- How to raise venture capital for your startup.
That's something I want to share with you guys.
You know, I get asked that all the time.
I've been fortunate enough to do it a couple times
for my own startups, and then I've helped probably 25
other companies raise close to, now, 100 million dollars
in venture capital.
So, I wanna walk you through a kind of a five step
high level process to do this.
I mean, I still remember when I was starting off working,
we were working on Flowtown, me and Ethan, my co-founder,
and we really had no clue.
I mean, if you feel clueless and you're just starting,
trust me we've all been there.
But we knew we just had to kind of do it and learn as fast
as we can.
And I still remember this one time when we were, first phone
call we ever had with investors, and he asked us what
our evaluation was.
And I don't know about you, but like, at that time, I didn't
even know what was a normal evaluation.
How do you even decide what your company's worth?
But, you know, we were a little ambitious.
We had a little ego.
And somebody told us once that mint.com did 600,000
on six million pre-money.
And we thought we were further along.
The product actually had revenue.
It was in the market, so we said seven on seven.
Why?
It sounded cool.
Now, at this point, it sounds ridiculous.
But anyways, the investor asked, and we said seven on seven.
You know, raising 700 k on seven million pre-money.
And he kinda went silent.
And he goes, how is everybody else responding to that,
the other investors that we had talked to.
And again, this was our first phone call, but with
confidence we said,
"oh, everybody's been really positive about it, and
nobody's had any questions."
And there was no lying in that statement 'cause it was
kinda true 'cause we hadn't talked to anybody, and we were
positive about it.
And there were no other questions.
But I tell you guys that story just so you know that
this strategy that I'm going to share with you,
these five steps, it's really fluid, and there's different
ways to do it.
By the end of the day, getting out there and starting
the conversations really help you get going.
So, number one is research the investors.
So many times entrepreneurs go out there, and they don't
actually have a plan for which kind of investors, or which
specific investors, they want to raise money for.
So, step one is to really go out there and do the work,
spend the time.
Go on AngelList.
Go on CrunchBase.
Ask other entrepreneurs that have raised money who the
investors who have invested that are in the market
or industry that you're in.
So, if you're raising money for a marketplace startup,
or an ad network, or a game, you really want to talk
to investors that understand those industries 'cause it's
gonna save you so much time from trying to explain something
to an investor that doesn't really get it, you know.
So, that's a huge lesson.
Do the work up front.
Do the research.
You know, the next thing I'm going to talk to you guys is
there's three phases to raising.
There's the fundraising process.
There's the close, but then there's the step before
called pre-marketing.
And nobody really talks about it.
But it is the work you do up front
before you actually say you're going to raise money,
so that when you go to do it, there's a lot of velocity
and momentum in that process.
And I would say the research, the investors, is part of
the pre-marketing phase.
And so are a few other steps I'm going to go over, but that
is usually half of the full time that you're
going to commit.
You know, when I try to do fundraising activities,
it's three to four months, so let's say six weeks will be
spent just on pre-marketing phase, which will be building
the spreadsheet of all the potential investors,
doing the research, finding out which entrepreneurs
they recently invested in, etc.
But that pre-marketing phase is where you don't tell people
you're raising until you're fundraising.
Okay.
So, that's the phase that you do all the work, and when
people ask you are you gonna fundraise, you say nope, nope,
we're just busy building the product.
But we both know that when you go to fundraise,
then it's a full on effort, and you don't want to stop
doing anything else.
The next thing I want to share with you guys is when you
talk to investors and when you first reach out to them,
you're product is your pitch.
You know, a lot of people ask me about building
a pitch deck, and what are the right slides, and what
information should they disclose.
And at the seed level, where most of the people watching
this, their first round of funding, it is all about
the product.
You know, it's really your pitch deck to the url.
So, don't think too much about all these other things.
You want to do the research and make sure you understand
the market in the competitive set.
But that url, that website, is gonna be what 99%
of investors go look at first and decide if they're even
gonna take a meeting with you.
Or, if you go through entrepreneurs, and the way I suggest
you do it, and I'll give you guys this tip, always ask
entrepreneurs that recently raised money from an investor
to make the introduction.
And trust me.
It may sound crazy, but most entrepreneurs that have just
raised money, especially if it was their first time,
if you email them, and their email is first name
at company .com, they may give you that 15 minutes.
And if you present to them in that 15 minute conversation
the excitement, enthusiasm, and the product, you show them
that you actually built something, they'll probably offer
to help, and when they do that, that's when you ask for
an introduction to their investor.
That's the way I've always done it.
I don't go direct.
I don't cold email investors.
I always go for an introduction.
And just to help you remember this, investors don't
want to meet with you.
They want to be introduced to you.
They don't want to meet with you.
They want to be introduced to you.
That's the right way to get investors.
Now, and because it's product.
So, there's this process, the pre-marketing,
the fundraising, and then the close.
What I'm going to suggest is when you're doing this,
as an entrepreneur, you run the process.
You do nothing else but actually fundraise.
If you're the founder, CEO, designer, programmer,
you're gonna have to understand that while you're going
through this process, if you truly want to be successful,
and most people that start don't actually get it done,
you want to make sure that you schedule that nothing
else happens.
That every morning you wake up, you work on the research,
the pre-marketing phase, you get the introduction,
you have the phone calls, you do all the work,
and you really, once you start fundraising, and you're
starting to meet with investors, and you're gonna see if
they're interested, and at what level they're gonna
be involved in your round, that's when you really just
want to keep that process running.
You want to go all in.
You don't want to be distracted by anything else.
If you have a team, you want to let the team know that
over the next few weeks, you're all in, and you won't
be able to meet for the morning meetings,
or whatever it is.
I can't tell you, and I can't stress enough how important
that is.
And then, the last part that I've seen founders just
totally screw up.
I don't know what it is.
Maybe they just feel like they get confident that they have
like six or seven investors interested, like 70%
of the round done.
But they don't sprint across the close.
Like if you're closing your round, the first thing I do
when I work with entrepreneurs is I ask them what day,
the specific date, are you gonna close the round.
And that date guides all other actions.
It guides the amount of time you're going to spend
in the fundraising process, the pre-marketing.
It is everything.
So, when you know that date, and you're getting and you
have momentum, and people are coming together, you want
to sprint across the close.
So, those are the five steps in strategies to get your
round done.
To have a great round of investors, you want to have a great
lead investor that puts in about 25%.
And then some great angels.
And maybe even throw in some advisors into your round.
That's gonna get you going on the right foundation
to build an amazing startup.
Hopefully you found that useful.
I would love to hear from you below in the comments.
If you have questions, I didn't go over a lot, like there's
real detailed stuff.
If you have questions, leave a comment below.
I'm also going to link up a special fundraising webinar
that I hosted a few months ago to help you kind of
go in detailed into this process.
The link is below in the comments.
I would love to hear from you guys.
I want to challenge you to live both a bigger life
and a bigger business, and I'll see you guys next Monday.