The first round is the hardest. Fundraising rarely comes easy, but at least with subsequent rounds you will have connections, time and options.
Once you have your foot in the door, investor intros are a dime a dozen. But when you're on the outside looking in, vying for the attention of investors can feel like screaming into the void.
Build an audience. Write. Tweet. Interview. Network. Having an engaged audience signals to investors that you can get traction on your ideas. Later, when it comes to launching, fundraising, hiring and finding angel investors, an engaged audience will be key.
Keep your deck brief. Keep your slides simple. Focus on showcasing your team. Why can you in particular solve this problem? Why hasn't it been solved already? Do you have a unique plan for distribution? Explain the problem, outline your solution, present the product and define the market.
Push your credentials. Scaling a startup means hiring great people, managing teams, shipping world-class products, distribution, marketing, sales. Demonstrating a proven ability to perform in these areas will derisk things for investors.
Practice your pitch. Founders never stop pitching. Whether it's an investor, potential employee or potential customer, you're always pitching someone. Make sure you can describe your problem space, vision, and market coherently and succinctly. Prepare 10 second, 60 second and 5 minute versions.
Promote your idea. Before handing over the cheese, investors will do their research. Make sure there is a lot of publicly available information about your idea. Launch a great website, shoot a promo video, write blogs, do interviews, procure testimonials. Even pre-product, you should be able to communicate your vision.
Chase down warm intros. If I could offer just one piece of advice, it would be this. Warm intros are infinitely more effective than cold emails. I cold emailed countless early-stage VC firms and received just a single response. The only reason the investor responded was because he knew someone who provided a testimonial in our deck. To this day, we're the only investment they have made from a cold email. Unless you're a repeat founder or have a lot of traction, you won't stand out. Focus on building organic relationships with founders and investors.
Be tenacious. I was rejected from dozens of accelerators, VC firms and grant applications. I was forced to turn down a shitty term sheet. I desperately reached out to founders asking for help. The first fundraise is incredibly challenging—listen to advice, adjust your approach, but don't give up.
Figure out how much you need. Investors will ask how much you're raising. This seems dumb because you'd take as much as they're willing to offer. At the same time, accelerators and pre-seed funds often offer fixed amounts. It's all very confusing. Just estimate how much runway you need to reach a significant milestone, add some wiggle room, then calculate the cost. Investors will want ~20%, so use that as a guide for your valuation.
Sell your vision. Most VCs aim to return their entire fund with each investment. If the fund is $100M and they own 10% at exit, they're hoping for a $1B exit. You need to somehow show a viable path to that kind of scale.
Consider alternative funding methods. Venture capital is not the only way. Actually, most businesses don't fit the VC model. Sometimes the market is niche. Sometimes the founders aren't interested in scale. Thankfully, there are many new funds offering alternative paths to profitability, like Earnest and TinySeed. Kickstarter is a viable option too—we raised $40k on Kickstarter before we began fundraising. The money itself won't stretch too far, but it proves you can capture the attention of the market.
Don't worry too much. Raising money doesn't necessarily mean giving up control. Tough conversations are inevitable, but our relationships with investors are healthy. We control hiring, salaries, budgets, product and direction. There's no pressure with slight pivots or delayed launches. Perhaps we got lucky, but the journey has been amazing so far.
Follow VC Twitter. It truly is the gift that keeps on giving.