Let’s go beyond the high-level fundraising advice that fills VC blogs. If you have a compelling business and have educated yourself on crafting a pitch deck and getting warm intros to VCs, there are still specific questions about the strategy to follow for your fundraise.
How can you make your round “hot” and trigger a fear of missing out (FOMO) among investors? How can you fundraise faster to reduce the distraction it has on running your business?
Unsurprisingly, I’ve noticed that experienced founders tend to be more systematic in the tactics they employ to raise capital. So I asked several who have raised tens (or hundreds) of millions in VC funding to share specific strategies for raising money on their terms. Here’s their advice.
(The three high-profile CEOs who agreed to share their specific playbooks requested anonymity so VCs don’t know which is theirs. I’ve nicknamed them Founder A, Founder B, and Founder C.)
Have additional fundraising tactics to share? Email me at eric.peckham@techcrunch.com.
Table of Contents
- You need to create a market for your shares
- The one month fundraise
- Thursday/Friday meetings
- The bicoastal month
- Early relationship building
- Organize your pitch better
- Research each VC’s style
- You’re not just being judged on your startup
- The money is already yours
You need to create a market for your shares
“You’re trying to make a market for your equity. In order to make a market, you need multiple people lining up at the same time.”
That advice from Atrium CEO Justin Kan (a co-founder of companies like Twitch and former partner at Y Combinator) was reiterated by all the entrepreneurs I interviewed. Fundraising should be a sprint, not a marathon, otherwise the loss of momentum will make it more difficult.
Naturally, in order to arrange this organized timeline, Kan–who runs a fundraising bootcamp called Atrium Scale–says to “arrange meetings a month beforehand so they all line up tightly for the same period of time.”
He also advised that seed stage entrepreneurs set the investment terms for smaller VCs firms who commit and do an initial close with them rather than waiting for a lead firm to set the terms.
The one month fundraise
Founder A is a notable consumer internet CEO in the SF Bay Area who has raised hundreds of millions of dollars across multiple startups, and has refined his fundraising to one month sprints. Here’s his playbook:
- Week 1: Meet with the 5 VCs you most want to work with. Tell them you’re not raising yet but are getting ready to do so and want to get their input as one of the investors you most respect. This avoids putting them in a position of having to say yes or no. Don’t give them an opportunity to say “No”. They may get excited and say they want to invest (a “Yes”) but because you don’t get a “No” you leave it as an ongoing conversation. VCs try to keep their options open and typically won’t give a hard “No” unless pushed to make a decision.
- Week 2: You are now officially fundraising. Meet with the next 10 VCs on your list, two each day (ideally spaced with a few hours between to make any changes to your pitch based on feedback). In the course of these conversations, you can say you’re talking to the 5 VCs from last week…they’re active conversations. Multiple “No’s” upfront from top firms can take the wind out of your sails because it’s negative signaling, hence last week’s strategy.
- Week 3: Same as week 2 with the next 10 VCs. Likely some of these will have reached out to you during Week 2.
- Week 4: Same as week 2 with the next 10 VCs. Likely some of these will have reached out to you during Weeks 2 and 3.
The sense that everyone is interested, including your top 5 VCs since they haven’t said No, pushes investors to decide more quickly and offer a term sheet. “As soon as someone offers a term sheet,” advises Founder A, “go back through everyone you talked to — backward first — and tell them because it puts pressure on them.”
What if you do all these meetings and none of the 35 firms offer you a term sheet? Founder A says to recognize that you clearly have a bad pitch. Go out of market for 6 months to figure out the issues with your business and/or pitch, and then try again. (It needs to be definitive that you stopped trying to raise and made significant changes, not seem like you’ve continued trying to raise for 6 months.)
Thursday/Friday meetings
Founder B has raised a substantial amount of funding for their startup in a short time window, with each round being very competitive. Here’s what worked for them:
“There were a couple of fundraising hacks:
- We focused on a two-week period and set all the meetings for Thursday and Friday. From 7am into the evening, back-to-back pitches at all the firms in one area then the next area. That’s because partner meetings are on Mondays, so the Thursday and Friday conversations would lead to pitching the whole partnership the following Monday. We had a 24-hour rule: if we didn’t hear back from a fund in 24 hours, we crossed them off the list.
- The first week we were still in stealth so the VCs felt they were seeing something early. Then after that first set of partner meetings, we released the story in the press. Now the whole Valley knew about us, and that next Thursday and Friday were insane. When everybody suddenly knows about the startup, it puts pressure on the VCs you’ve been talking to and creates FOMO.”
The bicoastal month
An NYC-based CEO who has raised well over $100M — and who I’ll nickname Founder C — has their own one month routine for bicoastal fundraising.
- Weeks One and Two: Do all your first meetings with VCs, starting with a week in NYC then a week in SF. Don’t start with your top choice firms since you want to warm up and test the pitch, but also don’t leave them to the end because you’ll be tired by then.
