Founders who thought they had no personal time when they first signed up to pursue this Herculean task of getting a business off the ground will find themselves stretched further when it comes time to fundraising. On top of running a company, they’ll have to prepare pitch decks, schedule meetings, fly to tech and VC conferences, actually present their pitches and attend the meetings, and otherwise spend an unreasonable amount of time collecting rejection emails from potential investors.
But there are a few easy traps that take up an enormous amount of time for very little reward, including taking meetings with the wrong investors, cold-pitching everyone you meet, and throwing too much time into going after the small potatoes.
Here are five ways to increase your productivity during fundraising.
Ask Investors to Put Their Money Where their Mouth Is
Throughout the fundraising process, especially in the early months, investors who like an idea or a company will often tell founders that they’re interested in investing without immediate follow-through. Statements like, “I’d be happy to invest, let me know when the round closes” are commonly heard among early companies in the first stages of their fundraising.
It’s certainly understandable that an investor would like to wait until the last moment, even if they are genuinely interested in the company, just in case any new information comes up. In these cases, promises are not investments – but they can be!
Founders in this situation can operate on a rolling close, and soliciting each interested investor with a SAFE document or a convertible note, with a memo letting them know that the round is closing (because it will be, as soon as you get even your first investment!). By asking investors to put their money where their mouth is as soon as they voice their interest, founders leave less time for them to decline the offer, and they’ll have secured their first real investment (which is well-known as the hardest investment to land).
Go After Bigger Ticket Investors
When founders are trying to raise their first rounds of seed, it can be easy to get excited at anybody who is willing to give any money at all. However, by concentrating too much time into investments to the tune of $5k or $10k, they’re often just wasting time that could be spent going after larger whales – the kinds of angel investors who will toss a $50,000 convertible note their way, or a SAFE for $100,000.
In this early stage, founders are better off spending their time polishing off their pitch deck and pitching a few bigger angels than putting in hours and hours applying to small grands.
Know Who Your Investors Are
If you’re raising for your Series A round, it can be a full-time job in itself, involving hours-long meetings with investors, and going to tech and networking events all over the country. It’s during this period that you really want to pare down your list of potential investors.
Think strategically about who you really want to meet, and don’t bother with anybody who has no capital, no precedence in investing in your field or in your stage of development. Instead, compose a list of investors who you know would consider investing in you and who can provide the level of involvement you’re looking for. If you strategize carefully over your potential investors, in lieu of pitching anyone and everyone who listen to you, you’ll save yourself a huge amount of time, and avoid an equal amount of rejection.
Have Strong Numbers & Lots of Them
As you approach fundraising for your Series A round, you’ll have heard a lot of information on how to craft your pitch and what you need to have figured out as a company. The essence of what investors want to know, however, is simpler than it seems.
As a company, you want to prove you have a realistic projection of your company’s financials and that you’re fully aware of how your company will grow. This can be established using real unit measurements, including lifetime value per customer, monthly recurring revenue, gross margin, cost per customer acquisition, and other hardline details.
By memorizing these company stats, you get to cut straight through the chatter, right to the point of the meeting. Investors hear thousands of business plans a year, and what they’re looking for is often not simply a compelling story and a good idea, it’s proof that the idea is financially scalable, and that compelling story helps to drive real, trackable growth.
Make A First Impression Before the First Impression
Rather than trying to cold-pitch investors at conferences and events, or through LinkedIn or e-mail, founders can get much further in their efforts by asking their immediate network for recommendations for investors, or to put in a good word for you. As VCs see so many different pitches, it really helps to get a first impression in before the actual first impression – and this can be done easily by a mutual connection casually saying, “You should meet this founder.”
Now it is time to get started! Using these tips, you will be able to spend more time fundraising with investors who are actually interested in your company, increasing your chances of getting the money you need to grow.