Fundraising Tips & Tools

Fundraising is hard. There is no way around it. It is a time consuming process that can be both physically and emotionally draining for founders. You will be rejected over and over again. If you are lucky, some investors will tell you why they think your baby is ugly. Many will simply pass or stop responding without explanation.

Fundraising is an important part of building a venture scale business, and it is critical to run a tight process. If your process is sloppy and undisciplined you are significantly less likely to raise the capital you need, on acceptable terms, in a reasonable amount of time.

If you miss on any one of those things, the survivability of your startup is at risk.

Running a startup is hard enough. When you add fundraising to the mix, its like adding another full time job to the two or three you already have as a founder. Here are a few tips and tools that can make the process less painful.

Fundraising Tips

Target a 3-month Process

Here I am referring to your "public" process, meaning the time that you are out in the market actively raising. There is a lot of work that comes before this step to put yourself in the position to complete the raise in three months.

Why three months? If the raise drags out much longer than that, investors start to wonder why you can't close. Investors spook easily. If the round appears to be stalled, they will wonder what other investors know that they don't and often default to "wait-and-see" mode.

To avoid this risk, you need to build and maintain momentum during your raise which requires a lot of effort both before and during the public process.

Do Your Research

Well before you start raising publicly you need to identify as many funds as possible (100+) who could invest in your company. Before adding a fund to your list, confirm that they invest in companies at your stage, in your industry, and in your geography.

Not every VC publishes this information on their website, which can be frustrating, but also can be an easy filtering mechanism. You want to work with investors who can clearly articulate their thesis and have some demonstrated expertise in your industry either with prior investments or professional experience.

That said, going from website to website to collect this information is tedious and time consuming. Fortunately, several free tools (see below) are now available to make this part easier for founders.

You also want to confirm investors you are targeting are actively investing. There is nothing worse than wasting time chasing a zombie VC.

Unfortunately many zombies will still take meetings with founders to show LPs they have a pipeline while trying to raise their next fund. An easy way to check activity is to look for press mentions about recent investments or ask a friend with access to Pitchbook for details on the fund's AUM, dry powder, and portfolio.

But why is this step so important?

I put a lot of effort into publicly sharing what types of companies I invest in. Still, every day, I get unsolicited pitches for social media, B2B SaaS, and consumer products that I am categorically uninterested in.

If you skip this step, and spray-and-pray instead, not only are you wasting your own time but you are communicating a few negative things to the market:

• You are lazy or low intelligence
• You are not serious about fundraising
• You are desperate or delusional

Prepare Your Materials

Yes, you need a deck (template below). No, you do not need a long written business plan. That said, you should have a data room prepared so that you are not scrambling to pull one together when an investor wants to move into due diligence.

There are plenty of data room tools out there for securely hosting your material. You can get away with using a basic cloud service provider (Box, Google Drive, etc.), just make sure to use a password or provision access on a user by user basis.

The platform doesn't matter that much as long as it is secure. Your data room will include sensitive information on financials, IP, cap table, employee agreements, litigation, and more. I've linked a standard due diligence checklist in the tools section below for reference.

Just make sure the data room is complete and well organized. This goes a long way towards speeding up your diligence process and helping you stay on track to close in three months.

Avoid Rookie Mistakes

Assuming your startup checks a few basic boxes (big market, scalable / repeatable business model, unfair competitive advantage) the next thing early stage investors are trying to gauge is your ability to raise follow on funding.

There are a few tell tale signs that a founder will struggle to raise. Just don't do these things unless you want to telegraph to investors that you don't know what you are doing.

• Don't ask VCs to sign an NDA before pitching
• Don't expect anyone to read your 60-page business plan
• Don't say "I just need X-dollars to get started"

Instead

• Build what you can, as fast and cheap as you can
• Show investors what you're building and ask for feedback
• Iterate and keep investors posted on your progress

This builds trust with investors so that when you are ready to raise they already know you and have confidence that you can build, you are coachable, and you are scrappy. These are three key things that investors need to believe in order to feel comfortable investing in your company.

Fundraising Tools

• Signal - connect your email to find investor intros from your network
• Deep Checks - get your deck in front of 25+ Deep Tech investors at once
• VC Sheet - search and filter funds based on investment stage and thesis
• The best deck template in the universe
• Sample due diligence check list & data room structure