Level up on your fundraising prowess

100% of founders agree: raising money is a frustrating, tedious, unpredictable process. The only upside are the memories made in comically bad VC meetings, and the few standout VC encounters along the way. Still, it’s got to be done! So, free of charge — here are some insider tips on how to level up from Crowdfunding Newbie to Fundraising Beast.

[Note I’m going to spend zero time here focusing on what VC’s can do better and all that. There’s plenty, but this is in-the-trenches advice for founders].

Prep Work

Because as a founder you are so busy managing everything else, you often end up stumbling into fundraising mode when cash needs become pressing.

To be successful, you need to factor fundraising into your key objectives as an open-ended, time-consuming process that will distract you from running ops. So set up accordingly: delegate, clear your plate, decide what you will NOT do whilst fundraising. Be explicit. Start early.

You need to treat raising money with absolute intent and a deadly precise aim. Think of it as a military operation where you have thought about every move ahead of time. You need information, you need assets and you need a method.

I can write an entire series on this, and probably will. Let me just make the following observations:

• Pitch: Too many founders rely on standard storylines of problem / solution that are formulaic and don’t convey either passion or the uniqueness of the opportunity. That’s not good enough. Build a unique narrative from scratch and test it relentlessly. More on that later.
• Data: Too many founders end up unprepared for obvious questions (classic one: can you please share your pipeline). You need to FAQ the hell out of your business and be prepared to deliver relevant information on a same day basis. Same day turnaround on what investors perceive as obvious requests will do wonders for your fundraising process. Be ready.
• Targets: Too many founders have spoken to a few random investors and I’m sometimes stunned to hear that they haven’t spoken to the obvious suspects. You need to build a clear view of who you should approach and how you will get to him or her. Planning is key to success. The information is out there.

Solid vs random intros

You all know you need intros. Problem:  most people do intros really badly. Here’s the usual MO: your contact knows X, sends random blurb you prepared for them, hopes for positive outcome. Throwing bottles into the sea is not a great way to get rescued.

Here’s how to do intros well:

• Ask the question very directly: does your contact know investor X? If yes, great. How well? Do they take her advice seriously or its this a tenuous connection? If tenuous, I may still ask that person for an intro, but let me see if I can find a closer contact.
• Your contact knows people and are ready to intro you? Great! Properly brief her about your business, make her excited, make sure she understands exactly why she’s recommending it.
• If your contact can call them instead of emailing them — even better! Make the intro request COUNT — put some wood behind that arrow. Find a way to help her in some other way.
• Of course opt-in is the way to go. But you knew that already.

You will find that a number of people will offer intros as way to offer some value to you (nice) but that they may not have great connections or may in fact use the opportunity to connect someone they haven’t talked to in a long time and get some brownie points for generating deal flow.

Be extremely explicit in your conversations with potential introducers so you can get real results. In my experience, a few people will probably take on the challenge of introducing you to a number of people and make a massive difference. Get them onside.

By the way — you are probably talking to too few investors. This is a low conversion sales campaign. Hence you need a large enough funnel. Work it; work every lead.

Engaging with gusto

Repeat after me: the objective of every meeting is to get to the next meeting.

Investors turn over cards and decide to do more work based on the information they gather. When they go all in, you will know. It might take some time. In my experience the best funds are decisive and fast, but this is not always the case. Don’t get anxious, play the game.

Prepare a set of news items that you can pepper through the fundraising process. If you are two weeks from closing an amazing client, maybe hold that back and tell the investors once you’ve closed. Find ways to communicate progress, interesting tidbits of content etc. in every one of your follow-ups. Demonstrate momentum.

Don’t EVER miss you short-term numbers. Just don’t. Sandbag them if you must. Nothing destroys confidence more than a short-term miss.

Remember that fundraising is usually an OUTCOME of your business doing well. Keep running the company.

Good follow-up is fast follow-up

Same day follow-ups win brownie points. Same day with specific insights addressing points raised in the meeting wins more brownie points. In fact fast responses to investor requests are a great way to wow investors — we use it as a proxy for how you work.

