Fundraising pitches are not actually pitches

The startup industry should stop using the word “pitch.”  It suggests that entrepreneurs should go into an investor meeting with a deck and stand in front of the room and start presenting.

Originally posted by chippythedog

Doing a Demo Day or a startup pitch competition is NOT the same as a pitch meeting with an investor.  Yet, too many entrepreneurs think that this is what they are supposed to do when they walk into an office on Sand Hill Road.

An investor meeting is much more akin to a power struggle.

Only 50% of an investor meeting is about storytelling and conveying information about your business.  You can find all kinds of information on the web about what makes a good pitch.  The other 50% is about controlling the conversation – how you answer questions, how you address topics, what the power dynamics are in the meeting, etc.  This is the part about fundraising that no one talks about.

Originally posted by marci1900

When I was pitching LaunchBit, I followed all the common advice about creating an investor deck (in fact, you should have multiple decks).  I would go into investor meetings, go through my deck, and answer whatever questions an investor may have had throughout the conversation.  And I felt pretty pleased with myself.

Then one day, I pitched two seed partners at a VC firm.  I thought the meeting had gone well, but afterwards, one of the partners pulled me aside and said that although he was championing my deal, he was very disappointed in how the meeting went.  He said that it went horribly.  He said that the conversation went all over the place, and I had no control over it.

The conversation basically went like this:

Me: [Intro to LaunchBit.]  The market size is HUGE and…

VC: What about your team?  Do you have experience in email?

Me: [Talk about my team’s experience]…

VC: But what about how you acquire customers?

Me: We acquire customers by doing outbound sales, and we…

VC: But, the market just feels really small.

A good fundraising meeting will feel more like driving a car. You should not zig zag from Place A → Place D → Place C → Place A → Place B in an abrupt way.  You should start with topic A, finish it, and then move on to topic B, complete that, and then move on to topic C.

Originally posted by ellenameliaburke

Although you do not need a deck to raise seed money, this is why I like to use a deck in my conversations with seed investors.  It is a lot easier for me to remember all the points that I want to cover in a story that makes sense. If investors have questions that are not related to the particular slide you are covering, it’s easy to say, “That’s a great question.  I’m actually going to address that a couple of slides from now,” and then go back to completing your thought on whatever slide you’re on.

When you drive the conversation on your terms, it not only paints a more coherent story, but it also implies what your leadership ability is like.  It may not be a fair assessment of how you’ll lead a company, but with limited data points, this is what seed investors are paying attention to.

Make sure you are driving this car.

You should have 4 fundraising plans

When I was raising money for LaunchBit, sometimes my conversations with investors would go something like this:

Investor: So how much are you raising?

me: We’re raising $750k.

Investor: Really?  Why so little?  You should be raising $2M+ or even a series A.

Of course, the first thought in my head was, “Wtf?  I’m struggling here to just raise anything!”  But, of course, I couldn’t say that out loud, because then the investor might not want to back me.

Originally posted by gabys42

This kind of conversation happens a lot, though.  So what do you do?  You need to prepare four fundraising plans.  What would you do if you raise:

  • $0?
  • Below your target raise?
  • Your target raise?
  • Above your target raise?

What happens if you can’t raise at all?

First, let’s address the easiest scenario – what if you raise $0?  Do you bootstrap and attempt to raise again when you have made more progress?  Do you have family and friends who can help float you?

This is a situation you should always be prepared for whether you are actively fundraising or not.  Investors will likely even ask you this question as a hypothetical scenario to understand how you think about your business.

Investors want to invest in growth

The trickier situation is to prepare for the remaining three fundraising plans.

Taking a step back, it’s worthwhile to know that regardless of your stage, investors want to invest in growth.  To be clear, growth means increased revenue or increased number of users or customers (or both!).  It does NOT mean growth of your employee base!

Originally posted by rukudzom

With that in mind, you should understand clearly what lower and upper bound raises you’d be wiling to chase.  In other words, your lower and upper bound numbers should ALWAYS be raises where you could put the money to good use to grow the company.  Here’s a quick thought experiment:

For your upper bound number, if someone offered to invest $50M into your company, would you know how to deploy that money efficiently to increase your growth tremendously?

For nearly all seed stage companies, the answer is no.  You could certainly hire more people with $50M, but again, growth is not measured in terms of employees.  It’s measured in revenue results.  Could you turn $50M into $1B in revenue in the next 2 years?  At the seed stage, you don’t have enough information about the levers of your business to know how to do this.

