“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.
Poppycock. 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.
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.
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):
- Meet as many good, new VCs and investors to the top of the funnel as you can, every week, every month, every quarter;
- 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.
- 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.
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. 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.
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.