going to get a million questions when you fundraise. Document all the good ones and come up with compelling answers and a coherent narrative. This will help you fundraise better, but more importantly it’ll help you de-risk your business.
Tip 14: Timebox the process Some of my best companies have dropped revenue by 15% during fundraising. One toe in, one toe out is a double whammy. Traction dips + fundraising gets harder. (
traction = investor excitement).
Go all in so you can get back to building.
Tip 15: Eliminate friction into the process Any non-standard practice (e.g. NDAs) stretches fundraising and makes it more difficult to partner with you. Focus on the north star – finding the right Investors as quickly as possible so you can get back to the business.
Tip 16: Don’t overfake hype If you have 10 term sheets and have leverage, then by all means use it. But if you have 10 *meetings* don’t overplay your hand. This is a pretty small industry and investors back channel with each other. This is the quickest way to break trust.
Tip 17: When choosing the Investor, always go with fit. Price, Firm Brand, etc. all matter but don’t over optimize for it. If there’s one thing to solve for, above all, it’s Investor fit. I know too many Founders that solved for price and would take it back if they could.
Tip 18: Get your mind right. You’re about to hear no. A LOT. Many meetings will make you doubt your idea. Some might even make you doubt yourself. Surround yourself with a good peer group so you can honestly communicate how things are going through the process. It’s not easy.
Tip 19: You just need a handful of believers. For argument’s sake, let’s say you have 5 investor slots. Company A: 50/50 say yes! Company B: 5/50 say yes and 45/50 say no. You know the difference? Nothing. You’re both funded.
Tip 20: Fundraising is a means to an end The market doesn’t care if you were a “hot” deal or not. Treat fundraising for what it is – a means to an end. Congrats on raising $. It might just be the easiest thing you have to do as a Founder. Now the real work begins.
As always, take this advice with a grain of salt. 1. Some pieces may not be applicable 2. Some may be applicable, but needs further nuance 3. Some may be the thing that pushes you over the edge. Hope this is helpful to wherever you are in the fundraising journey!
If you enjoyed this, give me a follow at @romeensheth. I tweet about lessons building a $50M+ bootstrapped business and investing in founders way better than me.