Founder Advice
Founder Advice

My Step-by-Step Process to Raising a $3M Seed Round

Fundraising in 2020 has been tough for many founders. Read Brent Franson's story and process of how he successfully raised a seed round for Most Days, during the pandemic.

In March of 2020, as shelter in place orders kicked in, I started my pitch deck and brought together my founding team.

Even for someone with experience raising money, that timing was…not great. Nevertheless, we went for it.

I started pitching June 24th, signed a term sheet on July 17th, and by August, I closed a $3M seed round for my new company, Most Days, a social app for healthy behaviors and community support. The round was led by Freestyle.VC, with participation from Harrison Metal, Village Global, and Correlation Ventures.

Like many founders, I was a little apprehensive about fundraising in the middle of a pandemic – but what was most remarkable was how similar the process was to pre-pandemic days. All of the same elements are still there: the importance of telling a great story, targeting the right investors, anticipating hard questions.

I won’t pretend to be an expert so treat this like you would a buffet (remember those?): take what looks right, leave the rest.

My step-by-step process to raising a seed round

Step one: Educate yourself on pre-seed vs seed

What’s the difference between pre-seed and seed? I’ve been an angel investor in a number of seed rounds, mostly betting on friends and former colleagues. But the “pre-seed” designation was a new one for me – and it was equally surprising to see how high the bar for a seed is.

Think of the differences between the two in terms of capital raised and early traction.

  • Pre-seed: This is a prototype or alpha, with little to no actual users, with a typical raise of $250K to $1.5M.
  • Seed: This is when you hit beta with actual users and/or revenue with a typical raise of $1.5M+.

In some cases, as it was for us, if the founders’ backgrounds are compelling, you can raise a seed-sized round with a pre-seed traction profile.

Then you get to make a decision about the type of investor firms to target: seed specialists or multi-stage. Some only lead seed rounds; others focus on As or seeds and A rounds. Seed-only firms include Freestyle, Harrison Metal, First Round and numerous others. Multi-stage firms lead at every level of pre-IPO financing, from pre-seed through D+. Think Sequoia, General Catalyst, Kleiner and Accel here.

If you’re pursuing seed capital, your goal is to generate enough business momentum during the seed stage to raise an A with a high-quality investor, such as a Benchmark or Sequoia. This is exactly why I prioritized a stellar seed specialist over a multi-stage.

My stack rank is:

  1. Top tier seed specialist
  2. Top tier multi-stage
  3. Mediocre seed specialist
  4. Mediocre multi-stage

Step Two: Nail your story and create your pitch deck

I’ll keep this short: a pitch deck is, first and foremost, your opportunity to tell a story. Yes, a business case is woven into that story but the narrative itself is the key. Even the most compelling business case will be less effective without a story that nails the basics:

  • What’s the problem?
  • What’s the solution?
  • Why are you and your team uniquely qualified to provide the solution?
  • Why is the world ready for the solution now?  (Too early is the same as being wrong)
  • How big is the market?
  • How, if successful, will you create a venture-scale business?

The business model of a venture capital firm also matters here. If a firm is profitable – and many are not – the majority of their investments still return zero. Only a small number of winners – sometimes just one – make up for all the failures and provide some profit. You have to clearly demonstrate how you’ll create a very large business; otherwise, your business won’t make sense for venture dollars.

(Check out my deck here; while not perfect, it’s a useful example).

DocSend insight: Once you’ve decided on the story you’re trying to tell, you need to create your deck in a way that tells it quickly. We found on average a VC will look at a seed pitch deck for 3 minutes and 27 seconds, according to our data. That’s actually on the long side. A successful pitch deck will be shorter. That’s because when everything in your deck makes sense and your story is clear it’s a pretty easy read. A typical VC will spend about 2 minutes reading a successful pitch deck. In that time they can understand everything they need to know to bring you in. The average time a VC spent reading the Most Days pitch was roughly two minutes.

