The Bottom Line On Fantastic Startup Funding

The truth about startup funding is not like television, movies, and the news makes it seem.

Initial funding

In 1998, I raised seed money by convincing a single investor. In 2018, we raised a seed round after attending an accelerator. In 2022, we raised a seed round from a friend of a co-founder. In 2023, I raised angel funds to start a company.

It gets harder

The easiest time to raise funds is when the company is just starting. Especially when you are coming off a recent exit; however, having multiple exits can only get you so far unless you have a strong network of investors.

Network

From the investors I learned from, it takes around 100 potential deals before one is completed. This means 100 decks, 100 pitches, and 100 general partner meetings before they decide to invest in your company. For this reason, you must network before you raise. Network hard for a year or two before launching a company.

It takes time

During extreme frustration, I was nearly in tears when asking a founder who had just raised a $3 million seed what I was doing wrong. He said, “How many VC meetings have you had?” I replied, “We had three pitches and no offers.” While laughing, he explained, “It took me 50 this time.”

Introductions

The most critical first step is a trusted introduction. Use your network to get introduced to the investors you want to pitch. Before becoming an investor, I thought this was silly. However, a trusted introduction makes me much more likely to move through the process with someone.

Series rounds

After your seed round comes the hardest raises. These are so difficult because you have to show maturity as a founding team and a company. An incomplete financial model, missing legal documentation, or amateur financial reports will not do. You must spend money on accounting and legal before even attempting to raise a series round.

Timeline

You should constantly be raising money, but never in public. Instead, when an investor asks, “Are you raising money?” Casually explain, “We are not ready yet to raise the next round. Are you investing right now?” The reason is that deals are only hot for a limited time. Set time limits on when you are raising money and build a list of interested investors before opening the round. Sometimes, investors ask to invest now, but others will remain interested through your investor newsletter.

Newsletter

You must send an investor newsletter monthly to every person who expressed interest. This newsletter should include critical milestones, exciting announcements, and stories of how the team is progressing. What you are reading now started as an investor newsletter.

Conclusion

Just as you would not go on a date without first showering, getting a haircut, and dressing your best, the same is valid for pitching investors. The introduction should be strong, the deck clear and exciting, and the pitch well rehearsed. Have an answer to “How much do you want to raise?” and “What will you do with the money?”