Book Summary of Raise Millions

I recently wrote the ultimate guide to fundraising for first-time founders with Hustle Fund . The book is free to read here. It's short (~140 pages) but if you just want the key takeaways, I wrote this article for you.

Fundraising 101

• Not every business needs to raise money. It can be advantageous to fundraise if your goal is to eventually get acquired or go public.
• If you're a pre-seed founder, we recommend working with angel investors. They’re more accessible, will give you money faster, and often roll up their sleeves to help your startup. If you’re in the later stages, VCs can provide you with more money and direction when you’re scaling fast.
• The amount of money you should raise is based on several factors: what industry you’re in, how experienced your team is, and how the market is doing. Typically speaking, we’ve seen founders raise $100K - $1M at the pre-seed stage, $500K - $3M at the seed stage, $1M-$5M at the post-seed stage, and $5M - $10M at the Series A stage.
• Incorporate your company as a Delaware C-Corp and take advantage of many benefits, including saving money on taxes through the Qualified Small Business Stock (QSBS).
• Raising money through post-money SAFEs is often the easiest and most cost-effective way to fundraise for early startups. Use a tool like Pulley to keep track of your cap table at all times.
• How much equity you give up will depend largely on the amount your startup raises and the valuation at which you raise. In general, it’s best to save as much equity as you can to allocate it to people who can meaningfully help push the business forward like investors (through capital and strategic help) and key employees.
• Determining your valuation is more of an art than a science, especially if you have an early-stage startup. Beyond factors like revenue, team, and market, what is oftentimes most important is investor demand.
• Be aware of the current market conditions. Do your research on how the market is before you fundraise. This will impact your fundraising strategy.
• The best months to fundraise are from January - May and September - November. Avoid fundraising in August and during the Thanksgiving - New Year period.?

Craft your pitch deck?

• Team: Investors focus heavily on the team, especially in pre-seed companies. Emphasize your relevant skills and background. Show investors that you have a strong relationship with your co-founder.
• Problem: VCs want to see your business solve a significant problem that affects a large group of people. Demonstrate how you arrived at your problem statement and how much you deeply understand your customers’ pain points.
• Solution: Focus on differentiation, framing the story, and product vision. You can differentiate your business by highlighting a unique approach or market niche. The way you frame the story should make your startup attractive even in less favored industries. The product vision should outline future goals to get investors excited rather than where you are right now.
• Market: VCs look for startups that can give them a 100x return while angel investors have different, often lower, expectations. If you raise money from VCs, make sure the market can be measured in billions of dollars. Consider raising from angel investors if your market is smaller, and have conversations about what success looks like for them.
• Traction: Think about traction more in terms of ability to execute rather than specific numbers. Your numbers don’t have to be great, but early-stage investors want to see that you can move quickly and experiment with different tactics. Include a go-to-market (GTM) strategy that includes early users, pilot programs, and/or distribution channels.
• Keep your pitch deck short. It should be brief, ideally 5-10 slides, and easy to understand. You should be able to pitch to someone outside of your industry and not leave them scratching their heads. If they find your pitch too complicated, that’s a sign to simplify your deck.
• Designing an effective pitch deck can have a huge impact on your fundraising efforts. Invest time to make it great.?

Build relationships with investors

• Networking isn't about exchanging business cards and playing golf together. It’s about forming authentic friendships in the way you’d normally form friendships. People prefer doing business with people they like and trust (aka their friends).
• You can meet investors anywhere. Start with people you know, and consider people you normally wouldn’t expect to be an investor (like your optometrist). Connect with them online through LinkedIn, Twitter, and Angelist. Or offline through live events.
• Ask for warm intros: Investors are more likely to take a meeting with someone who has been recommended to them. If you don’t know anyone, one tactic is to build a relationship with one of the investor’s portfolio company CEOs.
• Send cold emails: Research relevant investors in your industry and send them a short email. Include a line about your business, a few bullet points about your value proposition and traction, and end with a clear call to action.
• Have an elevator pitch ready: It should be concise, impress with a few key facts, and end with a specific call to action. It's not about closing money on the spot but more about driving enough interest to have a proper meeting.?

Pitch your startup?

• Have your first VC meeting on Zoom. Show your real background. Don’t worry about presenting your pitch deck. Listen to their story and weave their comments into your pitch.
• Expect questions about your team, the problem you’re solving, your solution, market size, customer acquisition, traction, and fundraising plans. Look at tough questions as a sign that investors are interested. Be open to feedback, show a growth mindset, and avoid being defensive.
• Follow up right after the call reiterating what you both talked about and send over any promised assets.
• Create an investor CRM to organize your investor contacts, track interactions, and manage follow-ups.
• Send an investor newsletter to all investors and potential investors. This builds trust with your current investors and it acts as a driver to fundraise from potential investors. Be consistent in sending out the newsletter, whether monthly or quarterly.
• Some investors may give you a vague pass. It’s OK to ask for specific feedback from investors who say no. If you’re not receiving helpful advice, lean on trusted founders for honest feedback.
• Follow up, follow up, follow up. Be persistent in following up with investors. Sometimes investors are busy. Send another message until you get a clear yes or no.

What happens after an investor says “yes”

• Before you commit to the wrong person, conduct investor reference calls before you accept their offer. You can find references by asking the investor directly, searching on LinkedIn, and asking the people you’ve talked to for other references.
• You’ll need to prepare necessary legal documents like incorporation certificates, bylaws, founder agreements, etc. Be aware that VCs may conduct background checks and require additional documents like side letters. Once you’re in the clear, confirm wire details over a phone call to avoid fraud. Lastly, beware of cashless VCs.
• A data room reflects how founders manage their company, so keep it well-organized, especially for series A and beyond. Having a messy data room can stall fundraising and be a bad sign about company management. Having a Dropbox folder with your key documents is a great start for your data room
• The capital call process is where VCs call down funds from their LPs. This might cause delays in founders receiving money, which is why founders should ask insightful questions about the fund's status and available capital.
• Share with your team the plans on how your new funds will impact the company’s runway and strategy. Remind the team to stay scrappy because fundraising successfully in the future is not always guaranteed.

Read the book (at no charge) here. You’ll have a deeper understanding of how the world of fundraising works. We'll also share our resources like email scripts, investor CRM and newsletter templates, and an investment checklist that you can steal.

I hope this guide helps you in your fundraising journey!