On Foundersuite’s podcast, “How I Raised It,” we take an open-source approach to sharing knowledge about the wild ride of funding a startup.
We asked both veteran and emerging founders to spill their secrets on everything from finding your dream VC to knowing when to make the ask –– and how to slay your pitch. Regardless of where you are in the process, we’ve uncovered some excellent –– and sometimes unexpected –– advice to help you master your raise.
Here’s a compendium of some of the best ideas we’ve heard so far. Entrepreneurs, buckle up: we’re about to accelerate your learning.
Look for investors who align with your values. Rousseau Kazi of collaborative decision-making platform Threads believes it’s important to look for “subjective” qualities in an investor. “We’re not only building a product; we’re building a company,” he says. “So it was important that I found someone that I knew was aligned with me, who cared about diversity and inclusion, and who recognized my strengths –– but also would push me on my weaknesses.”
Density founder Andrew Farah suggests taking as many meetings with different people from a particular firm as you can, and not being intimidated if some of them actually hate your pitch. Contention can be attractive. Some firms want to take on companies that spark big feelings. “The thing that you never want to feel as an investor is ‘meh,’” Andrew says. Safe to say he doesn’t have that problem, since he counts Founders Fund partner Cyan Banister, Mark Suster of Upfront Ventures and Jason Calacanis as backers.
Buck the system. When fundraising for his ethical meat startup Kunoa Cattle Company, Hawaiian rancher Jack Beutell quickly realized that traditional VCs and angels weren’t the best fit. So he looked for people who were interested in grass-fed beef, impact investing, climate change or even just Hawaii in general. “We ended up succeeding primarily with high-net-worth individuals, fund managers and grocery CEOs who have some kind of connection to our work,” Jack says.
K.J. Miller, co-founder of inclusive cosmetics brand Mented, cast a wide net when seeking investors –– but made sure to leverage her network. At one point, she says, “I reached out to every single woman from business school who listed herself as an angel investor and emailed every single one of them, no matter what she’d funded in the past. I was like, ‘You’re a woman. You’ve probably worn makeup, and you might understand.’”
Keep in touch. Susan Ho did just that with certain investors who initially turned down the pitch for her travel startup Journy. She’d call them with an update on her progress from time to time. After Susan revamped her business plan, a few of those VCs were eager to meet again. One such firm was Menlo Ventures, which eventually led her seed round. Unlike other investors who hadn’t even downloaded the app, one of Menlo’s principals had used Journy a few times and understood the potential. “It just felt like the right fit,” she says.
“Finding an investor who’s looking for a company just like yours is like finding a needle in a haystack,” says Debbie Wei Mullin. At 500 Startups, she was told to expect about 100 meetings for every million she wanted to raise. Debbie estimates that she had about 200 meetings to raise the $3 million for her specialty beverage company, Copper Cow Coffee. “About three-fourths of those were with actual VCs and about a fourth were to get leads to VCs,” she says.
Read more on Black tech founders raising capital.
First lesson of pitch decks? Don’t rely on pitch decks. “We almost never opened our presentation,” says Jessica Chang, founder of childcare platform WeeCare. “We had one, but we went into every single pitch focused on engaging the investors’ issues. If we needed to pivot based on their interests, we did.” While later-round pitches might need to be more metrics-driven, the seed round is all about story, she says. “When you want to capture a room of investors, you really only have five minutes. Talk to them directly. Showcase your story and your passion.”
Matt Randall, co-founder of short-term life insurance startup Spot, shares a tip from one of his mentors: “In the early days, you’re pitching a vision. You’re not pitching the numbers you currently have or anything like that.” In his fundraising decks, Matt focuses on storytelling and describing why the company will succeed. He doesn’t even include revenue numbers. Don’t approach dream investors until your pitch is nailed down. “Take the feedback you get from your first meetings and figure out how to improve upon it,” says Yin Wu, who raised a $3 million seed round for her crypto startup Dirt Protocol. She wrote down a list of common questions investors asked, and had a succinct answer for each one by the next meeting.