- Weeks Three and Four: Schedule your second round of meetings for these two weeks, again starting in NYC then flying to SF. Use the logistics of your limited time in SF as a deadline for additional meetings investors there might want and a deadline to at least verbally offer a term sheet.
Founder B reiterated the importance of keeping all investor conversations progressing at the same pace. If a certain firm becomes eager to invest during the first three weeks, they won’t want you to continue your full process (because they want to limit the competition).
You should define terms on which you would accept an investment immediately and shut down the rest of your fundraise… it could be a premium on valuation, a larger investment size, the VC agreeing to no board seat, etc. Otherwise, continue your process through the full month.
According to this CEO, Sequoia and Benchmark are the best at throwing entrepreneurs off their process in order to get ahead of the competition. Sequoia will typically arrange meetings for the morning so they can invite you back for a second meeting with more partners that same afternoon; Benchmark’s partners are quick to travel to wherever you are in the world and sell you on working together (with a term sheet at the ready).
Conversely, Founder C also said “When there’s doubt there’s no doubt….when an investor is taking a long time to get back to you, they’re not investing…accept it.” The same goes for VCs who respond that they are interested but don’t lead rounds so need to wait for a lead to commit before they can commit. In both scenarios, recognize the “No” and move on.
Early relationship building
Particularly for Series A and later rounds, Pilot CEO Waseem Daher (who previously founded and sold Ksplice and Zulip) recommends “having coffee with people you want to raise from 6 months before you plan to raise. Build a rapport and establish a track record of credibility by executing as you promised.” (Founder C emphasized the value of this as well.)
Daher also noted that the best time to raise money is when you don’t need to. If an investor is keen to invest when you do these informational meetings, you should reiterate that you’re not raising now and don’t need to raise but you could be open to doing a deal now if the terms give your team credit for progress that’s still to be made over the coming months. Mentioning your openness to that scenario can cause them to pre-empt the next round.
Organize your pitch better
One high-level point that came up repeatedly in these conversations: most founders don’t spend enough time crafting the narrative of their company and practicing how to pitch it in different circumstances. “Narrative is super important and underrated.” noted Justin Kan, “People buy into stories. Practice and refine your narrative.”
A serial entrepreneur who has gone through Y Combinator reiterated the advice he says YC gives founders: you need to prepare multiple pitches in order to fit the range of contexts in which you’ll meet investors. Specifically, a deck for in-depth 45-60 minute meetings, a short deck for 15-minute meetings, a one-minute pitch, and a ten-second description.
Founder C also argued that creating different pitch materials and knowing when to use them is important. This is what they create ahead of their fundraises:
- A Pre-Meeting Deck. This is a 5-6 slide deck giving the overview of your company and your team. It’s for sending to VCs ahead of your first meeting.
- A Meeting Deck. This is 10-15 slides with limited text that help you make your full pitch while in the room with VCs. Accompanying it is an Appendix of another 40 or more slides, each specifically designed to answer a certain follow-up question.
- A Post-Meeting Deck. This deck is to be shared with VCs after the meeting, using a unique Docsend link to track if they are sharing it. It includes versions of the core 10-15 slides from the Meeting deck but with more text to make the points since there’s no speaker accompanying it. The Appendix slides do not get shared with the VCs.
- A Memo. This 5-page outline of the company is like a “mini, mini S-1”, a reference to the Form S-1 that companies file when going public. It’s to be shared within a VC firm ahead of the founder’s presentation at a Partner Meeting (a meeting of all the firm’s partners).
- A Data Guide. For more developed startups who share a “data room” of spreadsheets and other documentation with investors, this document guides investors on how to read any spreadsheets, on how to understand certain metrics, etc. “We pre-chew the food for them,” said Founder C.
Founder C practices their meeting pitch with close friends who are or were VCs and makes an appendix slide for every one of their follow-up questions. Having a slide to respond to any question an investor has impresses investors by showing the depth of their analysis of their business.
Research each VC’s style
Another recurring piece of advice in these conversations is to ask around to find out each VCs’ personality and approach to investing. In particular, whether they tend to focus more on evaluating the team or the business.
You need to craft separate pitches to match their perspective. If the investor has a specific thesis then they are likely to pick apart the details of the business more than an investor who is generalist and more reactive in deal sourcing.
You’re not just being judged on your startup
Founder A noted that, consciously or subconsciously, big VCs are also evaluating the strength of your network for deal sourcing. That is, the extent to which you have close relationships with other top-notch entrepreneurs and the likelihood you will refer them to the firm as well. It’s a secondary factor but still a factor.
The money is already yours
“Because of their fund structure managing other people’s money and raising new funds every 2-3 years,” Founder A told me, “the VCs have to deploy their money. The money is already mine, they’re just looking for a reason to not give it to me. The VCs need you more than you need them. Viewing the dynamic this way can be very powerful.”
Have additional fundraising tactics to share? Email me at eric.peckham@techcrunch.com.
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