I am fairly confident there are at least 10,000 Medium posts, 20,000 WordPress articles, and over well over 1,000,000 Tweets on How to Get Funded.
It bores me personally, but I know it’s an important topic. Raising money for many CEOs is one of the their top 5 priorities. Without venture capital, I’d be nowhere. Both of my first two-startups were venture-backed. And it’s a weird, strange world that until recently was highly opaque.
Now having been on three sides of the table — founder 3x, worked at someone’s VC firm, solo investor — I’d like to take a moment to boil down all the possible advice I could into one learning:
The Highest Chance You Have to Get Funded is When the VC Already Wants to Invest Before The First Meeting. Before you’ve even met him or her.
Trust me. VCs claim to “meet” 1,000 or more start-ups a year. But that’s not really possible. No one can take 1,000 coffee meetings. Not really. They can flip through 1,000 emails, delete them, shake 1,000 hands maybe. But it’s all just too many. So as a CEO/founder, you have to stand out. And then of the say 100 potential investments a VC might take seriously … they know only maybe 10-20 are going to end up being in their sweet spot. A deal they really want to do.
And while every VC looks for different things, at different stages … they know what they want to fund, at least usually. It may be a repeat, successful founder. It may be traction in a very specific space. It may be very certain metrics. Etc.
So when they “hear” of a potential investment is right in their sweet spot the right way — they make that meeting happen. That one doesn’t take 90 days to schedule. It gets scheduled that week, or even, that day. That deal gets brought to the partners’ Monday meeting the next week. They move when they see a hot prospect. Just like a great sales rep does.
Ok you say, but how can I possibly make a VC want to fund me before I even meet her or him?
The following paths work just fine:
- A super warm intro from an amazing founder / seed investor. If one of the top CEOs a VC has invested in says “you have to meet Diane, she’s the best founder I’ve met this year” –you take the meeting. That day. Similarly, VCs invest in stages. If the top VC one stage earlier (e.g., Seed if you are Series A) says “this is my best investment” — you take this meeting. Now.
- Amazing PR, press, and customer engagement. If everyone on Twitter or ProductHunt or Stackoverflow or Hackernews or anywhere is saying you are the next amazing tool, that gets folks attention that are interested in your space. Mediocre PR doesn’t work. But “everyone saying good things” for real, works well.
- An epic cold email. Cold emails do work — if they sell the entire pitch on their own. Craft a no more than 40-line email (or so) that encompasses the entire pitch. Traction, metrics, team, logos, and vision. All of it. Yes, you can do this in one email that isn’t a ramble. If that email is so compelling you look like a Top 1% opportunity, you will get the meeting. Almost no cold emails meet this bar. But when they do …
- You are super hot. This isn’t you, yet. This is more relevant for later stages. Everyone wants to meet with Slack. But the one thing that is relevant to you is they all already want to invest in Slack even before the meeting. You create similar energy and momentum, just at an earlier stage, and the same thing will happen.
- Sequoia, Andreeesen, etc. is going to give you a term sheet. This is hard to play for 99% of folks, but it does mean other VCs, at least some, will want to take the meeting Just don’t overplay this if it isn’t true, or if the social proof is mediocre.
Note I added “super”, “amazing” and “epic”. You have to stand way, way out.
This is one reason YCombinator is so, so successful. When 500+ investors walk into each Demo Days, they already are assuming there are 1-2 companies they will want to invest. VCs think it’s just their job to find those 1-2. That is something special. EF may have this in Europe, but no one else has this. No other accelerator has every investor coming assuming there is one deal they at least probably should do. The investors literally, truly come with a checkbook. They already know they want to invest before the “meeting”.
If you can reproduce that, you will get all the meetings you want.
Now flip this around. What if you just “ask for coffee”? What if you “want to pick a VC’s brain”? I guess that works sometime. But what are the odds that makes the VC want to invest before the meeting? Zero.
Personally, every single investment I’ve done I wanted to invest before the first meeting. So maybe I’m biased.
But I can tell you it certainly works on me. And almost all my traditional co-investors, too.
(Cross-posted @ SaaStr)