Step Three: Build your target investor list

You’ll want a target investor that allows you to run a strategic process. I’ve included my template here.

most days startup fundraising process template

Breakdown of each column

  • Investor – It’s not just about a firm. Your investors should have a belief or connection to your space.
  • Best intro path – How will you get to each investor? Don’t overthink this. If you have a mutual connection, use it. If not, go in cold.
  • Air support – These are people who can say good things to an investor about you during a process. They can also play back-up if your best intro path doesn’t pull through.
  • Most common investment round – A late-stage investor won’t write a check for your seed. For some firms, seed might be the minority of their deals. You’ll want to know this heading into your process.
  • Lead or follow – Many investors do not lead; they’re not pricing rounds. Focus on investors who will lead your round first.
  • Sequence – Have your investors categorized by who you want to pitch first, middle, last. It’s okay if this is just directionally mapped out.
  • Status – Treat your process like a sales pipeline of prospects. Bucket your conversations based on probability of close. Remember: you only need one.

Step Four: Schedule your pitches strategically 

Russ, DocSend CEO, gave me great advice at a critical point in April, when the impact of shelter-in-place was still incredibly unclear.

“Schedule 30 pitches over a two-week period one month in advance; if you can’t get a lead after 30 meetings, you need to make some serious adjustments,” he said. And he was right.

What worked for me was strategic sequencing: ranking potential investors from most desired to least; my list included 56 firms that could potentially lead among a total of 118 individuals and firms.

I then concentrated on my top 30. I scheduled those ranking 15 through 30 first, hoping to perfect my pitch before putting those ranked 1 through 15 in the second half of my first two-week pitch window. This ensured I pitched my top targets after I had iterated on the deck several times and felt confident in the way I was telling my story.

As an aside, this is also the period to weave in angels and small checks from firms that won’t lead the round into the mix.

DocSend insight: Based on our report, in 2015, on average, founders raising their seed round contacted 58 investors and that increased to 77 investors contacted in 2019. Compared to 2015, founders are contacting more investors but netting the same amount of meetings. For both years, founders had an average of 40 investor meetings to close their seed round.

Step Five: Pitch, pitch, pitch (and pitch again)

Iterate, iterate, iterate. That was my mantra.

Every pitch results in both explicit or implicit feedback. The odds are good that you’ll see similar concerns about your pitch from one meeting to the next. After you start to see an emerging trend with feedback, revise your narrative to account for questions and concerns.

During that heavy pitch cycle, I made the time every evening to add, modify, delete or rearrange slides based on what I heard and what made sense. There will come a point when you know your pitch is resonating, as I did, when you can tell you’re answering questions or concerns before they have a chance to ask you directly. You can tell.

When sending out my pitch deck, I used DocSend for its analytics and security features. One of the firms shared my deck extensively outside of their firm without asking me. DocSend allowed me to turn off the link. Without DocSend, it would have been distributed all over the place by a low integrity investor without my knowledge.

A practical note about doing these pitches over Zoom: you’ll likely be in a situation where you have to switch between showing the meeting participants your deck and your face. Prioritize the face to face – because those investors are really taking a bet on you even more than the business. Take some steps to make this easier. Send the deck in advance with a short, written summary – and architect the presentation like a slide sandwich. In other words, the slides you present should be sandwiched between two face-to-face discussion segments.

For example:

  • Introductions + get to know you (10 minutes): face to face
  • Deck review (15 minutes): slides
  • Active conversation, questions and concerns (remainder of time): face to face

In-person or in Zoom, the best meetings are all the same: they don’t rely on the deck. They end up being an active discussion of key questions and concerns. In fact, my most successful pitches – including some with full partnerships at well known Silicon Valley firms – never ended up using a single slide. I’ll repeat that: It can be a good thing if you never end up presenting a single slide in your pitch and solely engage in conversation.

How will you know if it’s a no? The negative signals are easy to read: no active, immediate follow-up means no. If they want to work with you, you will hear from them.

DocSend insight: At DocSend, we’ve created the DocSend Fundraising Network, which provides warm intros for top quality founders to committed VCs who can lead their rounds. In the application process, each pitch deck is evaluated using our data-driven Pitch Deck Analyzer. The analyzer is based on our analysis of thousands of decks and millions of interactions across our platform. We’ve taken that data and narrowed it down to 11 criteria that we’ve found have a material impact on whether a pitch deck can lead to a meeting and a term sheet down the line. By submitting your pitch deck, whether it leads to an investor match or not, each founder receives objective, data-driven pitch deck feedback.

