Venture Capital

Yes, You Need to Fundraise 52 Weeks a Year. The 1-and-30 Rule.

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Jason Lemkin

“I don’t want to meet [That VC].  I don’t need money now and it’s distracting.”

……

There’s a lot written about the “Series A crunch”.  That with so many companies getting seed funding from so many sources, that there just isn’t enough Series A Capital out there.

Screen Shot 2015-09-10 at 9.18.05 AMPoppycock.  There’s as much Series A capital as ever (see the Mattermark chart at the right), and a little winnowing is never a bad thing.  At a high level, the average individual venture fund doesn’t even return 1x of the cash it’s given.  The average venture fund.  That means the average venture fund’s returns are a disaster.

So there’s no crunch.  There’s just a funnel.

Like everything.

So the thing is, you have to approach fundraising a lot like a sales funnel with medium-ish long sales cycles.  At least, until you are so hot investors are tripping over themselves to meet you.  And maybe even then.

And what do we do with a funnel, in sales and marketing?  Three things:

  1. We add as many good, new prospects to the top of the funnel as we can, every week, every month, every quarter;
  2. We nurture the leads and prospects we have, thoughtfully, and regularly, over a very extended period of time; and
  3. We invest outsized amounts in “customer success” — in our existing customers to get the best referrals and other customers from them.

130hiOk if you’ve been reading SaaStr or otherwise done it, you’re doing 1., 2. and 3 re: selling your product.  At least as best you can.  You’re getting a grade somewhere between A and C-.

But for selling your company’s stock, for fundraising — you are probably getting between a D+ and F here.

Here’s what you need to do, but probably are doing a pretty poor job of, to Sell Stock over multiple rounds.  Same as 1. 2. and 3. above really — just tailored for the specific type of sale (shares of start-up stock):

  1. Meet as many good, new VCs and investors to the top of the funnel as you can, every week, every month, every quarter;
  2. Nurture those VCs over time, so when the time comes to raise another round, some of the prospects are pretty far down the path of wanting to invest; and
  3. Make sure your existing investors are your champions.  That they are singing your praises.

And founders do a terrible, terrible job here:

  • They (often) only meet VCs when they need money.
  • They don’t nurture their relationships with potential VCs.
  • They don’t invest in making their existing investors “happy customers”.

On the last point, in particular, most of you do a terrible, terrible job with investor updates, board meetings, investor brainstorming — whatever it takes to make your angels, your last round investors, your biggest proponents.

I know you are busy.  I know sales matters everyday – and fundraising seems episodic.  But it’s not.

So let me simplify.  Let me help.  Because keeping the engine room full of coal, making sure the company has the fuel to keep going, is one of your Top 3 jobs as CEOs and founders.

So here’s your new quota and KPI:  Every week, you need to spend 1 hour meeting a new investor (Prospecting, Lead Nurturing, Updating, etc.), and 30 minutes updating and/or meeting your existing investors (Customer Success).

Yes, I said — Every week.

I call it 1-and-30.

“Should I meet with Linda from [VC Firm] that reached out?”  “Should I go to that start-up meet-up with investors at it?”  Well, here’s my answer.  Yes — if it’s your best use of that allocated, mandatory hour this week.

If you can find any investors to meet with you this week, take one meeting.  If you have multiple options, force rank.  But take one meeting.  Every week.  Always.  One hour.  52 weeks a year here.  Or spend that hour out where investors are, if you don’t have any meetings to take.  Just one hour.  But every week.  No excuses.

boredbeetingAnd then spend 30 minutes a week on customer investor success, with your existing investors, even if they are “just” angels:

  • Make sure everyone gets an update every month.  Professional, with all the metrics, and a quick narrative on how things are going.
  • Even better, before that update, make sure your largest investors get a “flash update” right when the month ends with the rough metrics.
  • Meet them.  Go meet your existing investors.  Or at least, invite them to your office / co-working space / wherever.
  • Don’t have a board?  So what.  You’re missing a chance to communicate and share.  Create “investor meetings” where you invite all your investors to do an in-person + Google Hangout’ed review every 60 days.  They don’t have to come.  But they can.
  • Again — go meet them.

Because if your existing investors, even if they are angels, small VCs, whatever … don’t give you a 100.0000% positive reference … you may be dead in the next round.

If I call up your existing angel investor, and she pauses when I ask what she thinks of you and the company … as a prospective investor for the next round, I’m probably out.  Done.  Danger, Will Robinson.

So are you investing enough here?  Of course you aren’t.

1-and-30.

Pick the best idea you have.  Meet that junior VC, that out-of-towner, that low probability investor … if it’s your best idea of that week for your New VC Quota.  Take that meeting with the guy that’s “a big fan” if that’s your best investor meeting idea for the week, even if you know he doesn’t really understand what you do.

It’s a quota.  Take the best prospect you have, and either work that deal … or spend the hour prospecting to get another deal, another VC.

You do this … and there will be no surprises.  You’ll have a full pipeline of new investors.  And importantly … with the 30 minutes a week for existing investors … you’ll have created champions.

Without a weekly 1-and-30 quota and commitment … you have a high chance of hitting a wall.

 

 

Published on September 18, 2015
  • Trevor Gail

    Did you do this when your ran your companies?

    It seems a little self-serving that a VC says spend lots of time on meeting VCs…

    • Jason Lemkin

      You have it backwards. Most VCs can’t write “the next check”. Founders don’t see this. 95% of VCs can’t carry an investment through the next round, let alone all the rounds. And I was pretty good at this, but no, I didn’t follow this rule. I should have. That’s why I know.

      • Jason Lemkin

        Well, most VCs can’t carry an entire investment, that’s true. But most VCs with a fund > $100m or so can, and do, at least write a pro-rata check, and if they get nervous about writing it, it can make your fundraising really hard. And if they’ve bought a fair amount of the company (say 20% instead of 10%), the second check can be quite stressful, and large.

  • Fantastic article – could not agree more. One thing I’d like to mention is that updating existing investors and potential “next round” investors is also great in terms of getting help and support.

    Every 7 – 10 days, I email our existing investors and include a “What you can help with” section. This is done on the understanding that they can ignore the requests of course. More often that not, I receive a great nugget of advice or introduction to someone who can help. This can be something as simple as asking for them to share a piece of content through their social media accounts.

    I find quite high-level, bullet points updates work well for existing investors. I use the following format:

    – What we’ve been up to this week
    – Plan for next week
    – What you can help with

    The same goes for the “next round” VCs. More often that not, I’ll be able to get an introduction to someone within their network (often a company they have invested in) that can help which is invaluable. I like to ensure they can come to me if I can help them with anything too.

    It’s all about relationships. If you can’t be bothered to spend time on them, then it’s wrong to expect they’ll be there for you and your business. Simples.

    • Jason Lemkin

      It’s great. I get these weekly one sometimes, too. I think once you are bigger, weekly perhaps can be overkill, but up to a few million in ARR it’s great.

      • Yeah, it’s dead easy to agree this with investors up-front….everyone has a different tolerance for how often they like you to get in touch.

        This didn’t change as our business grew interestingly; I find the nature of updates becomes more high-level but the frequency remained consistent. As you scale, you need just as much support and advice, it just takes on a different shape.

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