Fundraising is hard.
We’re all seeing the articles: central banks are pumping money into the global economy; there’s more money than anyone knows what to do with; founders are closing rounds in a matter of days; venture capital firms are making multiple deals every week; prices are rising across asset classes.
But whatever the macroeconomic context, most founders are still confronted with the harsh, familiar reality that fundraising is hard. This is because there’s usually no good reason why someone with capital to deploy should put it in your company rather than someone else’s. Indeed, compared to you and your company, there are always more seasoned founders, businesses with more traction, other startups with a better product, a more impressive team, or a more perfect timing for today’s market.
My colleagues at The Family have written extensively about the fundraising process and the mindset you should embrace to maximize your probability of success. Check out, for instance, Quick thoughts on fundraising tactics by Mathias Pastor; How much should you really raise? by Balthazar de Lavergne; Wait until the money is in the bank account by Oussama Ammar.
As for myself, there are three pieces of advice I find myself giving to founders all the time. Let me share them with you.
First, think of all questions investors might ask you, write them down, and then write your answers as notes or short memos, ideally with figures and graphics. It serves many purposes:
Empathy. It forces you to put yourself in an investor’s shoes. There’s no better approach to selling and bargaining than to embrace the other party’s perspective. So don’t hesitate to play devil’s advocate and anticipate every sort of question.
Clarity. The written form is the best way to ingrain comprehensive answers in your brain. The more you write, the better you talk, and the more effective you’ll be at conveying your thoughts during the fundraising process.
Compounding. Some investors will come up with questions you didn’t think about prior to meeting them. In this case, no matter what you answer in the course of the meeting, note the question down and prepare the perfect answer in case it comes up again in the future.
Second, draw a flywheel. I already wrote about this one, so let me simply share a quote:
A flywheel is nothing more than the comprehensive graphic representation of this sequence of loops, which in turn reveals leverage points. It makes it possible to spot a company’s repeatable processes and to make sure they all fit together in a way that generates returns on invested capital, the most important indicator in business life.
Note that the flywheel is not necessarily to be shared with investors. If you’re raising a pre-seed or a seed round, exhibiting a flywheel might suggest to investors that you’re rushing too far ahead rather than focusing on what matters right now. However, drawing that flywheel will force you to reflect on every angle of the business you’re building and will make you much better at answering questions.
Third, do it for yourself. Again, fundraising is hard and the outcome is uncertain (Will you eventually raise funds? If yes, on what terms?). Therefore you need to set things up so that the whole process creates value, regardless of whether or not it succeeds at getting money into your bank account.
Ultimately, all these notes that you write and that flywheel that you draw serve one primary purpose: making you better at understanding your own business. Once you reach the other side, at best you’ll have plenty of capital to enter the next stage of your story. At worst, you’ll have learned a ton and you’ll have hardened yourself so as to maximize your probability of success when you go back at it again.
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