10 Venture Fundraising Do’s and Don’ts

Fundraising is a CEO’s most important and time-consuming job. Delivering a compelling and organic pitch needs not only practice but finesse. We understand that pitching can place entrepreneurs in a vulnerable position, after all, what is more personal than your passion?

by Denise Stephan in Crunchbase. Originally published here

If you don’t want to fundraise, don’t become a CEO.

We break down the basics based on the pro’s advice. Here’s a rundown on how to find, cultivate, and build the most important partnerships in your business:

1. Relationship Building Is Crucial – Start Early

If you’re looking to build a company with venture funding, you will be a fundraiser for at least the next five years of your life. Networking and a lot of relationship building really matters when you’re trying to make your next raise.

A natural introvert? A great way to keep investors engaged is to add them to a newsletter of quarterly updates. Even if you don’t receive a note back, chances are the investor will read your update. Shooting over a thoughtful and quick news mention or a cool new feature release is an excellent way to remind investors you exist.

It’s crucial to keep relationships going, even when you aren’t looking to raise money quite yet, or are too nascent for the investor’s target stage.

2. The Venture Community Is Small, Don’t Burn Bridges

This one is pretty self-explanatory. The venture community is shockingly small. Any burned bridges may eventually come back to bite you, particularly when you are looking to raise funds. Our best advice? Don’t burn bridges – you never know when a past relationship will come back to haunt you.

3. Build Passion Into Your Pitch, Every Day

The hardest job you will have as a CEO is keeping the passion alive, and as hard as it may be, it is your responsibility to bring that passion everytime you pitch. This is more than just for investor meetings, but for when you pitch candidates and employees.

Passion keeps engagement and retention high and keeps employees from checking out. Similarly, investors want to know that building your company is your passion, and exactly what you want to do for the rest of your life.

4. Follow up Three Times

Absolutely follow up three times with an investor. No, you will not be scaring them away. Now, don’t do it over a two-day span, but over a two to three week period. Follow up quickly and consistently.

With fundraising as your highest priority, ensure you have a couple of partners to help you manage the communication. Fundraising is a big and vital project and should be treated as such. Enlist your EA or COO to help send out collateral. 15% of your dedicated partner’s time spent managing how many times you’ve followed up, who has your deck, and the like.

5. Pre-Qualify Your Investor

Pitching to investors shouldn’t feel like a monologue of 20 facts listed by order of importance. Be sure to make pitching a dialogue, which entails prequalifying an investor.

“It’s shocking how few people ask what is my investment criteria.”
– Courtney Broadus, Spider Capital Partners, Broadway Angels

Prequalify investors to maximize everyone’s time.

Quickly establish the investor’s investment criteria. Before going into your full pitch, find out if an investor can provide the minimum capital you’re looking for and if they invest in your sector.

6. Don’t Run Your Business Like Fundraising Is the Main Objective

While your main goal as CEO is to fundraise, you need to be careful not to run your business as such. That means not telling your employees that you need this particular story to be told when raising a Series A or B. No employee wants be working at a company with that’s always running to raise the next round.

7. Focus, Focus, Focus

The most important thing as a CEO is to have focus and to ensure no one lets you deviate from that focus. Hone in on focus from everything from product roadmap to metrics. Every part of your organization should be aligned with your end story and goal.

In that vein, a big red flag for investors is a lack of focus. You must be able to speak intelligently about your mission and goals. Focus on which metrics you measure, and having a complete understanding of the market and its nuances.

8. Build Your Story

Run your business like your story is your main objective. Crunchbase CEO, Jager McConnell explains how right after he raises a round of funding, he will draft a pitch deck for the next round. Referring back to the pitch deck is a great way to see when you are gravitating away from your story, and to ensure you are always revising and adjusting your story accordingly.

9. Selling Metrics vs Selling a Big Vision

Your goal when pitching is not to have people join your religion, but to convince them that your business is one worth investing in, and will make your investors money.

Depending on your business and the stage of your business you may need to decide whether it’s better to pitch the hype or your strong metrics. Strong metrics that are eating the competition mean that you may not need to sell the dream because real metrics say the business is working.

However, putting yourself against competition can be tricky, particularly if they are large companies. Investors will be disengaged if you pose yourself as a scrappy team of 5 or 6 taking on a company of 300.

 10. Practice From Your Pitches

Identify your top 10 to 20 investors who invest in companies like you, are top tier or are competitors of competitor investors. Then put this list aside.

Practice your pitch with “junk investors,” and wait until your pitch feels organic. Junk investors aren’t necessarily bad investors, but they are the investors you’re okay not getting your pitch perfect with or not winning. Strategically select when and who to talk to, because you won’t get a second chance to pitch right.