Fundraising Fieldnotes + A signal to strive for🚦 - 4.9.21
Hey - it’s Jason Yeh 🕺🏻
This is my Friday recap of notes I jotted down while helping founders solve their fundraising challenges this past week (4.9.21)
If you have any questions, please reply! I try to get to every comment/question I get :)
But first, thoughts on a powerful signal🛩
I like helping founders understand some of the signals VCs pick up on when making investment decisions. They can be transformative things for founders to learn about. In some cases, the founder might mimic the signal which can be helpful. In the best cases, they internalize the behavioral driver of the signal and then naturally give off the signal.
One particularly powerful signal that you’ll hear many fantastic investors mention is velocity.
Velocity can refer to speed of learning, speed of hiring, and speed of shipping product, among other speeds. I've always valued seeing velocity but, until recently, I never fully deconstructed that value.
After asking myself why it’s such a strong signal repeatedly (the five whys), I realized velocity is a reflection of a bunch of super positive signals in an early stage team all at once.
Said simply, you can't achieve great velocity without:
A desire to learn/iterate quickly
Limited concern for failure or perfection
Strong leadership
Trust between team members
Alignment of vision
Customer interest
...and other individual positive signals
I'm a fan of golf analogies when it comes to fundraising, even though they rarely resonate since so few people play golf now (sad 😞). I'll try one anyways.
In golf, it's hard to focus on more than one thing during a swing even though there are 1000 things worth being mindful of. To avoid confusing the mind with multiple swing thoughts, it can be helpful to have just one swing thought that incorporates a few important concepts into one. Focusing on a “great follow-through” is one example. A great follow-through requires you to have good tempo, keep your head down through impact, and not over-swing.
I think about the same thing when it comes to company velocity. A lot of things go into having great team velocity and if you can focus on that, your company will not only send a great signal to investors but also be in a better position to execute successfully.
Ok, on to the Fieldnotes for 4.9.21…
Can someone else lead the fundraise? 👩💼
Should the CEO always be the one to lead a fundraise? Not necessarily…but yes, it should be.
There are always exceptions but in most cases, I believe the CEO should be running a fundraise. I get this question quite a bit. In fact, it came up a few times this past week. Sometimes the CEO doesn't have enough time, he isn't the best at telling the story, she’s an introvert, they don’t have the relationships… Whatever the somewhat logical reason for wanting someone other than the CEO to fundraise, there are a few things to consider.
It might be very true that someone else on the team is a better storyteller or presenter. That said, hearing the best delivery of a story is not the only reason investors meet for a pitch. They are also trying to read the core decision-maker of the company and get a sense for the soul of the businessperson that will be driving productivity and the culture of the company.
In the case of a solo founder who might not be great at telling a story, they were still the person that started the company. Deeply understanding why she founded the company is super important for an investor to hear. In the case of multiple co-founders, there was a decision at some point to go with one of the co-founders as CEO. Understanding the underpinnings for that decision is also very important for an investor to unearth during a pitch.
So my encouragement would be that any deficiencies, shortcomings, lack of resources or time can be overcome. If your CEO struggles (or if you the CEO struggle), find support, opportunities to practice, help with training, or additional resources to help with becoming a great fundraiser. An important part of a startup CEO’s job is to keep the company capitalized and something worth working on.
Again, there are always exceptions, but I do believe that in most cases this is the best path forward.
I don’t think we’re going to follow your exact strategy
“I don't think I'm going to follow what you taught in terms of warming up the fundraise”
That was the somewhat apologetic comment I got from a founder I advised. I immediately yelled at her and told her there were only two ways to get a successful fundraise done - my way or the highway😡
I’m kidding of course.
I told her that was perfectly ok. The truth is, while I would like to make things as actionable and understandable for all founders in all situations, I have really struggled with translating all strategies into universal action plans. That’s because fundraising is both nuanced and highly dynamic. Small differences can affect your approach to fundraising and the landscape is changing every week. Because of that, it's more important for founders to understand the first principles behind fundraise strategy. With that, they can modify based on their current situation, their company, their team, and their own selves. Things like warm-up strategies are not one size fits all. Depending on the elements already in place, your successful strategy may or may not follow what another company has done in the past or what some expert might tell you to do 😇.
Whether it’s my advice or other great resources you find on the topic, ask questions to get a deeper understanding before acting.
Till next week. Stay adamant and be chased.
Jason
p.s. I went to the LA zoo with my niece and nephew and learned a strange thing about flamingos 🦩 -> wrote about it for my daily workout group here if you want to see
p.p.s. I’m pulling together the last pieces of my fundraising bootcamp. Very excited. Are you raising in 1-6 months? If so let me know if you’d like to learn more. Opening applications soon 🙏
Small asks!
If you thought this was helpful or enjoyable in any way, I’d love for you to:
Share this newsletter with others who would enjoy it
Listen with a friend to Funded, my podcast that tells the rollercoaster stories of how founders raised millions (and subscribe🙏)
Ask me your fundraising questions so I can help you and cover them in a future issue
Love your “Stay adamant and be chased”!). What’s the best strategy to create FOMO amongst VCs once you have a lead VC investor and want to close the round very fast (and ideally be oversubscribed)?