I recently gave a talk at an AWS Loft event to a group of founders who are looking to raise their seed round. Every entrepreneur wants to know what they can expect when they start fundraising for the first time. Not only have I raised two successful seed rounds, at DocSend we’ve also analyzed thousands of seed pitch decks and talked to countless founders about their experience. Here are the top four things you need to know going into your seed round.
Give yourself 6 months of runway
Fundraising is a long road. We’ve all heard a story of someone who had the perfect pitch and raised $5M in just three days. But that’s not the norm. The odds that your first meeting is going to be with the exact right investor is slim to none. We know from our research that the average time to raise funds is 11-15 weeks. That’s why I recommend having six months of runway. You have three months to raise, and another three months in case you don’t get funded to figure out your next steps.
We know from our research that the average time to raise funds in a seed round is 11-15 weeks
Within those 11-15 weeks of fundraising you’ll ideally be taking a lot of meetings. I recommend booking your face-to-face meetings with investors in a short window. Not only will it limit the amount of time you’re away from your business, but it also helps to create a sense of urgency with the VCs. I recommend using a two-week window for your scheduling. It’s the same concept as when accelerators have demo days. Every VC knows they’re competing, so they’re more likely to pull the trigger to beat out another firm. It also helps get you in the groove. If you’re pitching all day every day you’re going to get into a rhythm. If you miss out on funding you don’t want it to be because your pitching skills were rusty.
Know when to make adjustments
Just like you shouldn’t expect to meet the perfect investor out of the gate, you shouldn’t expect your seed pitch deck to be perfect on your first try. You’ll find you naturally make adjustments as you go. But how many times should you be pitching? I once spoke to a founder that reached out to 500 investors when he was fundraising. When I asked if he would recommend that tactic to anyone else he said no. The data agrees with him.
The number of investors contacted does not correlate to the amount of money you raise. It does correlate to the amount of meetings you get, but only to a point. We found that the average successful founder had 40 meetings. But keep in mind that’s the number of meetings, not the number of investors. Most founders meet with the same investors multiple times.
Our research shows the average founder contacted 58 investors during their seed round and took 40 investor meetings.
So if you’ve had 30 or 40 meetings and you keep hearing a hard no, it may be time to stop and evaluate. It could be something as simple as your timing, or something more complicated like you haven’t nailed your total addressable market. Either way, sometimes it’s best to take a break, make some adjustments and come back again in three months.
Be a storyteller
One thing that can cause a VC to say no to a good business is your narrative, or lack thereof. Your goal with a seed round pitch deck more than any other round is to put together a narrative that not only leaves them wanting more, but also feels obvious. It’s not always easy to know what your narrative is when you’re first starting out. Uber and Pinterest went up and down Sand Hill Road looking for an investment, but both had a notoriously hard time it. Looking back now their narrative seems obvious, but at the time they were telling a different story. They’ve both evolved into the companies that they are now. The trick with creating a narrative in your seed round pitch deck is using what I call the Why Now and Why Me slides. These set up the narrative to why the time is right for you to solve this problem.
A VC will spend on average 3 minutes and 44 seconds reading your seed pitch deck.
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 44 seconds. 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.
Don’t feel like you have to use the standard seed pitch deck template
Don’t feel like you have to follow the standard advice about what order your deck should be in. If there is a question about your startup that keeps coming up, you’ll want to get out in front of it with your pitch deck. If you don’t address potential deal breakers first you risk the VC tuning out during your pitch. The best way to see what questions might be bubbling up, or what areas you need to lead with, is to go through the page by page analytics for your deck. This may seem counterintuitive, but more time on a slide is a bad thing. This means something about that slide is hard to understand or confusing. Remember, if you’ve built a good story your deck should be an easy read. If the same slide keeps getting all the attention you should probably look at changing it.
The only thing every successful seed pitch deck had in common was the Team slide, but 96% of decks included Product slides and 88% of decks had slides focusing on the Problem they were trying to solve.
You can also glean a lot from the questions they ask. If VCs are questioning the size of you product market fit, or they don’t understand how your background fits the problem you’re currently trying to solve, you may want to cover that in one of your slides. Jump in and tackle the obvious questions as early as possible so the VC is free to focus on the rest of your pitch.