Quick thoughts on fundraising tactics.
It’s now been two weeks since The Family’s Demo Day. The 27 startups in our batch have had hundreds of meetings with VCs and angel investors from around the world. The first rounds are being closed and we can’t wait to announce who’s joining us in partnering with these incredible founders.
Being there as these fundraisings have progressed over the past two weeks has also brought back a few thoughts on tactics for founders who are raising funds for the first time.
In fundraising, tactics matter just as much as strategy. They won’t close a deal, but they will give you a shot at presenting yourself & your business in the best light.
It’s a one-founder job
Fundraising is important, but it’s also a distraction from running your business. If you have cofounders, agree on who will handle fundraising & let the others take care of the product & clients for the time being.
Practice, a lot
Pitching is hard and it’s unnatural, especially at the beginning.
In my first week at university, my philosophy tutor told me that writing essays was frustrating in the same way painting was: there’s always a gap between the image in your head and the one on the canvas, just like I wouldn’t feel that I was doing my ideas justice when I wrote them down.
Pitching is the same: with no preparation, you won’t be telling your best story. Narrow that gap by practicing with your co-founders and friends, pitch as much as you can.
Remember the forces in investors’ heads
Investors are constantly torn between the fear of missing out and the fear of looking stupid. This sometimes creates a herd-like mentality, where no one wants to invest initially and suddenly a lot of people wake up. So you will have to push extra hard to get that first “yes”.
Don’t BS
Your best shot at creating FOMO isn’t to exaggerate: if there’s one pattern investors are good at recognizing, it’s bullshit.
Set the pace
To make investors feel like a lot of people are considering investing in your startup, you should speak to as many people as possible in the shortest amount of time. Your own sense of urgency will seep into everything you’re doing, from your body language to the intensity of your meetings.
Remember it’s about volume
Investors all have theses & mandates. But ultimately they’re in the business of exceptions, and often we see those mandates stretched in various directions. Series A funds might lead a seed, marketplace funds end up investing in SaaS. So take the intros, even if you don’t feel like you’re exactly in that investor’s sweet spot.
Don’t start with your favorites
Not everyone will get your best pitch, so don’t start with your dream investors. Give yourself the chance to test things out.
Treat them as equals
Investors want to figure out if they want to work with you for several years. Don’t add any more formality than you are comfortable with.
Know your numbers
First impressions matter. You need to know your business’ most important metrics like the back of your hand.
Be precise
The more tangible the future you are describing, the more inevitable it seems… and the more scared investors will be to miss out on it. For example, don’t talk about the roles you will hire for, mention the actual people you will bring onto the team.
Don’t wait around
If you get introduced to someone, bounce back immediately. If someone told you they’d get back to you in two days, don’t wait for four before reaching back out. Don’t be afraid to take early morning or late evening calls.
Don’t get too excited
“Maybes” aren’t “yeses” and term sheets aren’t checks. Unless they’re absolutely certain they won’t move ahead, investors don’t have real reasons to give a hard no until you have the leverage to ask for a final response from them. They’re much better at playing the waiting game than you are.
Build an FAQ
Investors will likely have similar questions. Anticipate those by building out an FAQ. It will save you time and it also signals that you are speaking to many potential investors.
Send updates
Show momentum. Share new commits from angels, new features launched, new clients signed. Investors will know they’re not the only ones receiving it.
Have a backup
Timing when to fundraise isn’t easy. It might be a bit too early, so don’t spend 6 months looking for a lead. If some angel investors are happy to invest now, take their money, get back to work and come back to the fundraising market in 6 months with your progress (again, updating prospective investors along the way).
We’ve opened applications for our next batch at The Family, which will start in September. We’d love to hear about what you are building! And by the way, if you’re looking for that perfect cofounder, our next Be My Cofounder event is coming on Thursday!