Creating your deck, honing your pitch, hooking investors—find out what experts and people who've successfully fundraised recommend when it's time to raise money.
"It’s important to try to have valuation conversations over the phone instead of over email. While much of the fundraising process is very human, valuation is one of the topics that can feel cold and transactional. It’s easy for this negotiation to become toxic if it’s happening via email." - Mike Wilner, coauthor of Oversubscribed.
"At the seed stage of a startup, what you’re going to accomplish is more important than the specific numbers that will help you measure whether or not you’ve accomplished it. The best milestones demonstrate that you’ve built more certainty around the business model (often referred to as ‘de-risking’) and that a high-growth future is not just possible, but likely." - Mike Wilner, coauthor of Oversubscribed.
"As a founder, there’s a good chance you’ll start to receive a lot of cold emails from analysts. While it can be tempting to respond to them—especially if they come from well-known firms—doing so generally isn’t worth your time. Many analysts are goaled on how much email outreach they can do, so receiving a cold email from an analyst doesn’t mean their firm has a particular interest in your company. If they really like you, they’ll have a partner, or at least an associate or principal, reach out." - Mike Wilner, coauthor of Oversubscribed.
"Privately tell the investors you already have warm relationships with that you’re about to start fundraising. Explain that you’re going to them first before you start broader outreach to other investors in your network—and, to create urgency, tell them precisely when you’re going to do that. They’ll feel like they’re getting early access to a deal, which investors love, and may be compelled to write checks quickly." - Mike Wilner, coauthor of Oversubscribed.
"Founders like helping other founders—it’s part of the startup ethos. By reaching out to the founder and asking if they think their investor would be worth talking to, you’ll quickly get context for why they invested. If the angel isn’t looking for other investments, they can tell you that. However, if the angel might be interested, the founder might be able to facilitate an introduction, which would carry a lot of weight." - Mike Wilner, coauthor of Oversubscribed.
"Unsure if your valuation is realistic? Talk to an investor who you’re not planning on raising money from. They can be blunt with you about how the market is valuing companies like yours, and you can rest assured that they’re not trying to negotiate." - Mike Wilner, coauthor of Oversubscribed.
"When looking for angel investors, a great place to start is through your alumni network. Successful alumni generally want to support younger entrepreneurs if they can. You’ll also begin with a head start, as fellow alums already share a common experience with you, and they’ll often trust that if you went to the same school they did, you must be of a certain quality." Mike Wilner, coauthor of Oversubscribed.
"You should always have a conservative bias, and assume that things will not go exactly as planned. You should aim to give yourself eighteen months of runway, even in a scenario where things don’t go too well. The last thing you want to do is close your round and then need to start thinking about fundraising again only a few months later." - Mike Wilner, coauthor of Oversubscribed.
"When an investor looks at your website, they’re not trying to learn your pitch—that’s what the actual pitch is for. They’re trying to see that you have a clear idea of who your customers are and that you know how to simply explain your solution to them. In other words, they want to know that you speak your customers’ language." - Mike Wilner, coauthor of Oversubscribed.
"A bad pitch is one where the investors politely listen and nod their head. A good pitch is one where you get interrupted frequently with questions and even pushback. While it may seem counterintuitive, pitches that are going well often feel like debates." - Mike Wilner, coauthor of Oversubscribed.
"Every investor should feel like you’re about to leave their office and go to another investor’s office—and that should be precisely how busy you are based on the meetings you’ve stacked up. You should give every investor deadlines." - Mike Wilner, coauthor of Oversubscribed.
"You should think of your fundraising round as a limited supply of dollars that you can accept. For example, rather than thinking of your $1M seed round as $1M that you need to raise, think of it as only $1M in equity that you’re allowed to give away." - Mike Wilner, coauthor of Oversubscribed.
"Repeat founders who have a successful track record of building and exiting companies are often able to raise seed funding with nothing but an idea and a deck, but they’re the exception, not the rule." - Mike Wilner, coauthor of Oversubscribed.
"When you’re not in fundraising mode, you’re not asking investors to make a decision. As soon as you turn on fundraising mode, there will be an implication that you’re asking for money, which will change the ways that investors will engage with you. It will also limit your ability to have your network share early access to your investment opportunity. You should stay out of fundraising mode until you’re 100% ready to start turn the faucet on." - Mike Wilner, coauthor of Oversubscribed.
