By the time I got to my first venture, I was clear that the path to money was going to be hard. A soul-grinding, mind numbing, frustrating experience. I did believe however that it would be straightforward.
I thought: “There’s a doctrine. You study it, and you’re good”. It goes something like this: First make a 10-15 page deck engineered to attract enough positive attention to get you a meeting. Take the meeting. Show you’re good at business development. You get basic finance. You know how to market. You follow the rules, you tell a great story, you’re full of morsels of market wisdom. You get funded. Right?
This method works – it’s not just folklore – but it didn’t work for me initially. I was lacking the network, the numbers, the experience. And oh, God, did I try in the beginning.
Early on though, I realized a few of things.
First, if I have to do this thing for months at a time I need to do it in a way that I feel alright during the process.
Secondly, history is written by the victors. In this game, no matter what you do, no matter what your personal goals and values are, it’s the result that will deem you successful or not for the world. So follow the path that works, not the one that comes recommended.
Last but not least, always be forthcoming with facts, tell the truth. It saves a lot of time and helps discern the “yeses” faster. As with most other things in life, fundraising is a numbers game.
When fundraising, make sure you feel good.
When undertaking a tough and lengthy task, it’s crucial to feel good. Now, there’s a difference between feeling good and feeling comfortable. Uncomfortable is good. Keeps you on your toes. Keeps you sharp. But there’s also a difference between feeling uncomfortable and exposed. “Exposed” is the state when your actions and your beliefs are in dissonance. Exposed also equals “stressed” and stressed is counterproductive. Anything that spikes your cortisol above acceptable limits should be banned. You’re an exec fundraising, the last thing anyone wants to sense is fear. Maintaining composure is imperative. And if a relaxed countenance is not achievable certainly abstain from stress inducing situations, set ups and choices.
For instance, don’t “prettify truths”. Don’t try to extort intros. Don’t front. Irrespective of impact, abstain from anxiety feeding behaviour.
Generally, no matter what advice you receive, make sure you feel good with your actions. Alignment of actions and beliefs is crucial for consistent performance.
Following what works, not what’s prescribed
The first time I raised money, I raised ~£200k. Of that, ~60% came from people I had no previous connection to. No intros. No common friends. No school classmates.
Would I have done it again? 100%. Was it my first choice or recommendation? Certainly not. But I didn’t have the option. So it was decided. I was going to get complete strangers to close my first.
In contrast, here’s the traditional wisdom:
Find founders and/or people that can intro you to others. Take coffee meetings. Be nice. Help them. Then eventually ask for an intro to investors. Blah Blah.
And I did that as much as possible. There’s merit to this approach. But in my case, burning money like crazy, coming off a corporate spin off and having two months of runway at the time was not providing the stable footing required for building this kind of long winded relationships. Also, how many coffees can one drink per day really?
More importantly, I didn’t have a large enough network in investment, and my friends’ intros were either not enough or would not pan out in the desired timeframe.
What I did have was a fundamental belief that we are a good team. Resilient and adaptable. We were worth the bet.
If I spoke to enough people, a few would share my belief and we’d bank the needed cash till we can form a more concrete view of the business.
If you have a good idea, try it
So I decided to proceed in an untraditional approach to fundraising. I went cold. First, I spent a day stitching together data from AngeList, LinkedIn and other networks. That provided me with a list of professional investors. To get started and test my approach I qualified leads (investors) based on really rudimentary parameters i.e. stages invested, number of investments, connection degree. Finally, I blasted every single investor that passed my lead qualification stage. I think I ended up with something like 2.000 leads in my first list.
To diminish manual work, a bot was tasked with connecting and initiating conversations with people on LinkedIn. I would pick up conversations once signs of engagement were present. It was a very elaborate scheme, one that got complex as I was moving on, and probably deserves its own post but let’s just say that it working really well.
It only took a few days and I was suddenly connected to 100s of angels, VCs, family offices. Eventually this process became more targeted but initially I didn’t care. I just went on a whim. Experimented.
The result is that I pitched around 40 people I have had no previous connection to and closed the money I needed. More than money, I formed meaningful connections with individuals I respect and have kept in my close network. Oh and definitely, opened up doors that previously were closed.
Were mistakes made? Obviously. Does it matter? Not really. Did the funding close? Yes. Did we ‘win’ against all odds? Yes.
If something seems like a good idea, try it. People advising to the counter should serve as a caution, not a mandate to follow. Do what works for you.
Pitch like you’d pitch your friend’s friend.
Everytime I write an email to a new connection, investor, partner or client I imagine that I’m talking to a person I like but I am not familiar with.
I aim to write with friendly tone, get straight to the point, raise my request yet not in a pushy way. Above all, maintain transparency.
During fundraising founders often seek advice and feedback on their decks, business etc. Feedback will rarely be music to your ears. For some, this can be overwhelming and try to conceal or prettify their weak points.
Acceptable? Maybe. Factual? Yes. However, is this how you’d communicate your business to a friend’s friend? Perhaps not obvious at first, this is counterproductive, leads to time waste and misunderstandings.
What do you do instead? You lead with weakness. You tell the truth. The truth does not need to be bent to be attractive. Nor am I suggesting of course regurgitating the problems of the business as a conversation starter. It is narrative that presents an opportune moment. Example:
- We have found problem X for person Z.
- We have solution Y. We believe the solution is superior because of abc, the timing is great and the market is sizeable and up for grabs.
- Now is the time to act and solve 1,2,3 issues (weakness) that stop us from a homerun.
- Want to work together on this?
Also remember, a marriage. Your relationship with each investor might span the duration of the company’s remaining life. You don’t marry on first date. You wanna see the ugly side first. So do that, present your weakness. Don’t lie; stay true to your narrative. Explain why these issues are not insurmountable. If you get a call for a second or third meeting (sometimes you need to wait a bit, feel the environment, it’s not always good to rush) you’re on a good path. Else, you’ve saved a lot of time.
This is perhaps the most important lesson I have picked up along the way. Here’s another way of looking at it.
Version A: pitching life at the prairie where everything is rosy.
First call/meeting: 100 people.
Second call/meeting: 80 people.
Follow-up: 60 people.
(due diligence or consideration)
Term sheet: 0-2.
And consider the cost of relationship management at those numbers. Juggling 60 names and email threads at time compounds. This is why most people say fundraising is a full time job.
Now, version B: The 8-mile-final-battle approach. Say it as it is but with style.
First call: 100 people.
Second call: 50 people.
Follow up: 20 people.
(due diligence or consideration)
Term sheet: 0-10 People.
I have done both. The latter works so much better.
Meanwhile the team won’t miss a founder because fundraising takes 40% of your time leaving 60% for working on the product/business instead of giving 10% to the job (barely catching up with what’s going on, no input) and 90% discussing with investors in vain.
Fundraising sucks. And as much as I try to reframe the process, think of it as a terrain to practice on self control, patience etc, really, it’s a grind.
So do it in the way that works for you. Conventional wisdom is good, but business is a game, the most complex of them all. Crafting your own path might mean the difference between reaching your destination or not.