At the seed stage, you might have some sense of 1 or maybe 2 customer acquisition channels that are working (at least for the time being).  You should use your data from these experiments to figure out the maximum amount of money that you’d feel confident throwing into these channels to yield great growth.  Great growth in venture investors’ eyes is often 30% MoM growth or higher depending on your baseline revenue and the space or business you’re in.

Originally posted by gabrielmismash

Similarly, you’ll want to repeat the same exercise for your lower bound number.  If you were to spend 2 months dedicated to fundraising, what is the smallest investment number that would be worthwhile raising such that you could immediately pour that money into growth for your business?

Consider growth, 18 months of runway, buffer, and milestones

Ok, so now you have a lower bound and an upper bound number for your raise.

Now, to pick your target raise (which is in between the lower and upper bounds), you should figure out the number in this range that will:

  • Give you 18 months of runway
  • Multiply that number by 2 for buffer, because things always take twice as long to achieve
  • And also gets you to the next milestone in that timeframe

If your next milestone is a series A round, you should remember that series A milestones tend to be in the $2M-$3M net revenue runrate range these days.  This is a step up from the $1M runrate milestone that people touted a few years back.

Originally posted by find-a-reaction-gif

If your next milestone is a seed-plus round, you should know that a lot of startups chasing after seed-plus rounds (i.e. what the old series A rounds used to be) tend to be doing $500k – $1M net revenue runrate range today.

Note: Marketplace and ecommerce companies, GMV is NOT REVENUE.  

I’m sure the milestone targets will only rise as more people become entrepreneurs and competition for limited investor dollars increases.  So, aim to err on the side of being more conservative around what milestones you need to hit.  Also, if you are in a crowded space (e.g. on-demand food), you will need to go above-and-beyond and surpass these rough milestone guidelines to demonstrate you can rise above the noise.

More on milestones in a subsequent post, but the bottom line is that you should make sure to pick a target raise number that hits these criteria. You do not want to fall short and be dismissed at the next round for not having accomplished enough in a timely manner because you raised too little money.

Form a concrete plan

So, now you need to prepare a concrete plan for all three raise numbers.  You should figure out:

  • Who you would hire?  (if you have specific names of people in mind who want to join you, this is even better)
  • How you would deploy the money for growth?  (the more specifics, the better)
  • What milestones would you hit? And on what timeframe?
  • What would the payback period of your customer acquisition be? (if you know)
Originally posted by veggietalesgifs

Four plans give you optionality

Now that you know what you’ll do in each of these four scenarios, you have a lot more optionality.  Although you will still go out and discuss your target raise, if an investor asks you why you aren’t raising more, you can always say, “Well, actually, I’ve prepared a plan around X, and if we have the interest, we’ll certainly opt to do more with a larger raise.”  By preparing details around how you’d use the larger raise, an investor may actually offer to invest at that larger amount.

Alternatively, let’s say an investor says, “I really don’t see how you’ll hit your target raise, and if you’ll fall short of your raise, I’ll lose my money.  I’m out.”  You’ll have a good response to this as well – you can describe what happens if you raise near $0 and also what you can achieve with your lower bound raise.

Alright, go get ‘em!

Why fundraising takes so long (for most entrepreneurs)

Techcrunch makes fundraising look like a breeze.  You just mosey on over to Silicon Valley, and there are dollar bills lining the road!

Originally posted by iheartswagdouble

Unfortunately, this is NOT reality.

While fundraising for my company LaunchBit, I was a wreck.  The actual process of going to meetings to talk about your company was not difficult, but the self-inflicted pressure to convert investors started to take a toll.  Compounding this with a lack of sleep made the process even more difficult.  It started getting harder when I started hearing “no” and still had to go into every meeting just as energetic as the last.

About 10 weeks into my fundraising process for LaunchBit, I had a nervous breakdown.  Literally a nervous breakdown.  My body felt like it was being pricked with pins all over all the time.  Obviously, no one was actually jabbing pins into me, but it was annoying, and I was unable to sleep at night  (not to mention, it simply felt weird).

Originally posted by hannah-sieberling

I went to see several physicians, including some of the best specialists in the country, and no one could figure out what was wrong.  Because this nervous issue started around the time I started fundraising, I decided that it was probably related.  So, I paused fundraising.  And, of course, the problem went away.  Fundraising is an incredibly stressful and lonely process that is like a rite of passage for startup CEOs.

