Dear SaaStr: What Are Some of the Unwritten Rules of VC Fundraising?
A few that come to mind:
- The initial decision is made within 20 minutes of the first meeting, or at least, the first face-to-face. Make it exciting, speak with data, and get to the point. The initial Yes, Maybe, or No decision is made within 20 minutes. So save slides 20–200 for questions and back-up.
- If your existing investors have a strong brand and aren’t positive on you, it can much harder to raise. At a minimum, keep them in the loop. Don’t just ignore them after they write a check. The converse is also true. Your existing investors are often your best source of leads for the next round of funding.
- It has to be the CEO that pitches the VCs. It just has to be. Don’t send your co-founder or your “COO” or your CFO or whatever. For most investors, that’s almost an immediate No.
- Making stuff up is death, or close to it. If you don’t know the answer, just say that. It’s fine. But make something up that the VC knows the answer is otherwise … that’s almost always a No right there.
- You have to know your competition. Every great salesperson and CEO does. Learn more here if you don’t.
- Cold outreach works. It just has to be very, very good. Everyone reads email. But if you are going via cold outreach instead of a warm intro, make the email amazing. Simple, but metrics-filled and to the point. Hide nothing. Don’t ask for coffee. Get to the point. This is your one shot. At least, there is a decent chance it will be read if the headline is exciting and of interest. More here, with examples.
- Slow growth is death in fundraising. Maybe wait to raise, then. If you just aren’t growing quickly enough to support a venture investment, it can be better to wait and go out in a few months. At least, you need to have 3–4 good months strung together in a row to show a pattern (and hope).
As founders, how do you keep growth up >and< fundraise at the same time?
Well, you just have to
"We didn't grow fast last month because we were fundraising" is death in talking to VCs pic.twitter.com/acQ3xkrVfa
— SaaStr (@saastr) November 10, 2022
- Your existing investors often save some money for a second check. Treat them that way. Most institutional investors can give you at least a little more money if you are doing OK and need it. So again, keep them in the loop. Otherwise, they won’t reserve this money.
- Be yourself. A top “sin” in fundraising is acting like someone else. Be yourself. Be true. 50% of fundraising is the VCs getting to know the CEO. It’s OK to overindex on the topic you are most passionate about (product, sales, marketing, etc.). It’s OK if the presentation doesn’t look exactly like some deck you saw on Business Insider. Make it all great. Rehearse. Take it seriously. But don’t not be yourself.