Step Six: Generate demand and momentum

At the beginning of a process, you have no leverage.  You need money and you haven’t yet created demand. As you create demand, you create leverage for yourself. You use that leverage to optimize price and the quality of investor. It’s a bit of chicken or the egg problem as many investors only seem to be excited when they know others are as well (enter FOMO).

Getting an investor to lean in culminates in them signaling that a term sheet is coming or verbally proposing terms before sending a term sheet (note: some investors will want you to verbally commit to them before they send terms).

This verbal cue is leverage that can be used to accelerate your other conversations. It also gives you an excuse to reach out to investors you haven’t spoken with yet and give them the impetus to schedule a conversation ASAP.

Do not shop terms during these conversations. What you can say is that your process is moving quickly, you have a verbal on terms or expect terms shortly, but that you still remain excited about speaking to them. Emphasize you’d like to work together to help them get to an answer quickly.

Once you receive the term sheet or specific verbal terms, you’ll want to tell that investor candidly that you will need to finish out a few conversations that were already in process, but that you will not start any new conversations. This is delicate: you now have a bird in hand and you need to be careful about risking it for two in the bush.

Have those conversations and finish them up quickly. With any luck you’ll have multiple options. Now comes the process of optimizing the terms and choosing a lead.

Step Seven: Pick a lead investor 

Now it’s time to pick a lead and sign a term sheet.

If you have options, start by ensuring the investor is right for your business. Ideally, they know your space or are passionate about the problem you are trying to solve.

First, backchannel the investor – ideally with other founders who have worked with him/her – before committing.

The actual capital you receive from a venture investor is commoditized, meaning the funding itself isn’t what differentiates them from their competitors. I think about the value of a venture capital investors generally on three dimensions of quality (in this order):

  • Brand: The better the brand, the easier it’s going to be to attract the best talent. Love it or hate it, this is true. And there is nothing more important to the success of a startup than the people. A great brand (i.e., Benchmark) can also boost potential customers’ confidence.
  • Network: A good investor will be incredibly generous about introing you to prospective customers, candidates, and partners. It’s up to the entrepreneur to close, of course, but a good investor will help you increase both the number of and the quality of your at bats.
  • Business advice: Great investors have seen many companies succeed and many more fail. The more experienced and successful the investor, the higher quality of advice you’ll get along the way.

Step Eight: Fill in the round

This is the fun part. You’ve signed a term sheet and are confident in your pitch.

Now you get to rocket down your list and chase smaller checks, which you’ll find come much easier now that a lead has committed. It’s a great excuse to talk about your business with interesting people who might be relevant. Regardless, it expands your network and it’s worth your time.

I had a ton of fun during this phase.

I’m excited and grateful to work with angels, investors, and routine authors such as Alex Korb (Author / Neuroscientist), Antoinette Giedzinkas (Sierra Tucson), Britney Blair (CEO, The Clinic), Eric Roza (new CEO, CrossFit), Nikhil Krishnan, Noah Lang (CEO, Stride Health), Owen Tripp (CEO, Grand Rounds), Ross Chanin (CEO, Artifact), Ryan Nece (Next Play Capital), Sonia Arrison (100 Plus Capital), Sriram Krishnan (former Head of Product, Twitter), Vlad Novakovski (CEO, Lunchclub), and Will Smith (Octave Capital).

It’s easy to lionize venture investors and over-rotate on the mythos behind Silicon Valley venture capital. Keep in mind, however, that even the absolute best early-stage venture investors have spent a huge portion of their careers on the frontlines of failure. They’re passing routinely on pitches, most of the investments they make fail, and they’re constantly working with founders to avert those failures if at all possible. They’re often spending much more time working with failing companies than those that are succeeding.

Like talking a three-legged dog into walking back into traffic with you, it takes a lot to convince the average VC to take the plunge again. But if you target the right investors and tell a great story around a strong business case, you’ll get there.

Even in a pandemic.