Eventually, we raised over $1M in that round (TC reported $960k here). It sounded like a walk in the park to get name investors into the round, but in reality, it was super hard and took a long time to raise.

These days, I hear a lot of entrepreneurs saying, “Oh, my raise will be hard because 2016 is going to be tough for entrepreneurs.”  Honestly, no matter what the economy is or what space you’re in, fundraising is ALMOST ALWAYS F***ING TOUGH as a first-time entrepreneur.

So why is it so hard, and why does it take so long?

Here are some common issues:

1. Your story is not yet compelling

Maybe your story is OK, but if there’s no wow-factor to get people really excited, then it’s not going to be good enough to get investment dollars.  You’ll need

  • a wow product
  • wow results
  • a wow team
  • a strong and/or unusual differentiator
  • interesting insight

At least one of these has to be above and beyond amazing to make your story awesome.

Originally posted by dell

2. There are discrepancies in your story

I’m not talking about lying — though it goes without saying that you should not lie about your business!  Sometimes you are so close to your business, you do not even realize what looks off.

For example, if you have a marquee list of enterprise companies as your customers but are only generating $10k/month in revenue, you need a good explanation for why this is the case when these customers could be paying you so much more.

It could be as simple as stating that your customers are right now just piloting or beta testing your product, but your whole story needs to be consistent.

3. You cannot yet answer questions well

Before you start fundraising, you should be able to answer all common fundraising questions well.

In addition to this list, you’ll also be asked about your vision, where you see the business going, and how you see the future.  This is often difficult for a lot of first-time entrepreneurs because you are so heads down in the weeds just trying to fight fires.  And who the f*** knows what will happen in 10 years?  You don’t need to be right, but you do need to have a vision for the world as the CEO.

You will also be asked about your next hires and what you’ll do with the money. Of course, you will also be asked a hodgepodge of questions you cannot anticipate a priori.

4. You do not seem confident in your pitch

Fundraising is an odd beast for first-time entrepreneurs.  On one hand, it feels like a sales game because you are trying to sell an investor on your business.  On the other hand, it is a lot like a power struggle.  You must assert yourself and show that you know how to run a company.

Unfortunately, there are a ton of great entrepreneurs who are not naturally high energy or confident-seeming even if they are actually confident, great leaders in quieter ways.  You’ll need to exude high energy and high volume to give an investor confidence that you can run this business.

This may mean experimenting with how you speak, your body language, what you wear, and your mannerisms.

Originally posted by disneypixar

5. Investors have information concerning your business that you’re not privy to

Even if you can solve for the points above, there’s a lot of information that investors know that entrepreneurs don’t.

Investors may:

  • See way too many pitches in your space and/or think the market is crowded (e.g. on-demand food delivery)
  • Have had a bad experience with a company in a similar space or business 7 years ago and don’t want to touch that space again (e.g. travel)
  • Know just how big competitor X is and how much funding they have secretly raised and are concerned that you are too closely related

In your first 20 meetings, your job is to tease out all of these concerns.  You need to figure out what is wrong quickly so that you can fix these issues at subsequent fundraising meetings.

However, it’s important to avoid have pitch-whiplash and change your pitch based on every little comment.  But if three investors mention the same concern, then you should be self-aware enough to change your pitch and investor conversations OR change the types of investors you pitch to.  Test new ways to address concerns in subsequent meetings.

Fundraising takes a long time because you need to meet with a lot of investors in order to refine your pitch, how you pitch, and find investor-business fit.  Unfortunately, there are just no shortcuts.

How many entrepreneurs are doing their pitch decks all wrong

Even though there are a lot of web resources on how to put together a pitch deck for seed-stage companies, most don’t address how many decks you need and for what purpose. If you are fundraising, you’ll need at least 2 decks:

  1. An email deck
  2. An in-person meeting deck

If you are participating in a Demo Day with an accelerator, you’ll also need a Demo Day deck.

Originally posted by theweekmagazine

Obviously all your decks will be similar, since you are pitching the same company!  All of your decks should:

  • Be compelling – lead with your strongest points first! If it’s team, then lead with team.  If it’s traction, lead with traction.  If it’s a big problem, and you have an unusual solution, go with that.
  • Tell a story – this is not just a series of facts.  The slides must flow together.
  • Be visual  – i.e. verbalize, don’t make an investor read words.
  • Be simple – an investor should understand the slide in 1-2 seconds; don’t make him/her think.
  • Include your contact information so that people can contact you!
Originally posted by the-office-daily

But, there are some major differences…

What is an email deck?

