In a recent interview with First Round, New York-based investor Kevin Ryan discussed some fundraising strategies that he has picked up over the years. Here are a few of his recommendations for founders:
- Start meetings with VCs 6 to 8 months before you actually raise. This allows you to set the stage for a later meeting when you are actually raising. This way, you'll be in a front position to get the meeting, as opposed to trying to secure this meeting when you are actively fundraising.
- Prep yourself to know every single number in your pitch deck so you can exude self-confidence in your ideas (without seeming arrogant). Don't ever say, "Let me get back to you with that number." If you know the approximate number, give an estimated number or a range. This is better than giving no number at all.
- Make sure to play up your contacts with the other investors with whom you are meeting. Do your homework. If you are a real estate tech company pitching VCs, bring up (in a nonchalant and non-forced way) that you are also speaking to the firms widely recognized for leading investments in the real estate industry. (See Mark Suster's Guide to Using Social Proof in VC Meetings)
- Go into the investor meeting knowing the strengths of the VC you are speaking with, and then make them feel like they can help you. Look at their portfolio and find companies with similarities to your product. Show you have done your research by referencing these companies in your conversation.
- Use the "auction strategy" and be strategic when the topic of money comes up. To keep firms interested, you might want to start with a low valuation. Ryan's advice: “When I want to raise $5M or $6M, I go out and I say I want to raise $3-5M. I believe in the auction strategy. There’s nothing that makes people feel better than when you go back to them in two weeks and say, ‘Actually, I know I said $3-5M, but it’s really going to be $5-6M.’ That means other people are interested.”
- Don't sweat the details of your term sheet until the very end. You should try to get as many term sheets as possible so you have the leverage to set the terms and to make investors feel like they are competing to get into this round of your funding.
- Expect between 3 to 4 weeks from final interview to the time you receive your term sheet, but be clear in setting a timeline for investors to make a decision.
- For your first round of funding, the location of investors is important. You should try to find investors who are local. There is no substitute for face-to-face meetings and guidance.
Read the full post on First Round's website here for more great anecdotes and details about each of these recommendations.
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