Raising venture money is one of the biggest pain points entrepreneurs face. From making the right connections, to valuing your company strategically, to deciding exactly when it’s smart to even look for funding, to navigating the discussions with investors ... the experience can be overwhelming.
So we decided to tap the smartest founders we know for their advice. In addition to assembling a panel discussion about raising VC money, we asked founders in the Stacklist community for their reflections on their own fundraising experiences. We hope they will be of great help to you on your own startup journey.
What advice do you have for other entrepreneurs who are about to start fundraising?
Don't raise before you are ready. How do you know if you are ready? You should be at a point where something is flying up and to the right. Cobble together resources to get your venture to a minimum viable product stage that demonstrates evidence that there is a problem worthy of solving. Ideally, servers are melting and you can't keep up with demand and THAT is the reason you are raising money.
- Chad Billmyer, CEO of Panjo
Make sure you have some "magic" -- especially at the seed stage. The magic can come from your product, your team, or your traction -- but without real, irrefutable "magic" with one of those, you'll have a hard time getting a deal done.
- Tim Chaves, Founder of ZipBooks
It's not about the volume of conversations, but rather about identifying investors that might be a fit. Be ready to take many many "no's" for an answer. Most investors won't give feedback and be evasive, but if you can get feedback, even if negative, use it.
- Alex Kruglov, CEO & Co-Founder of Smiletime
Get the objective of fund-raising absolutely clear in your head. It is good if you want to extend your product from early adopters to early majority. But, it can prove dangerous if you raise without a product-market fit.
- Jugal Anchalia, Founder of JustDoc
Prep and reach out. Ask for intros from folks who know VCs, as opposed to just sending. But if you know no one, be persistent and just keep attacking them. You need what you need.
- Stan Bokov, COO & Co-Founder of TradingView
You should have at least two of the following: 1. A working prototype of your product, 2. A Team with a good entrepreneurial track record, 3. Traction (i.e. customers /users). If you don't, don't waste time with fundraising.
- Andreas Kitzing, Founder & CEO of Sponsoo
Try to get the investor to a "yes" or "no" as soon as possible to save time for everyone.
- Nisha Garigarn, Co-Founder of Croissant
Don't be afraid. Get out there and share your story. Take every meeting to practice and learn from and ask questions. Don't forget you are interviewing the investor as much as they are interviewing you.
- Stephanie Benedetto, CEO & Co-Founder of Queen of Raw
Don’t contact investors until you have all the materials ready and well polished, at least the investor’s deck and company’s 1 Pager (make sure you also worked on the numbers displayed for Sales and marketing). First impressions count, and the quality, speed and deliverance on these materials already send a message about you and your company.
- Yesika Aguilera, Co-founder & BDO of Tespack
Crowdfund for cash first. 92% of startups fail, and if you can't raise a cash round from your friends, family, followers, and professional network first, then your business probably isn't going to make it. Crowdfunding allows you the freedom to prove out your model, establish product-market fit, and get some early customers for your product who will give you feedback. Even if you're a B2B company, if you have supporters, you can raise a cash round to give you some capital to build your MVP or, if it's built, to do some beta testing. If all of that is successful, then you actually have a business and you can confidently fundraise for equity because you now have proof points! In the meantime, don't quit your day job. Seriously, don't.
- Karen Cahn, Founder & CEO of iFundWomen
Study. You don't want to start the conversation without knowing, for example, what's the difference between a participating and a non-participating liquidation preference. Don't even think that's stuff for lawyers. It's your company. Don't ever give the impression you need to close the round at any condition. Try to have 2 investors sending you a term sheet in the same days, tell them there's another one but don't reveal the identity until you have both TS.
- Gian Luca Petrelli, Founder of BeMyEye
It takes longer than you think it will. Sometimes things fall through. Someone needs to dedicate a large portion of their time to it to get it done. You need intros to be made by people the investor already knows, not a cold email or form submission.
1) Raise what you need, not more than you need; 2) Be realistic in valuation; 3) Never overhype your numbers/growth/retention; 4) Just because someone says 'no' doesn't mean you have a bad idea. Raising money is like match making. If you both don't swipe right, keep talking to people until you find a match; 5) Do your diligence on the investor before meeting him/her. Talk to entrepreneurs they've invested in; 6) Strategic money > non-strategic money, always, even if it means taking a hit in valuation. Always.