"Non-dilutive grants are essentially ‘free’ money that don’t cost you any equity in your company. They can can come through pitch competitions, research grants, or small business development grants. Non-dilutive grants are a great way to fund your startup as you continue making progress in preparation of a larger seed round." - Mike Wilner, coauthor of Oversubscribed.
"It’s important to note that VCs who are relevant for your business should know more than you do about how your business model and market is evolving. While you’re heads down in your business, a VC has a lot of data points that they’re seeing, and they’ve tracked companies at your current stage as they’ve grown and faced later stage challenges." - Mike Wilner, coauthor of Oversubscribed.
"While there’s a lot you can and should do in the weeks and months leading up to fundraising, once you begin fundraising, you should treat it as your full-time job. All of your energy should go to running a swift fundraising process, and you should make sure core business functions have been offloaded to someone else on your team so you don’t get distracted." - Mike Wilner, coauthor of Oversubscribed.
"It’s important to have a minimum check size to limit the overhead involved with raising your round. For friends and family, this may be $10K. For other angels, $25K is a good minimum check size (but may be higher for bigger rounds). You can have different minimum check sizes for different types of investors." - Mike Wilner, coauthor of Oversubscribed.
"As a rule of thumb, you should be able to take someone through your full pitch in no more than five minutes. If it takes you longer to pitch your business, then your narrative isn’t concise enough and you might be getting caught up in the weeds." - Mike Wilner, coauthor of Oversubscribed.
"The single most important thing to keep in mind when raising your first round is to do research on your target investors to ensure that a) they are a fit in terms of check size and stage at which you currently are b) long-term alignment with the investor on how to build and grow the business and c) the investor brings additional value to the table in the form of network, industry knowledge, etc. over and above the capital." - Shweta Singh, principal at SRI Capital.
On choosing between a great team, a great track record, or a great market:
"A great market. With a massive opportunity and a massive market, a good team has a boatload of runway to make a lot of mistakes. A great team in a bad market, you get one shot on goal. And let’s be honest: You need a lot of shots on goal." - Jesse Middleton, general partner at Flybridge Capital Partner.
"As much as your VC is doing due diligence on you, make sure you’re doing due diligence on your VC. It’s totally within reason for you to reach out to other CEOs they’ve invested in. The best mile marker for figuring out who you want to partner with isn’t looking at the partnerships that have gone really well; it’s talking to the CEOs where the business has struggled, where there’ve been fights around the board table about what to do. That’s where you see if you have a real partner in the room." - Cat Hernandez, partner, Primary Venture Partners.
"Even in the early days, you have to figure out your unit economics. Does it cost you $1,000 to acquire a customer whose lifetime value is $200? That's a business that’s upside down. Or can you get to $1,000 in revenue against a $200 spend to acquire that customer? Because the next round of investors, if they’re pouring $10 million into your business, they want to see that you’re going to hit the gas and ramp up that revenue very quickly. You have to know the unit economics of your business before you can ever go out and pursue that kind of capital." - Marc Michel, founder of Runway Ventures.
"My advice to founders thinking about their first round of institutional capital is to know what kind of investor you’re looking for. Everyone has a different style, background, and area of expertise. You’re getting married to someone for the next seven to 10 years, so it's not just about who’s giving you the biggest valuation." - Cat Hernandez, partner, Primary Venture Partners.
"Last year we received over 3,000 pitch decks. We met with over 800 companies and I think we invested in 11. So your odds are pretty slim. I don’t say that to dissuade you. I say that to explain out of those 11, we’d known more than half of the founders for more than six or seven months. They came in through a warm referral, or they reached out early." - Jesse Middleton, general partner at Flybridge Capital Partners.
"If at all possible, I would not recommend cold emails into venture funds. Try to find another founder that the firm has a relationship with, because that’s your introduction; that’s your first vetting screen. That lets me know that you’re worthwhile and it’s worth my time to listen to your pitch." - Marc Michel, founder of Runway Ventures.
"You want to start talking to investors early. At that point, you can’t sell us on having 1,000 customers, because you don’t have them, and that’s okay. What you want to sell us on is that you're capable of succeeding against all odds. Are you resilient? Are you intelligent? Do you know this industry?" - Jesse Middleton, general partner at Flybridge Capital Partners.
"Taking a terms-laden deal is like starting the clock on a time bomb. Your only option is to hit the IPO window as fast as possible, otherwise, the terms will eat you alive." - Bill Gurley, general partner at Benchmark
From Gurley’s blog, Above the Crowd.
