“I don’t want to meet [That VC]. I don’t need money now and it’s distracting.” — most founders, post Seed round
There’s a superpower some founders have. When they are ready to raise the next round, be in Seed-2, Series A, B, C, or whatever … they just send out a few emails, and in a week or so, have a few offers and even term sheets. How did they do it? What sort of magic is this? Well, it ain’t magic.
They put in the time, folks.
And as good as times seem to be in SaaS today, in some ways, they aren’t easier for fundraising. They aren’t easier because so much of the VC money out there is going to late-stage rounds and very proven names. And not as much to start-ups no one has quite heard of. More on that here:
But what’s behind the numbers? If you squint, you can see there’s just a funnel.
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:
- We add as many good, new prospects to the top of the funnel as we can, every week, every month, every quarter;
- We nurture the leads and prospects we have, thoughtfully, and regularly, over a very extended period of time; and
- We invest outsized amounts in “customer success” — in our existing customers to get the best referrals and other customers from them.
Ok, 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 C+ 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):
- Meet as many good, new VCs and investors at the top of the funnel as you can, every week, every month, every quarter. In fact, force yourself to take 1 VC Zoom a week. Just pick the “best” meeting you can get.
- 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
- 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. And then they try to scramble to “run a process” with folks they don’t know, and that don’t know them.
- 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 customer sales matters every day – 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.
CEO’s job, post seed round:
Be able to raise the Series A at anytime with 3-4 emails, once metrics hit
— Jason ✨BeKind✨ Lemkin ⚫️ (@jasonlk) March 28, 2021
And 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 / Zoom with them. Go Zoom and when you can, meet your existing investors. Or at least, invite them to your office / co-working space / wherever.
- Don’t have a board? So what. Have an “investor meeting” instead. 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 talk to them. At least 50% more regularly than your gut tells you to.
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.
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.
(note: an updated SaaStr Classic post)