Fundraising … It is sales.
It is selling stock.
So be very careful with what advice you get.
When you have more demand than shares to sell, yes you can sort of run an auction. You can do it all on your terms even, sometimes.
At all other times, it’s the opposite. You need to be selling. And as part of that, one key to sales is taking friction out of the buying process. So:
- Don’t hide numbers. Even in the early days, the numbers do matter.
- Don’t hide the bad stuff. Share it up front. No one expects perfection in a start-up.
- Share the deck!! This saves everyone time. If a sales rep asked you to “get coffee” about a product you’d never heard of, would you? Probably not …
- Know your product cold. You have to at least know the competition and the market dynamics better than your buyer.
- Build trust. This is critical to all non-transactional sales. Each interaction should build more trust. 50% or more of each investment is in the team. Your buyer has just gotten to know you. Why should they trust you? Nothing works better than transparency combined with prompt follow-up.
- Be on time and professional. Just like Mom and Dad taught you.
- Do your research. Only a subset of VCs and even angels will be interested in the type of start-up you are running. Sometimes it’s still worth a meeting, but don’t waste too much time on folks that won’t fund you.
- Write your own investment memo. Forget the business plan, but instead, write a memo on why if you were a VC, you’d invest in your own company. Flip it around, and put yourself in your buyer’s shoes. And force yourself to write a memo you’d have to write as a VC, to get your partners’ buy-in. If you are struggling to write a compelling investment memo on your own start-up … you aren’t ready for your first real pitch.
- Practice. Everyone gets better at pitching. Practice on your friends first. Then, practice on a CEO or two that has raised VC money before. And finally, maybe for your first real VC pitch, maybe don’t have that be your #1 first live pitch. So you have a chance to make a few mistakes there too, and learn.
- Sometimes, they really will just invest Later. A lot of investors will pass and use “you are too early” or something similar as a simple catch-all. Usually, “you are too early” just means Not For Us. But sometimes, it really actually means we like the opportunity a lot, and it’s close — but it really is just a bit too early. Any VC that “passes” but has high interest in you and the company, keep them in the loop with your progress. They may invest 3–6–9–24 months later.
- Trust > brand or anything else in the investors you pick. If you have options, i.e. more demand in the end than supply of shares, there will be many criteria you use. Start with Trust. You’ll be stuck with your investors for years, maybe even decades. Start with the ones you’d trust the most to be on the journey together.
Fundraising is just a highly, highly specialized type of sales. You probably will eventually get good at it. Until you are, err on the side of promptness, honesty, and full disclosure. It will build trust faster.