Don’t let the funding odds discourage you - "There’s not a big percentage of companies that get funded. However, people shouldn't let that stop them because those who made it really had big stories, and a lot of them didn’t have much experience at all." - Mark Modica, founder and CEO of MOD Enterprises.
Know what makes a startup story great - "If you can’t get a story or a mission out in the first five minutes, you have no chance unless you have really good metrics. A good mission story is personal but a great mission story is personal and has a value proposition for the VC." - Mark Modica, founder and CEO of MOD Enterprises.
"With our initial campaign we wanted to make everyone happy, almost to a flaw. If people would ask for upgrades or different options, we tried our best to make them happy. At the end, when it was all said and done we had over 20 variations and upgrades people ended up getting. It became a nightmare for shipping when there were over 2,000 backers. It’s an awesome trait to have as a company, but at some point you have to stay focused on the core product and what you’re trying to bring to market." - Andrew Beltran, cofounder of Original Grain, from foundr.
"Hone your pitch, tell a compelling story, know your numbers, and stick to the script." - Karen Cahn, Founder and CEO at iFundWomen.
Think beyond addressable markets - "The problem with addressable markets is they don’t have any vision to them. So if you were talking back in 2007 about Uber and Airbnb, how would you address their markets? You have to get a bigger vision of what it could be and that’s where the story comes in—you tell a story about how you could change a whole area." - Mark Modica, founder and CEO of MOD Enterprises.
"Start building a tribe months before the launch even starts. Grow an email database and keep them engaged and ready for launch day to show as much success early in the campaign. This leads to a groundswell of backers." - Roy Morejon, founder and president of Command Partners, on crowdfunding, from foundr.
"Who are you selling to, and do they need it? Do people other than your parents think this a great & useful idea? This goes back to your business model, but you need to ensure you can make money (and back it up with data). By the way, your market is not $1 Trillion!" - Gira Desai Wieczorek and William Bradley, Founding Partners of Aleberry Creative, a fundraising strategy and design firm.
"You have to nail the numbers. You need to know your numbers inside and out. You need to know the model that you’ve built, why you put those assumptions in, how things can change if you don’t, you know, if say there was a downturn, how would it change this or x or y. But you really need to know your numbers." - Amy Nelson, founder and CEO of The Riveter, from the 2018 Seattle Female Founders Conference.
"Be as familiar with your VC audience as you are with prospective customers. It is important to know what potential investors are looking for in terms of investment size, stage, and how big your company can become." - Brian Hopcraft, managing director at Lewis & Clark Ventures, from Inc.
"You have to plan, paradoxically, for the unknown. And that’s the first reason you should raise more money than you think you need." - Reid Hoffman, cofounder of LinkedIn and partner at Greylock, from Masters of Scale.
"When you're talking to an investor, you want to create a FOMO moment. What is that one thing you can say that will make the investor wonder what they'd miss out on if they don't give you money? Are they missing out on a trillion dollar market? You need something that will make them feel like they couldn't forgive themselves if they said no." - Oded Lavie, VP of innovation and biz dev at Publicis One.
"What worked for us was to tap into people’s optimism and desire to change the world, and so the investors who really came into that first seed round after demo day were people who believed in the vision. And also were willing to think not just about the US but globally." - Beth Kolko, cofounder and CEO of Shift Labs, from the 2018 Seattle Female Founders Conference.
"How much do you realistically need to raise? What are you raising for? Picking an investor is a long-term relationship. You need to think through what qualities (other than their check size) would benefit your team and product. These can include things like industry knowledge, introductions, expertise in whatever you are lacking in, etc." - Gira Desai Wieczorek and William Bradley, founding partners of Aleberry Creative, a fundraising strategy and design firm.
"You're asking for money and likely giving away a bit of equity - so you need to think like an investor. What are your safeguards? What type of protection (IP, secured partnerships, unique industry expertise, etc.) do you have in place if every worst-case scenario occurs?" - Gira Desai Wieczorek and William Bradley, founding partners of Aleberry Creative, a fundraising strategy and design firm.
"Crowdfund for your first round of capital--prove that there is demand for your product or service before investing years of your life, or even worse, going into debt, funding your startup." - Karen Cahn, founder and CEO at iFundWomen.
"Establish domain expertise, trust, and credibility--early stage investors are betting on YOU and your ability to deliver, so establishing your domain expertise and creating a sense of trust with your supporters from day one is important." - Karen Cahn, founder and CEO at iFundWomen.