Don’t get upset if people don’t respond, and chase. Too many founders judge VC’s on response rates — well, some of the best investors out there, the ones that you want, may suck at responding to email. Inbox zero is not a KPI. Getting shit done is a KPI. Is this asymmetric and unfair, since same day turnaround is expected from you? Yup. Totally unfair. Chase with consistency. One email a week. Don’t re-forward the same email — use pre-canned emails that demonstrate some form of company progress or contain some new information. Keep your pipe moving. Have machine like behaviour. Keep emailing until they say no.

Don’t force people to get to a No. Yes people will kick the tires and waste your time. They suck. It’s life.

Don’t indicate fundraising timing too early. Not a number you want to miss. Be nebulous until you have real clarity.

Don’t tell investors who else you are talking to before you come to a place where term-sheets or indications of interest are actually streaming in, and even then use these disclosures strategically. I can’t tell you how many times I’ve heard “Index is interested” when the founder has had one meeting. That’s naive. Now having said that FOMO works really well — just use it wisely.

Qualifying that bloody pipeline

OK, this is hard. Key observation : most founders aren’t great at understanding where they are in a VC funnel and associating the right probability of close to each discussion.

Let me handicap VC feedback for you:

• Let us get back to you = I have no clue what to do with this
• We’ll run it past partnership on Monday = I have no clue what to do with this but maybe my colleagues will
• This is intriguing = I have no clue what do with this but it’s not shit
• This is interesting = better. Might get another meeting soon
• Wow this is awesome let me blow up my agenda and spend more time with you = you’re engaging. We’re in funnel.

Did you talk to a check writer face-to-face? Did they tell you they want to prioritize this and take a hard look? No? Well, it’s not because you’ve had three meetings that you’re near the finish line, sorry.

I’ve written before about younger members of the teams being real advocates and champions, but don’t think you’ve got a qualified lead if you haven’t seriously engaged with a partner. You’re not.

Don’t hesitate to push for feedback: ask clearly, what are the key questions the investor is asking herself about your company and this investment opportunity. Fundraising is selling, so find the barriers to selling. Handicap accordingly.

Don’t stop moving investors down the pipe just because you’re getting interest.

Closing

A hard part of running an effective fundraising process is to manage investors to the same timing. When you start getting some real interest, let other investors know (especially your favorites) about the timing very explicitly, so they can prioritize accordingly: “we’re expecting a term-sheet within a few weeks and want to make sure you don’t fall out of the process”.

One very effective way to do this is for the person who made the original intro to nudge the investor: “hey, I hear fund X is getting close to making an offer, you better move”. This way you don’t appear needy and you turn the tables on the investor. Highly effective.

As you get closer to term-sheets, a number of things may happen:

• Some investors will want to position early and may want to push you to accept allocations even though they are not leading. Screw that. If you don’t lead, you wait for the lead to appear. No free options. Don’t commit to anyone too early.
• Some lead investors will issue term-sheets really fast to position on the round. It is perfectly legitimate to ask hard questions about how “baked” their diligence is. You want a detailed term-sheet that lays out all the terms at the point where investors have done their commercial work. All that should be left to do is financial and legal DD, if needed. You can choose to deviate from this — but be very explicit in your own head and with your board about what risks you are taking.
• Some investors may start to move on price, while others will absolutely refuse to do so. The best investors sometimes price up because they see the vision more clearly, and sometimes price down because they are disciplined. These are hard tradeoffs to make.
• Don’t take money from assholes, or bad investors if you can avoid them. Ever. You can’t fire them.

Execution

You don’t have money in the bank until you have money in the bank.

Don’t outsource the process to your lawyer. I have seen too many examples of lawyers slowing down the process in endless technical back and forth. You make the decisions, you drive the outcome, and you need to understand the docs.

Have clear rules of engagement: who holds the drafting pen? Can the lead do the docs on behalf of his investment syndicate? What’s the scope of the DD required? What ancillary agreements are needed?

Once you have the basics in place, do an all-hands call with all parties — agree on the process, set a closing date, work back from that date to set clear execution steps. Worth its own blog post! With a clear cut plan, you can execute in two weeks.

Closing

Have a closing party. A real one. Invite everyone. Celebrate. You earned it. Take two weeks off. Get back to work.

Onward.