Funding Hacks - How To Build A Funnel To Raise Venture Capital.

Funding Hacks By Nathan Beckord (CEO of FounderSuite.com) 

We recently invited Nathan Beckord, CEO at Foundersuite.com, to speak with our network on Funding Hacks for startups on the fundraising journey. 

 Let’s begin with what fundraising isn’t ... 

Fundraising isn’t “Can you introduce me to investors?” That is too broad a question to be acted on and it puts the heavy lifting of figuring out who you should be talking to on another person’s shoulders (and this is actually your job as CEO). 

Instead of an unfocused approach, think of fundraising as “Sales 101” - as simple as B2B sales:

Lead-Gen → Qualify → Engage → Close

Fundraising is like a funnel where you start by building a database of potential investors and then screen them according to geography, stage, sector and focus. The important step is to find the right contacts and then find ways to receive warm introductions. Upon establishing that, presenting your pitch and performance about your company will lead you to the last step -- to sell your company’s equity to investors. But make no mistake, all of these steps --- from finding leads to closing them --- are YOUR JOB. 

Lead-Generation: 

In the real world, typically only 5 percent of total investors (VC’s & angel investors) become your successful leads and you get rejected 95% of the time. The idea is to pitch to more than 100 investors at the beginning. Here are some resources:

1. AngelList has almost 35,000 investors listed (with some VC’s) & you can search them on the basis of market, location, school or employee. 

2. FonderSuite.com has a list of 40,000 funds which includes VCs, corporate VC, private equity, family funds & 100,000 individuals angel investors. They all are tagged by type of investor, industry, city, location, along with the summary of what they have invested in the past & their social media handles. By Q1 2021, FounderSuite will have Investing Insights eg. if the investor is actively investing or taking a break & what is important to them. 

3. Crunchbase - the best way to search is make a list of the 10-12 companies that are similar but not directly competitors and add them in crunchbase to see their investors. Or look up your investors and see who all are their co-investors. 

4. Subscribe to newsletters from PEHub, InsideVenture, VenturePulse & StrictlyVc to know who is getting funded and who is funding them. The best venture fund to pitch in is the one who just raised a new fund & is looking for new deals because in the first two years they invest 50% in new deals (and reserve 50% of the fund to double down on their winners).

The other places to look for potential leads are Quora, Twitter, PitchBook & CB Insights (paid databases). 

Mining your network and Linkedin is the best tool to search for 2nd degree investors. Read their profiles and see if they fit in your list, then find a mutual connection willing to introduce you.

Filter & Qualify the Leads

The best sales professionals don’t chase every sales lead but rather spend a lot of the time qualifying them, ranking and prioritizing them. Momentum is an important component of fundraising for your deal and It’s hard to get your momentum going if you are out there chasing poorly qualified targets e.g., people who don’t invest in your industry, aren't actively fundraising or don't invest in your stage. 

Some of the filtering criteria that helps qualify your potential good leads: 

1. Remove the investors who invested in competitors 

2. VC’s who haven’t raised a new fund will end up mostly as a pitch practice session

3. Angel investors who haven’t invested for awhile shouldn’t make the ranking list

4. Leads in different sectors or those who invest in different stages then you are currently at, aren’t your best bet at this time

5. Someone who has a bad reputation shouldn’t make the qualified list

After removing investors based on the criteria above, your “qualified lead list” will have about 25% to 30% fewer contacts than your original list. Find your strongest mutual connection path to your investor. In the case where you have zero mutual connections, contact the founder directly in which the investor invested in the past and ask for an introduction. There is a great culture of founders helping other founders so make use of that dynamic. 

Engage

Get organized with the list of the leads and see who is your closest contact and ask for the introduction. Foundersuite’s CRM has a very neat tool to organize this information. 

Before you contact the leads make sure your pitch is awesome and the best it can be. Ensure you have practiced it extensively and incorporated constructive and true feedback.

Start sending an intro request email to your connectors, asking for the introduction to each investor on your short list. 

Some attributes of this intro request email:  

• Keep it short - 2-3 sentences

• Describe your your company, what round you’re raising

• Include your most sexy/impressive traction / achievement

• Include a link to a teaser deck (5 slides - problem, solution, market, traction & team).

Hustle like you have never hustled before!  

Your deck will get refined after each and every pitch. Keeping momentum building for your deal is your primary job. Investors should know you have others interested. This is where having a process and a timeline to close the deal is key. 

Send a company update on your progress to everyone on your list and the best plan is to start sharing your progress 6 months before you start raising capital. 

The update should include: 

• A brief company overview (to refresh the readers about what you do)

• KPIs

• Key wins / progress points

• Looking ahead 

• Include an image of your team & your product 

In the case where you are getting some traction but have no one to lead the round, keep hustling & use the conditional commit approach “Give me an amount that you are willing to commit and tell me any conditions”. Collect these until you have your round 30% oversubscribed. Then set the terms. 

Closing

Every time there is a meeting with an investor, ask them for their interest level, typical check size and next steps. Any next steps is always good news. 

Make them chase you a bit by asking them questions like how they grow their portfolio companies & how will they help you grow, etc.  

Expect at least 2-3 meetings before getting into term sheets. 80% of the hustle will be to get the first term sheet and 20% will be to fill out the round. 

Follow-up frequently with investors as it can be hard to get an actual ‘no’. There are some people who will ghost you but don’t take it personally.

Use the “handshake deal protocol” when they give you a verbal yes. Confirm it in the email when they say they are “in”.

The most important point is “Don’t let up until the money is in the bank.”

Fundraising is just the beginning! Now you need to perform -- so go and have fun. 

Some Cool Resources: 

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