Sending the best signal in fundraising
3 tricks to running a better business
No amount of process engineering, storytelling magic, or investor psychology voodoo will get you funded if you’re a crap founder working on a business you don’t love that isn’t going anywhere.
Oof. I know that was harsh, but it’s the truth. In fundraising, the STRONGEST signal is… running a great business. That's what I want to explore in this essay: how to nurture that signal and set yourself up for success
Running a great business and doing it well
When an investor sees a founder running a great business the right way, she can’t help but spend an extra second pondering it. She’ll be overwhelmed by the urge to ask questions to learn more. She’ll be probing to see if she can (and should) invest. Even if this is all happening at one of those bad startup events with 99% bad ideas and founders (you know what i’m talking about), she can still sense a great opportunity. Great investors are like truffle pigs sniffing around the dirt of bad startups looking for signs of a quality company with a great captain at the helm.
This is partially why I focus so much of my work on fundraising prep. While I’m always thinking of how to improve fundraising, influencing the work before the launch of a fundraise allows me to improve the way a founder runs their company overall while increasing the likelihood of a successful fundraise.
From cliches to coaching
In service of that, I want to take 3 overly common pieces of advice for startups that both drive great businesses and that I deeply agree with. On top of that, I’ll add some layers of context to make them less of an eye-roll cliche for you all.
If you take these pieces of advice… you will improve your company and in turn, improve your chances of attracting investors.
#1 Focus on a passion (... it’s HARD otherwise)
Yes I may have led with the biggest cliche of them all, but damn it’s an important one. My add-on for this is to go deeper into why it’s so important. You might think the point I’ll make is do what you love and you’ll never work a day in your life. Au contraire, my cynical friend. The point of focusing on a passion or something that truly excites you is to give you a better shot at making it through the really tough times that you’ll inevitably face in your startup.
If your motivation has more to do with the destination than the journey you will run into a wall and quit. It might not be the first wall or the second… or even the 5th. But by the 10th, it will be really hard to keep going when that shiny object destination feels so far away. If you are passionate about what you do and get excited about the day to day challenges… If your customer is your North Star and you love having the opportunity to help them, then you may have the fuel to get through it all.
Some people get frustrated when they hear pundits talk about the need to have a deep passion for their company. Do I have to have a sob story that drew me into working in this space? They think “Can’t I just be excited about the opportunity to build and sell software that makes money??”
It is possible. For sure. But I think it takes a special type of entrepreneur who truly just gets excited about solving business problems without a deeper connection to the problem. To hear what those founders sound like, listen to my interviews with Guy Friedman and Parker Treacy.
For everyone else, try to find a problem you have a connection to, a passion you need to feed, a deep opportunity to learn more about something that excites you. Something that you’ll love doing during the twists and turns of a difficult journey no matter the outcome.
True passion and excitement is one of the most effective drivers of productivity, execution, and eventual success which is why this cliche is so valuable.
#2 Talk to customers (don’t worry, there’s a hack)
"Talk to customers" is another common piece of advice. The challenge with this cliche is different than #1. It doesn’t have that amorphous quality that searching for a “passion” does. No, the problem with this advice is how scary it can be for many entrepreneurs.
If you’re an introvert (maybe an engineer or builder that is used to solving problems in front of a computer screen) the prospect of putting yourself out there and feeling like you’re bothering a bunch of strangers to learn can be daunting, maybe even impossible. I can describe this feeling so clearly because I felt that running my last startup.
True story: While searching for product-market fit, I cold-called dozens of architects in LA asking them what their biggest problems were and if they wished for technology to help them. It was excruciating for me and I did only a fraction of what was needed at a snail’s pace because it was so painful. On one call, the architect I spoke to (who had no idea what I looked like) told me how technology ruined his business and attributed that to the Asians who invaded this country.
You can imagine how excited I was to continue cold-calling to “talk to customers”...
Anyway, this advice is difficult because without any additional support, it is so damn hard to do. And it’s why so many founders rush into building product before they’ve spoken to customers and validated the premise for the product.
This is where my version of the advice comes into play.
I wish someone had instead advised me to first create an excuse that makes it easy to talk to customers.
If you have a sales background & picking up the phone is easy, go do that. You barely need the excuse because the action is easy.
For everyone else, go create the most basic representation of a product or service that gives you an excuse to talk to customers. The product doesn't need to be highly-developed, it just needs to give you a reason to start a conversation. You could even collect feedback without an actual product- create ads and a landing page for a hypothetical product, host a meetup for your target customers, heck, even tweeting about a hypothetical product could all provide you with valuable responses.
The more you talk to customers the more you’ll know. The more you know the better decisions you make. The better decisions you make the more successful you will be.
#3 Team is everything (I know why this is hard to understand)
To really supercharge your business, find energetic people excited to work with you. After all, team is everything. This is one of those truisms that was repeated by the partners I worked with at Greycroft Partners. Once you hear that a few times, you repeat it yourself but you still have your doubts. They can’t make that big of a difference and surely having a killer product is more important…
If you roll your eyes at this as a dumb cliche, it’s probably because you’ve heard “team is everything” a million times but haven’t experienced the full range of bad, average, and amazing teams yourself.
Adding talented, motivated people with great team dynamics/ is a gamechanger at any stage, but I mention it for growing a biz because recruiting amazing talent is easier to do after you’ve figured a few things out on your own first.
BTW - the importance of hiring was hard for me to fully appreciate until I saw the good, the bad, the ugly, AND THE AMAZING myself. The feeling of an amazing hire is heaven. And once you feel that you never want anything else again. Shoutout to my team at Adamant who gives me that feeling and is the reason we do such great things :)
There’s truth in cliches
So there are 3 cliches that are worth diving into. I always say that there’s a reason a cliche becomes a cliche. There’s some real truth in there, you just have to go digging for it. I hope I helped illuminate that for you without too much digging 🙏
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