For me, the killer was realizing our whole business plan would be skewed to the return expected by the investors. 100% owned companies don't need to grow 10x in 5 years.
- Bridget Harris, Co-Founder & CEO of YouCanBook.Me
The hardest thing about raising a round is finding a lead. Once the lead is there, other dominoes fall, often much more quickly than you expect!
-Tim Chaves, Founder of ZipBooks
Do not raise before you have the data to back it up. It's time-consuming, so focus on meeting people that only invest in companies at your stage.
- Lauren Foundos, Founder & CEO of FORTE
We haven't found the right investor so far. So I guess, it's finding the right partner in crime.
- Antonio Rotolo, Co-Founder & CEO of Ludwig
Closing the round! You may get investors to agree to the price & equity, but the devil is in the details! Get it in writing!
- Stephanie Benedetto, CEO & Co-Founder of Queen of Raw
I found that it's hard to repeatedly answer the same questions over and over again while continuing to express authenticity and passion. It requires practice and a lot of focus.
- Judd Schoenholtz, CEO & Co-Founder of Open Listings
Pre-screening potential investors to identify whether your venture is a potential fit. Most investor conversations end before they begin because your venture isn't consistent with their thesis (stage, target, industry, size of round, etc.)
- Alex Kruglov, CEO & Co-Founder of Smiletime
It can be tough to raise money for a completely new idea or concept because investors aren’t always the most technical people, and there are no comparisons they can make to help value your business. This is especially true in the seed stage.
Foundersuite - A stack of software tools that helps founders in the startup stage manage and organize their investor relations
Insightly - A CRM for small businesses who want to build relationships, accelerate sales, and deliver projects
AVC - Fred Wilson is a 30 year VC veteran who shares his daily thoughts, opinions, and reviews on this funding-centric blog
Both Sides of the Table - A blog from the double perspective of Mark Suster, an entrepreneur turned VC at Southern California’s largest and most active early stage fund
Dreamers // Doers - A high-impact membership community for trailblazing women that also hosts a startup-focused blog
FeldThoughts - A blog where VC and entrepreneur Brad Feld shares his insider tech perspective
Paulgraham.com - Programmer and writer Paul Graham’s website is a curated collection of startup resources, including a link to Y Combinator, the incubator he started, where he still invests in early-stage companies
SaaStr - A community of SaaS enterprises replete with information about software, startups, and funding. (Saastr.com was invaluable in helping us understand where we were relative to the market, and how an experienced SaaS founder would look at our business! - Tim Chaves, Founder of ZipBooks)
Techstars - The worldwide network that helps entrepreneurs succeed
The Twenty Minute VC - A podcast about venture capital, startup funding, and the pitch
WAMVentures - A business advisory firm that serves as a catalyst for primarily women & diverse business leaders, offering guidance and workshops
Women 2.0 - A leading brand for women in tech that connects candidates with workplaces, hosts a blog, and is focused on closing the gender gaps in founding & investing
DocSend - Helping you find and share the documents that close deals
Dropbox - A free, online file-sharing and cloud-based storage platform, great for organizing investor documents
Google Sheets - The Google Suite’s free, online spreadsheet editor, perfect for managing investor pipelines
2X In Tech - A conference with thought leadership, workshops, and networking amongst female tech founders
AirBnB Pitch Deck - A great example of an early deck that turned into a successful company, suggested by Jugal Anchalia
AngelList - A worldwide startup network for finding and posting startup jobs, as well as investing
CrunchBase - An online database that accelerates innovation by bringing together information on companies and the people behind them
F6s.com - Connect with accelerators, funds, and investors and grow your startup
Gust - A global SaaS funding platform for the sourcing and management of early-stage investments
Venture Hacks - Startup advice from the founders of Angel List
Equidam - An online tool for calculating your business valuation in minutes
eShares - The #1 cap table management platform
Other Helpful Tools
Calendly - A scheduling tool that cuts out back-and-forth and saves you time when setting up investor meetings
SketchDeck - Creates high quality sales and marketing assets, on-demand
UberConference - A conference call alternative with a host of advanced features
If you enjoyed this breakdown of fundraising and are looking to get more advice straight from experienced founders, join us in NYC Monday, July 24th for our panel “Your First Venture Round: Fundraising Advice from the Experts.”