An email deck is what you’ll email to investors if they ask to see a deck first before setting up a meeting with you.

There should be enough information here to be compelling enough to take a meeting with you. BUT, not too much such that they can decide NOT to take a meeting with you.  Keep in mind that many investors could (will!) forward this to other people, so don’t put anything too confidential in here.

Examples of what to put in (not in this order per se):

  • Problem you’re solving
  • Your solution
  • Traction – key performance indicators (could be MRR, growth, users – whatever makes the most sense for your business)
  • Market
  • Team

The purpose of the email deck is to get a meeting – that’s it.  So, you should include facts about your business that will be compelling to get you that meeting and nothing more.

The flip-side is that you shouldn’t include too much – specifically, anything that can be nitpicked.  These are some things I wouldn’t include in an email deck include:

  • How many people you are hiring
  • Financial projections or forecasts

These are hypothetical. The number of people you hire could change, and if an investor thinks you should hire 5 sales people instead of 4, you shouldn’t let that be what stops you from getting a meeting.  Similarly, if you are projecting too high or too low of a revenue number for next year, an investor may think that you are unrealistic or not ambitious enough, and you are not even there to defend your argument when he/she reads your deck.

Realistically, an investor will spend only 10 seconds looking at your deck, so it has to be understandable and concise.  It’s ok, if he / she only understands the gist.  The meeting will allow for detailed discussion.

Lastly, an email deck serves to provide context.  Sometimes an investor you’ve already met with may ask for an email deck so that he/she can send the opportunity to other partners / investors at his / her firm so that they can get context before meeting with you.

What is an in-person meeting deck?

An in-person meeting deck has the meat.  Lots of great people have written about what slides you should have for this deck.  You can find great resources herehere, and here (among many other places).  I don’t need to dive into this in detail.

In short, an in-person meeting deck should have ~10 high level slides with appendix slides that dive into the weeds.  In addition to the other slides from your email deck, include your business model and 1-2 key unit economics (LTV, CAC, churn, etc.).

Originally posted by nasty-parlour-trick

Even for this deck, you’ll want to still keep the slides at a high level.  If an investor asks to dive into the weeds on certain areas, then you can guide him/her to the appendix slides you’ve prepared and fully cover a topic before continuing on.  Some investors prefer to dive into product questions and others really want to dive into customer acquisition channels and unit metrics.  You’ll want to have lots of appendix slides to cater to different audiences, but most of the time, you won’t dive into all of them.

If you’re meeting with an angel investor, this first meeting may be all that you need to secure funding.  But, if you are meeting with a VC, the purpose of this deck is to get the next meeting.  (Be sure you ask questions to understand how an investor decides to invest and what his/her process is.)  At a firm that moves quickly, that next meeting could be an all-partner meeting, which is typically the last meeting needed to make a decision (for seed-stage).

Go get ‘em!

What questions should you ask seed investors?

I’ve ragged on investors quite a bit in my recent posts here and here.

But fundraising meetings are a two-way street.  Entrepreneurs also need to do a much better job pitching.  Specifically, I’ve noticed that many first-time entrepreneurs do not ask any questions.  This is a serious mistake.  Entrepreneurs should learn everything they can about an investor.  Taking investor dollars shouldn’t be done lightly.

Originally posted by urbanrealism

You don’t want to take money from bad apples because down the road when things get tough, investors can:

  • Call their convertible note
  • Potentially replace you (depending on the equity and board situation)
  • Threaten litigation (even if they have no case)
  • And most importantly, be a big pain in the ass and call you all the time

You are looking for a relationship – not just money.

Originally posted by aliens-bro

Before taking an investor meeting (or even reaching out), you should definitely do your homework and research investors.  Make sure to reach out to investors who are actually a good fit for your business (stage, sector, amount, what they look for, etc).  Most websites will spell this all out – especially newer microfunds who are trying to differentiate themselves in the market by going after a specific niche.

In addition, here’s a list of questions you should ask investors when you meet them:

  • How big is your fund? (for VCs)
  • Where are you in your fund?  (for VCs)
  • When will you need to fundraise again? (for VCs)
  • Do you lead rounds? (for VCs)
  • What is your typical check size?
  • Do you reserve capital for follow-on?

