A concise and tactical guide to fundraising with everything you need to know. Must-read for anyone planning to raise venture capital.
Ryan has formed his intuitions on the topic the hard way through trial-and-error, and has the results to backup his strategies with his company Bolt raising huge venture rounds.
His framework for an ideal pitch is also the perfect minimal narrative to explain any venture-scalable company.
Always remember: you are worthy. Money is plentiful these days. YOU are the scarce resource. You're the one actually building the thing!
Self-confidence is the key to fundraising.
Avoid high-ego investors at all costs.
Investors want to back a founder who is relentless, unique, postive, and kind.
Uniqueness is especially essential. Investors meet with hundreds of founders and only invest in a few. You need to stand out.
Ryan keeps the following qualities in mind - visionary (creative, bold, unique vision), thinker (critical-thinker, open-minded, willing to change mind), warrior (you will run through walls to win).
Fundraising is purely a matter of momentum.
The three critical steps of building momentum to fundraise are:
- Lay the soil - build a network of champions
- Plant the seeds - start casually meeting investors
- Send it - start fundraising
The likelihood of an investor taking you seriously has a lot to do with the way you're introduced. Strong introductions are critical. The best introductions come from other founder friends.
Casually meeting investors before your raise without raising has several benefits:
- It signals that you care about relationship building
- It signals that the upcoming round will be competitive
- You will get to know investors and determine whether they are good fits for you
- You can't get NOs
- You will still get YESs
To get intros to investors, see who in your network is connected with investors and ask for an introduction. Prioritize strong connections.
The first impression you make on an investor is everything. Focus on dialogue, not decks. YOU are the business - the investor should be bought into you as the founder first.
Email immediately after your first meeting to setup a follow-up where you can dive deeper into things.
The more touchpoints you have with an investor, the deeper your relationship.
Talk about milestones that lie ahead, and then to build momentum, when you hit milestones (especially faster or better than expected), you can use that as an impetus to raise.
Start with a small round and then build up the amount of capital you're raising.
Use staggered valuation caps - reward people who believed in you and invested in you earlier with better valuation caps.
When an investor expresses that they want to invest, don't immediately say yes. You should first ask them what terms they typically invest at, introduce them to another co-founder, and ask for references who they've worked with in the past.
It's important to talk to references to determine the character and helpfulness of an investor.
Make sure that the investor you're working with has decision making authority in their firm.
Never give away board seats in a seed round. Try not to give preferred board seats away for as long as possible.
One founder or co-founder should be explicitly responsible for fundraising.
There are several common pitfalls to avoid while fundraising early rounds:
- Avoid bringing Series A/B funds into an early round.
- Don't reveal that you're fundraising too early in the process.
- Ensure that fundraising is the full-time job of one founder. Plan for at least three months.
Use SAFEs for early fundraising rounds.
The pitch is your most effective fundraising tool. The best way to have a good pitch is to know your stuff. The most important pitch isn't a polished one, it's a casual one.
The perfect pitch: (I love this framework)
- Here's how the world works today.
- Here's how the world should work in the future, but here's what's broken/missing.
- Here's why no one has been able to solve this problem so far (potentially reference folks who have tried and failed). This is a massive opportunity. Whoever solves this problem is going to have to do X, Y, and Z, but will be rewarded heavily.
- Here's the secret to how we're going to fix this. A secret can be a unique insight, approach, technology, invention, or some shift or change in the world that has opened up an opportunity with you being the first mover.
- Here's why we're going to execute the best (best team ever, traction thus far if applicable, your unique experience as a founder, etc.).
For later rounds, many things stay the same, but there are a few differences.
You may need to start using materials like decks and data-rooms.
You'll have to start relationship building far in advance of a fundraising round.
The only way you'll be able to negotiate on terms is if you have other term-sheets in your hand.
Always come back to the following two critical principles:
- Relationships trump metrics - You want to find, work with, and get support from investors who are there for the right reasons and who value what you're trying to build.
- Momentum is everything - The relationship building is the groundwork. But you still have to create a compelling event or "moment." And when the process starts, you have to drive urgency.
As a founder, you should spent considerable time getting your mind and body right. Eat well, exercise consistently, sleep well, take breaks, and meditate.