It took serial entrepreneur Andrew Hoag 14 months to refine his pitch for his brainchild, Teampay. “In the beginning, test the story, knowing it’s going to change. Then simplify things,” he says. “What wins an investment deal are the slides you take out of the deck, not the slides you put in it.”
“A deck is your best friend,” says Density’s Andrew Farah. “You should love every sentence in your deck. If you don’t, you won’t be excited when the next slide comes up. But if you’re stoked, that communicates volumes and dramatically improves the quality of your pitch.”
“Don’t try to raise money in the summer,” says Jameson Toole of AI startup Fritz. Everyone’s out enjoying the nice weather, so it’s noticeably harder to track people down in July and August. At one point, I was like, I’m going to rent a boat, find all these VCs in Nantucket, and pitch them there.
“The Mom Project’s Gregory Robinson cautions founders who want to raise capital in the earliest stages of their business: “The biggest thing about raising money is not running out of time. When you’re raising earlier, it’ll take longer. If it happens right away, be thankful but wary. Investors who lend money quickly might lock onto what I like to call a false consensus –– something they think makes the business work, but maybe it’s not the bigger opportunity,” he says.
One of Cargo founder Jeff Cripe’s goals was to raise a seed round immediately after completing the Techstars accelerator. “The program ended in September. We had been warned that if you’re going to try and raise capital, you’ve got to raise it before Thanksgiving,” he says. “Afterwards, it’s nearly impossible to get a deal done. I knew it normally takes three to six months to raise a round. So I started raising pretty much as soon as we got into the program. It ended up working out pretty well for us.”
Prepare to be busy –– really busy. Enrico Palmerino raised $4.5 million for his bookkeeping startup, Botkeeper, in two months by maintaining a packed schedule of three to four meetings per day. That helped him build a reputation of desirability and stoked competition among investors. Although he put everything else –– including most of his email inbox –– on the back burner, he always responded to requests from VCs within hours, Enrico says: “Even if they sent me something at 10 p.m., they got it at 2 a.m.”
Even business veterans can benefit. As a former M&A lawyer and crypto exec, Qwil’s Johnny Reinsch was skeptical about what an accelerator could do for him. “I was like, dude, we don’t really need to join an accelerator. We understand what we’re doing,” he says. But 500 Startups’ Sheel Monot managed to change his mind, Johnny explains. “Sheel said, ‘I don’t really think you get it. I’ll help with debt and help deal with regulatory.’ He knew exactly what concerns I had –– we didn’t have enough money to grow. Plus, we’re flirting with a bunch of highly regulated industries.” Qwil joined the program and raised a $5 million Series A shortly thereafter. “The 500 Startups fintech track, in particular, is great,” says Johnny. “It gives a stamp of approval to VCs.”
“I would absolutely do Y Combinator again,” says Cameron Yarbrough, CEO and co-founder of Torch. I would do it three more times. It was that good.” In addition to the invaluable guidance on building the right deck and approaching the right investors, he points to what he calls the “batch phenomenon” –– the momentum that arises in a group of peers. “It creates positive pressure, which you really need early on,” he notes. Plus, YC helps you decide what not to do. “Many startups fail because they try to do too many things, rather than focus on a few they could do really well,” Cameron says.
First-time founder Mile Selden of cellular agriculture startup Finless Foods found invaluable resources in a specialized accelerator, biotech-focused IndieBio. He also leaned on support from founders of similar companies when the going got tough. “It was 12 sets of mistakes for the price of one, which I love,” says Mike. “I can’t recommend that enough.”
“Techstars encouraged us to do a newsletter, and send it out monthly to investors,” says Cargo founder Jeff Cripe. “I resisted for a while. But honestly, probably 40 to 50 percent of the capital we’ve raised came as a result of those newsletters. We’ve kept ourselves top of mind with investors.”