This gives you a sense of how much money you can raise from a given firm or individual.  This is really key because there are a lot of investors out there who have no money but are still taking meetings.  It’s OK to take a meeting with an investor who has no money to invest, but you should know that they won’t be able to come into your round until they have raised money so your meeting might not lead to anything.

Originally posted by odditymall

Understanding how much is allocated for follow-on investments also gives you a sense of how much money is left in a fund.  If a fund is $10M and two-thirds is reserved for follow-on, then in practice, there’s $3M for first checks.  If the firm has already deployed $2M, you know that your chances of getting a first-check is slim…

In general, it’s slightly easier to raise from funds that have just raised a fund.  They have a lot of money that needs to be deployed, and so they are more eager to invest.  In contrast, when there are fewer dollars left to deploy, those last dollars will be extremely competitive.

You should find out an investors’ cadence:

  • How many seed deals have you done in the last 6 months?
  • How many seed deals do you anticipate doing in the next 6 months?
  • How long does your process typically take?

And how decisions are made:

  • What is involved in your process?
  • Who is the decision maker?  (for VCs, although sometimes angels need to consult their families or friends)

By the end of the meeting, you should understand

  • Everything about an investor’s decision making process
  • Whether you have a champion to take this to the decision makers (whether it be partners at a firm or their family)
  • What the concerns are with your business in their eyes
  • What the CONCRETE next steps are

If you do not have answers to ALL of these questions, keep asking questions…

Attention investors: can you just be upfront with your thoughts? K thx bye.

The first time I ever tried to fundraise, I was completely clueless.  My team had built a highly technical product that allowed consumers to co-browse with each other, but we had no customers or users.

Originally posted by chloaw

A lot of investors turned me down, but I didn’t even realize it because they were not clear in their rejections.  Investors would tell me:

“Oh this is a very interesting product.  Let’s keep in touch.”

“The technology is quite interesting….thank you for showing it to us.”

As a naive founder, initially I did not push to get to a call-to-action or to learn what the next steps should be.  I had no idea how close I was to successfully raising investor dollars (read: not at all).

As I met with more investors, eventually, in my frustration of not getting anywhere, I realized that I needed to push harder to find out what investors really thought and whether they were going to invest in my company soon.

Still, investors were quite nebulous in their thoughts on my company.  I remember this one phone call very clearly:

“So, are you going to invest?” (I was not sure how to ask this in a great way, so the first time I asked it, I was pretty blunt because I just needed to know the answer.)

“Well, it’s an interesting product.  Let’s chat again in a couple of months.”

“I’m not sure I understand; is that a yes or a no?”

“It’s a no for now.”

Originally posted by yaasbabe

That conversation was just the first step in my becoming a savvier fundraiser, but it took many, many more missteps and poorly-run fundraising meetings for me to eventually understand how this game is played.

Most investors are simply not upfront with their true thoughts because they are afraid to reject entrepreneurs.  They think entrepreneurs will not come back to them later when they have made more progress or have found a better business.  I find that this is particularly common behavior amongst investors who have never been founders.  So this is the type of vacuous email you typically receive as an entrepreneur:



This is a big mistake in my opinion.  Although, founders should also be less clueless on how to run investor meetings and should ask good questions (something I hope to change with this blog), if investors were more upfront with their true thoughts and opinions, founders would find that feedback valuable.

Great founders can take feedback well and can learn and adapt quickly.  The investors I have the greatest respect for are the ones who were candid with me about my company – whether they invested or not – without my having to pry their thoughts out of them.

Originally posted by gurl

I realize it is a tall order to ask investors to be explicit with their feedback.  It’s not a fun job to send tons of rejection emails everyday.  When I first started investing, I was unsure what to write in a rejection email, and so I asked Dave McClure for advice.  He told me to frame my emails positively – what it would take for me to invest?

This has been one of the best pieces of advice I’ve received in joining Venture Capital.  So, I now write entrepreneurs emails like this:


Although, it’s still not fun to be the bearer of bad news, it causes entrepreneurs to come back to me later when they’ve fixed some of my concerns.  This helps me see how quickly teams can learn and adapt, which is one of the best indicators of a team.

Plus, we end up having productive conversations about their progress which actually *helps* me build a relationship with entrepreneurs.

Entrepreneurs: what has been the most helpful “rejection” you’ve received?  Tweet @dunkhippo33.