They passed before...why should they invest now? (Fundraising Fieldnotes - 11.19.21)
Keys to unlocking value from past passes...
Hey - it’s Jason Yeh 🕺🏻
This is my Friday recap of thoughts I’ve had while helping founders solve their fundraising challenges this past week (11.19.21)
I’m in Brazil🇧🇷 at the moment and will be here for a couple more weeks! I’ve had an amazing time so far and am excited to meet more people/founders/investors.
If you want to spend Thanksgiving with me in Brazil, I’m hosting. an event with founders and investors on Nov 25th in São Paulo → limited space so register early https://lu.ma/thanksgivinginbrazil
As always, if you have any questions, please reply! I try to get to every comment/question I get :). Especially drop me a line if you’re in the region…
On to the Fieldnotes…
They passed on you before... why should they invest now?
After a founder who has been unsuccessful raising money discovers the concept of Calendar Density, they eventually realize that the best path forward is starting a new, tightly organized fundraising process. Soon after, the question usually surfaces: “Should I reach out to investors that passed once before?”
This question arises in a variety of situations, so understanding an approach to unlocking value from this cemetery of old leads is worth a deep dive.
First, we need to identify if the original pass was truly not a good fit. Actual bad fits come from mismatches around stage or industry focus. No matter how sophisticated your fundraising strategy, reaching back out to a growth stage, biotech investor who passed because you’re raising a seed round for a social media app won’t change the outcome. These we don’t touch at all.
The rest of the passes, no matter how they were delivered, fall in the category of “so you’re saying there’s a chance.”
I know that some of you might be confused as to why I would even recommend spending time with an investor who wasn’t excited the first time around. After all, I preach the importance of defining your specific story, sticking to that story, and then searching for your match (the investor who thinks like you and is excited to find you).
Here are a few thoughts on why we spend time with old passes:
Interest in your deal is valuable to the process overall, regardless of who it’s from or the final outcome. Because of that, stimulating interest from investors who passed can be valuable on its own. Plus you already did the work of finding them…might as well squeeze out a little more value.
It’s very possible that you sucked at telling your story the last time, but you’ve gotten better! A better pitch could very well have a very different impact on the same investors who passed before.
Your story may have evolved. Actually, your story has evolved since you’re coming back to the table after a failed attempt. Staying alive and coming back for another shot shows a level of grit that investors want to see. I’ve seen this be a real difference-maker for investors multiple times.
Your already established relationship with the investor who passed is valuable. Having history with an investor can be very valuable in the path to a term sheet.
The more term sheets the better. If you can get an old lead- even one you like less- to convert to a term sheet, you’ll be in a much stronger position to negotiate with investors.
There’s a chance, but how do you maximize that chance?
The first thing you should realize is nothing will change if you don’t change the dynamics of the investment opportunity (continue reading for the how…)
This will take some time to trickle down to founders but it’s a good sign!🙏
Till next week. Stay adamant and be chased.
Jason
p.s. haha dogs are the best
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