I’ve designed a highly prescriptive approach to fundraising by synthesizing advice from many advisors who have raised hundreds of millions of dollars. It’s because of all that feedback that I’ve been able to raise successfully by creating a detailed process that works for me.
How my fundraising process evolved over time
The way I ran my fundraising process four years ago is very different from how I run it now. My first few fundraising experiences were anything but systematic: I reached out to individuals and took meetings whenever there was interest. My very first raise, for example, dragged on for six months because there simply wasn’t a coherent process. My second raise happened almost accidentally: a friend and mentor offered to invest $100k and made introductions to other investors. This worked well for a few weeks but here, too, the process dragged on and took several months because I didn’t have any plan to actually close the round.
After these two raises, I began to tighten up my process considerably and create a structure. I sought advice from my network of advisors and from fellow founders among our investors’ portfolio companies. I also read up on VC opinions on what they think fundraising should look like. When I started developing my own process, I knew I wanted to borrow approaches that had worked for other people and give them my own spin. Many people influenced me along the way, but I give special credit to Ben Ling, one of our current investors, and Sam Rogoway, an investor/advisor who’s Chief Product Officer at Headspace.
While I learned over time that it’s extremely important to have a process, I also learned that it’s crucial to stick to that process. Be disciplined about whatever approach works for you, otherwise, your raise can quickly spiral out of (your) control. Here’s a breakdown of how I take control of my fundraising now.
1. Evaluate where you are and plan VC outreach accordingly
I begin by evaluating the stage we’re at and determining how much we should be raising for that stage. For example, a VC may be a great fit based on your industry and what types of companies they usually invest in but your company may be too early for the round they invest in. Consider if there is a chance they’d want to get in early to reserve that space for your future later round or if you should hold off reaching out until you have more traction.
I compile a list of every firm I’d like to reach out to about participating in the round. This is a very focused list of VC firms who might be interested in what recess.tv is doing right now–in our case, it’s an at-home fitness marketplace. I’ll make a list of every VC that’s interested in one of these intersections and eventually end up with 100-200 VCs.
2. Leverage your network for introductions
Next, I’ll go to every single VC’s website and look up every partner on LinkedIn to see how I might be connected to them. Ideally, there’d be a very warm lead but even if it’s a colder lead I find a way to get an introduction.
I use Google Sheets to keep track of my VC targets, any connections I have to them, and the status of our conversation — as almost an investor CRM. I share my Google Sheet with my existing investors and advisors and ask for feedback, intros, or additional suggestions. I’ve found it a lot easier for investors to provide suggestions or constructive feedback when presented with my outreach strategy vs asking “is there anyone you can connect with me.” When they see my list of targets it can spin up additional ideas, recommendations, or connections they may have and can make. It also shows the organization and effort I’m putting into fundraising which reassures them that the intros they are making will reflect well on them.
3. Rank potential investors for more efficient outreach
Once I’ve gone through this list of firms and partners, I stack-rank the VCs by dividing them up into waves. Wave one is usually a group of five to seven VCs and/or Angels who I already know really well. Sure, they might end up investing but what’s important is the honest, straightforward, and confidential feedback they can give on the pitch deck.
Wave two is composed of people who I’d like to lead the round and who can act as a good barometer of how investors outside of my close network will receive the pitch.
Wave three is a “best of the best” list of firms, your dream team if you will. I wait to reach out to my dream team until the raise is well underway: I want to make sure that I’m putting my best foot forward and have incorporated all earlier feedback received. Saving these firms for later also allows the people connecting me to them to mention any soft verbal commitments I may have already received. It’s really important to show these big firms that you have momentum when you’re the one reaching out.
4. Contact investors during a soft “unofficial” raise
I set a very strict timeline for myself when fundraising, but I begin “unofficially” fundraising about three months before I start the process in earnest.
During this unofficial period, I’ll get intros and reach out to the VCs on my list. I tell them that I’d like to meet with them and talk about what we’re doing but that we’re not currently fundraising. This ends up being a 15-20 minute informal chat, and I let them know that we’ll be raising in three or four months. The soft raise is all about building relationships: I’m a relationship person, and these meetings are a great way to show me which VCs are a personality match.
