Fundraising Playbook

Updated: May 9, 2020

A founder should bootstrap if possible and then start raising money. The time to raise money is not when you need it but probably much before that, roughly 4 months for seed and 6-8 months for series stage. Fundraising is a distraction for the founder, so you should not engage in fundraising unless you’ve made up your mind. At early stage founders cannot sustain the distraction of fundraising for long and hence they should quickly get it over and as efficiently as possible. The principles here are described for a seed round and pre series however, these may also be applied to advanced rounds. Step 1: Internal Assessment  Timeline – 1 week ​All startups are not fundable hence in order to save time and run the fundraising efficiently, founders should objectively assess if the startup is funding ready. The funding readiness of a startups is subjective but almost all the investors have similar grading mechanism for evaluating investment opportunity. The risk appetite may vary. You can check venture handle funding readiness here. ​So, how would a founder learn if the startup is ready for funding?​Typically, A good way to introspect is to look at following factors:​

  • Market – At seed round you would have a clear definition of the problem you’re trying to solve, clear and concise view of the problem and the solution. A good measure of this is if you’re able to summarize this in a single line. Can you describe your company in 60 seconds?

  • Team- As a startup, you would typically have core founding team in place with complimentary skills in technology/domain and business. Mostly, this initial team will involve the people who would have a deeper insight of the market opportunity, either by the virtue of their experience or education

  • Traction:  The team would have delivered an initial product that matches customer’s needs and is being adopted at an interestingly rapid rate. How rapid is interesting? This depends, but a rate of 10% per week for several weeks is impressive. And to raise money founders need to impress

If you can say yes to all the above questions with certainty, then it’s time to plan the fundraising process.​ Step 2: Planning Timelines: 1 week​ Once as a founder you’ve decided to initiate the process, it is important to realize that it is unlikely that the process will take good amount of effort and focus to close a round. There are no set rules but typically, A seed round may take anywhere between 4 weeks to 4 months, in some cases even more than a year, so make plans accordingly.You would need to assign a co-founder on fundraising full time, that person should be a good communicator and will dedicate significant number of coming weeks even months or year chasing money. So have a backup plan for somebody else to share his workload while he is on the street.  In a startup that means straining the team that is already stretched. Time you process slightly earlier than you need so that you can plan well. In the months and weeks leading to process focus on major releases and getting some good traction as it will be important. Step 3: Preparation Timelines 3-4 weeks​Just like a warrior before going on a war ensures that he has got all the tools and weapons in his arsenal, as a founder you would need some tools to do the heavy lifting. Start working on these tools. This is not a one-time thing and will have to be refined as you meet more and more prospective investors.

  • 90-180 Day plan/projections

  • Pitch Deck

  • 60 sec elevator pitch

  • One-page summary

This is the bare minimum kit for investor outreach that you should have in place once you decide to get into fundraising mode. Each of these items will be needed at different point in time. There are other legal and fundraising documents that you need once you have commitments from the investors, but you can get those along the way.​ Step 4: Investor Outreach Timeline- 5-6 investors per week till you a close​ Founders are expected to find their way to reach an investor. There are 2 approaches in investor outreach:

  • Warm outreach: Clearly, the best way to connect with an investor is via someone who knows that investor. Don’t spam investors with your business plan. Instead, convince someone who has relationship with investor such as partners from Guild of Founders or any other friends/acquaintances to introduce you to investors. An effective middleman is simply someone investors listen to often another entrepreneur or investor. The absolute best way to connect with an investor is via an investor who invests in your company who will connect you to another investor.

  • Cold Outreach: The other options is directly reach out to investor at events, emails them, connect on Linkedin, attend pitching session like fundraising Boot-camp from Guild of Founders and others such networking events. Cold outreach is also very useful for founders and provides many leads.

A key fact to remember is that investor outreach is more like sales in a B2B context. As a founder, you must focus on building a relationship rather than treat investor as a wallet.​    Step 5: Follow up Timelines 4- 20 weeks ​Once you’ve made your pitch and met the investors, you will have to follow up with investors without upsetting them This needs a very balanced approach as some investors will just buy time and not commit while some investors may be genuine and may need time to evaluate the opportunity. Here are few tricks to efficiently follow-up: Stay on the radar — You need to find a very polite way to persistently be on the top of the radar screen of your VC. Start with a very short thank you email the day after your pitch. If any actions were agreed this should be in the email. If they said they’d use the product it should have the password. If they wanted to talk to people, this should have the contact details. If any junior people attended send them separate emails and help them get up to speed on the product. It is much easier to follow up by calling the junior staff. Circle back and keep the investors updated — After a week or two has passed and you haven’t heard back it’s time for step 2.  A polite follow up email saying, “just wanted to follow up with a quick summary of some exciting news.” Yes, I know only 2 weeks has passed. That’s why in your original meeting come back with news that you would have mentioned as work in progress, for example a product feature or an advertiser deal or a metrics that you have achieved, Just a good sales tactic, just offering a bit of new news that renews their interest. Find a way to help the investor — This a not possible all the time but a good way to build up a relationship. For example, do you have access to an event that’s coming up and you want to invite the investor? Whatever. Doing a “not over the top” favor is a good way to build rapport. Time is not your friend here. Every day that goes by without hearing back from a VC is reducing the odds that they will engage. It is up to you to estimate whether the VC you pitched is a prospect or not. Multiple endorsements / touch points — The same strategy that works to get intro’s to people work to get momentum from people. You may have multiple touch points. It needs to be masterfully orchestrated by you but very subtle. You need to find out who influences the partner. Who knows them well or at least somebody that they see on a regular basis? It needs to be somebody you know and trust. The more people who mention you the better. A sense of urgency — Investor don’t not to miss opportunity of investing in hot startups. This is why Demo days of Guild of Founders work perfectly well as many investors and many startups come together. One investor late response to founder may result in another investor’s gain.​  But in other context, how do you create urgency, First, you do need to create multiple interested parties. You can’t fake it. If all else fails you give the VC a call with a very subtle and polite message, “Just wanted to keep you updated on our situation. We’re getting some strong interest from a couple of firms. We don’t have a term sheet yet but seem close. We really liked your firm and just wanted to get a sense on what else you need from me to help your process.”

Investor Outreach Guild of founders provides investor outreach tool to find and connect with suitable investors. This tool used along with funding guidelines can significantly reduce the time and effort in fund raising process for founders.​​

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