Play it SAFE. Y Combinator, says Stephen Kuhl, CEO of sofa-in-a-box company Burrow, pushes founders to raise on SAFE notes. “It allows you to push off the conversation about valuation to a much later date, when you actually have traction.” That strategy also helps startups get money faster. That was key for Stephen and his co-founder, who were still tinkering with product design while completing the accelerator program –– and finishing business school to boot. “We couldn’t afford to take two months off and raise full-time. So we just raised on SAFE notes from people who were interested.” Those early investors helped Burrow raise its valuation from $7 million (pre-YC) to $12 million afterward.
As a repeat founder who’s also an angel investor, Bill Boebel chases the balance between growth and profitability with his companies. “I call it a ‘touch zero’ operating model,” Bill says. “We’re going to invest every dollar we can.” That means that his startup Pingboard might have zero in its bank account at some point. But at the same time, he says, “we’re designing it profitably, which means we’re in full control of our destiny. If we invest more than that, we’re not in control. If we spend any less than that, we’re not growing as quickly as we can.”
If it’s an option, Allie Magyar of event-planning platform Hubb suggests founders focus on funds instead of individual angels. “If you get 10 angels, they may write checks for $25,000 apiece,” she says. “But then you’re dealing with 10 different people with 10 different sets of questions, views and perspectives.” But at a fund? All of the investors contribute, and entrepreneurs only deal with a single point of contact.
Work toward becoming indispensable. Serial entrepreneur and Crossbeam founder Bob Moore says he doesn’t even consider raising another round until he feels like he has “a really strong universe of representative clients, all of who are willing to pick up the phone and say, ‘this thing changed my life,’” he says.
Find a great lead investor who isn’t too large if you’re a growing business. That was Matthew Klein’s strategy when fundraising for his design and product development software, Backbone PLM. “I really wanted somebody who was going to be hands on, rolling up their sleeves and helping us with product-market fit strategy,” he says.
Another tip? Don’t promote the fact that you’re fundraising. “We never were ‘out’ around the funding,” Matthew says. Instead, he focused on building rapport with potential investors while playing up the buzz around Backbone’s customers, like Stitch Fix, Warby Parker and Outdoor Voices. “We were starting to work with some exciting companies, and then we started getting a lot of excitement from top funds throughout the country.”
“It’s hard to run a business at the same time that you’re running a fundraising process,” says Ryan Boyko, who has raised more than $6 million for his dog DNA kit company, Embark Vet. He advises to “either have a really wonderful co-founder who can keep everything moving forward, or hire somebody who can. We lost opportunities to grow and to make good hires while I was busy fundraising.”
Jessica Chang made a point of starting conversations with potential investors before actually pitching them. To raise funds for her company WeeCare, a platform connecting daycare providers and parents, she spent time building relationships before kicking off her seed round. When she did, those investors already had context for the company and could see the progress it made. Her meetings were “mostly about updates and metrics,” says Jessica. “Investors had done a little bit of research, so they were excited about the daycare space.”
Create a memorable impression. PebblePost founder Lewis Gersh would open investor meetings by throwing down a stack of postcards on the table and announcing that they were worth more than Google Adwords. “It would grab their attention and create a fun intro,” Lewis says. “Like let’s go old school, let’s have a discussion.”
“Terms are always more important than the amount of money in the valuation,” Sean Byrnes says, noting that it’s vital to understand the fine print on any cap table. “As founders, we get kind of obsessed with dollar signs on a piece of paper.” The Outlier AI co-founder adds: “I believe in raising as little as possible. That’s how you control your own destiny. It’s an ego boost to say, I just raised 10 million. But really all you’re doing is constraining yourself and reducing optionality in the future.”
Nathan Beckord is the CEO of Foundersuite.com which makes software for raising capital. Foundersuite has helped entrepreneurs raise over $1.5 billion in seed and venture capital since 2016. This article is based on Foundersuite’s How I Raised It podcast, a behind-the-scenes look at how startup founders raise money.
This article was originally published on Founder Suite. It is reposted with the permission of the author, Nathan Beckord. Read the original.
