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There’s a myth that VC fundraising is driven by story + metrics alone.
Some founders think you’re either crushing it, or a good story teller, and that not much else matters.
Its more complicated from what I’ve seen. Situational awareness is key.
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Some founders think you’re either crushing it, or a good story teller, and that not much else matters.
Its more complicated from what I’ve seen. Situational awareness is key.
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Take this scenario:
A startup has been going for 2-3 years and has raised $3M
Revenue is minimal, but there are major opportunities emerging
A year of runway could unlock non-linear growth
But they’re out of cash in six months
Would it get funded? It depends!
2/14
A startup has been going for 2-3 years and has raised $3M Revenue is minimal, but there are major opportunities emerging A year of runway could unlock non-linear growth But they’re out of cash in six monthsWould it get funded? It depends!
2/14
Orphaned startupsSolid startups can have trouble raising because the lead VC doesn’t seem as engaged - maybe they left their fund, it changed focus, or closed. A startup may be doing well, but not so well that it can overcome these issues.
3/14
BUT early-stage funds VCs can help signal strength to the market by writing proportional (or super pro rata) checks that alert new money there is a deal to be had. But for this play to work, you need someone who can write a meaningful check to galvanize action.
4/14
4/14
Out-of-season dealsSome startups are actually “crushing it,” but are doing so in obscure industries that are not en vogue with other VCs. In these cases, inside VCs can play a pivotal role in galvanizing new capital. Often, they’ll just fund the company themselves.
5/14
OR go the untraditional route. Pursue strategics that have a reason to get involved with the company. Think about pitching others besides the “usual suspects” of VC. There are many pockets of money out there - LPs doing directs, hedge funds, family offices, corporates, etc.
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6/14
Struggling startupsSome startups are legitimately struggling — lack of product-market fit, bad hires, or a founder thats gone. Despite a good faith effort, they’re unable to scale, but still hope should not be lost!
7/14
Some important things to considerStage-specific funds
Stage-specific funds have reserves set aside for scenarios where the startup doesn’t go up and to the right, and have seen teams overcome stumbles.
8/15
Founders rarely regret taking funding from a firm that focuses on the stage you’re in (seed/A/B/growth). As @dafrakel says “fund size tells you everything.” At @fcollective, we’re used to companies needing time to find their footing; we expect it.
9/14
9/14
Sell your wins and make them achievable
Be sure to make the objectives realistic (e.g. 3 enterprise accounts with a strong NPS) and communicate your enthusiasm to the investor group regularly. See https://hackernoon.com/a-fill-in-the-blank-investor-update-template-for-busy-founders-d431c227347b
10/14
Be sure to make the objectives realistic (e.g. 3 enterprise accounts with a strong NPS) and communicate your enthusiasm to the investor group regularly. See https://hackernoon.com/a-fill-in-the-blank-investor-update-template-for-busy-founders-d431c227347b
10/14
They WANT to know how the sausage is made
VCs want to feel part of the story. If you solicit input, get their help on introductions or closing a candidate, they will feel more engaged and compelled to keep investing. If they haven’t heard from you; out of sight ...
11/14
VCs want to feel part of the story. If you solicit input, get their help on introductions or closing a candidate, they will feel more engaged and compelled to keep investing. If they haven’t heard from you; out of sight ...
11/14
I don’t want to overstate the case. A startup with absolutely no traction is going to struggle, no matter who is on their cap table. That said, don’t buy the lie that your choice of investor won’t impact the capital available to you later in your journey.
12/14
12/14
There are a lot of great startups that only exist because they had VCs who stuck w them through dark times.
Getting that next round, whether a bridge, step-up, flat round is a much more nuanced, multi-variable equation that founders think.
13/14
Getting that next round, whether a bridge, step-up, flat round is a much more nuanced, multi-variable equation that founders think.
13/14
I can’t overstate how rare it is for startups to go up and to the right out of the gate. Most startups will have multiple near-death experiences before notching a billion-dollar valuation. Read the room like a good poker player and you can get that round done! 
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