| Do you need to raise capital in order to make payroll and keep your company alive? If yes, welcome to one of the most stressful periods of your business. In my experience this is a terrifying 3am-stare-at-the-ceiling territory level stress because it combines the prospect of your idea failing + damaging the great people who have quit other good jobs to come work for you. Spend as little time here as possible. Get an independent coach / therapist that can help you process this level of stress. If you’re company is default alive and doesn’t NEED to raise right now then (congratulations, and) some of the below things might help you deal with the stress of fundraising: 1. Adopt the mindset that when fundraising it’s just as much YOUR job to say no to a potential investor as it is their job to say no to you. Most investors are not a fit for you. It’s your job to find the ones that are a fit for your business. Understand that the investor is incentivised to preserve optionality and give you an indefinite “maybe” rather than a quick no. In my experience great investors will give you a quick no with good specific feedback about why - that then lets you then calibrate if they missed an important point about your business (which means you need to level up how you communicate the story) or that you’re just not a fit for how they see the world (which is fine as early stage investing is more opinion than science). 2. View fundraising as a process - and structure that process in a way that best serves you. For me this means doing a lot of research up front about who might be a good investor for my business, preparing outreach messages and then crunching everything into a 90-day period from initial outreach to close (all money in the bank). The nice thing about how competitive VC has gotten is that they are all forced to broadcast their investment thesis in order to try and get inbound deal flow. Ideally target not just a fund but which General Partner at that fund so that you can draft initial messages that can say things like “Hi you’ve invested in X, and tweeted Y and Z which means we might be a fit for you”. It’s a three line email max. Use docsend for a teaser (max 10 slides) pitch deck so you know if they hit it. Understand that many investors will look at this on their phone so AVOID tiny text. If they hit the pitch deck but don't reply within 3 days email them again ask for a meeting. For a first round I like to have ideally at least 100 targets before I press the go button to send out all the prepared messages. If you’ve done great research then this should net you at least 20 first meetings as you search for a Lead (to price the round and set terms). Ideally jam ALL of these first conversations into the same 2 week window. If you let this stretch out over an extended period then some might be 3 meetings deep with you in DD while others you’re just taking the first meetings. This makes it hard for you to run a good process and having competing term sheets turn up within the same reasonable time window. 3. During the first meeting ask them lots of questions that let you qualify if they are a fit for you. It’s hard to have a list of generic questions to ask them as it depends on the context of your business but things like “do you Lead?” “what is your ideal investment size?” “do you have a target ownership percentage?” “can you give me examples of when you have led rounds in companies like mine?” “what is the decision making and approval process in your fund?” “normally how long do you take to go from first meeting to term sheet?”. If they don’t have good answers to these questions (or balk at answering them) then qualify them out as “Not a Lead” and move on. Stop talking to them until you have found a lead. 4. Do not believe positive language until someone gives you a term sheet. Words are free. I’ve seen VCs go 5+ meetings deep, repeatedly say things like “I will lead this round” and then say no. See my earlier point about their incentives to preserve optionality. Do not get your hopes up. The phrase "I am interested" is your enemy. Start to feel hope only if they send you a term sheet. 5. If you get a no ask for feedback - do not let them off the hook with things like “you need more traction” - push them to be specific about why they don't believe you will be successful enough for the risk you're asking them to take. 6. If you find a lead (and hopefully multiple competing leads) then negotiate terms, sign the term sheet and circle back to all the investors on your original list and invite them to Follow (if there is space in the round). If you don’t have a strong network or are doing this for the first time then lean on your Lead to help you. Great investors will do serious work to help you close a round fast. If you ask for help and your lead doesn’t lean in this is a red flag that they might be a bad investor for you. 7. Find ways to share the emotional burden. Getting told “no” over and over sucks no matter who you are. Find a way to share SOME of how bad this feels with your team (and then also share with them what about your idea that gives you the resilience to keeps you going). Authentic vulnerability helps build trust. If you know other early founders who are 12-24 months ahead of you then talk to them as well so you can vent and potentially learn some tips from them. 8. Good luck. This is a lottery if you are a first time founder without a good network. |