I also use these conversations to work out the pitch-deck narrative I’ll be presenting and to figure out which data points investors may find most interesting. The company story I’ll be telling during the official raise takes shape over a number of weeks during this unofficial period. There’s some overlap between putting the deck together and contacting wave one of investors, but I make sure to have the narrative nailed down before reaching out to waves two and three. Later on, I use DocSend analytics to refine storytelling as needed based on where certain investors have spent time in the deck.
5. Re-ignite conversations and gauge interest just before the raise begins
About six weeks before the official raise begins, I’ll reach back out to the investors I think most connected with the business and vision to sync briefly and catch up. When I do this, I’m building relationships and getting a sense of how interested these VCs really are. This way, I don’t waste time pitching to people who aren’t going to bite.
6. Nail down your deck strategy
It’s important to have a well-defined strategy for preparing and sending out your deck to interested investors. Unlike many people, I don’t send my pitch decks to investors ahead of time. Instead, I use DocSend to send a passcode-protected link to an executive summary of my pitch and company. I only send a full pitch deck to investors that I’ve met with two or three times. I take this approach because of my personal style: I write slides that are sleeker and less text-heavy, and I want the chance to contextualize everything live before sharing the deck.
Again, I’m a relationship person. I want to connect directly with the VCs and not allow for the split-second decision to be made. Not every VC is open to this approach, and I’ve had my share of meetings called off when I say I wouldn’t be sharing the deck ahead of time. But by this point, I’ve developed enough of a rapport with enough investors that many of them will accommodate my process.
When I do eventually send out the full deck, I upload it to DocSend and create a separate link and passcode for every firm. I restrict download and use a passcode to access because many firms now send DocSend links to an offshore team that creates a PDF of the deck, which means you lose all the analytics. This also helps prevent investors from sharing your deck in ways you might not want or with unknown parties.
7. Set a strict timeline and let VCs know
When it comes time to begin the raise, I let investors from waves one and two know that I’m kicking off the raise on a certain date (say, March 1) and that I’ll be doing all my pitches over the following 14 weeks. Once this process begins, I don’t make any significant changes to my deck or narrative because I’ve already ironed things out during the unofficial investor conversations.
About two weeks after the raise begins, say on March 14th, I’ll move to the next stage of the process and open the diligence room. At this point, I’ll contact investors from wave three and hopefully report that we already have a lot of interest in the round. I’ll plan to do follow-on pitches until the 28th and plan for a term sheet around April 15.
This timeline involves about 8 weeks of things like pitching and diligence. Once you accept a term sheet, there’s usually an additional 4 weeks or so of further diligence and legal paperwork. Many people will think that 8 weeks is fast for a raise, but I think that at the end of a period like this you’ll know whether or not you’re getting a term sheet. A process that drags on longer than 8 weeks in a positive sense is fine, but if by this point you don’t have a strong verbal commit or term sheet it’s a sign that it’s time to reevaluate the process.A fundraising process that drags on longer than 8 weeks in a positive sense is fine, but if by this point you don’t have a strong verbal commit or term sheet it’s a sign that it’s time to reevaluate the process. Click To Tweet
8. Evaluate early results and pause the process if needed
Having such a prescriptive process forces you to calibrate quickly on how things are going. For instance, if by the end of the first two weeks you have no one who wants to have a second call with you, then you should pause the fundraise.
If this happens, go back to square one and evaluate what went wrong: what was your feedback? What needs to be changed in the deck? Are there any problems with your numbers? Once you address questions like these, you can start all over again. Being willing to evaluate how things are going will keep you disciplined and prevent you from losing time. Don’t continue to sink time and energy into a process that isn’t working.
Fundraising requires structure–don’t wing it!
The fundraising strategy I’ve shared is one that I’ve refined over several years. Also, it’s one that works for me personally. That’s one general piece of advice I’d give to fellow founders: talk to peers and advisors, learn from their mistakes, and come up with an approach to raising that suits your business and your personality. Most importantly, though, always remember to give a structure to your raise. If you do so, you’ll be more likely to stick to a timeframe, remain disciplined, and iterate quickly on feedback.
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