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The Breakdown: Raising Venture Capital

Aana Leech
October 14, 2020

Venture capital is a game of outliers --  and insiders. The insiders know the who & the how to get a wire from investors. Those on the outside waste precious time trying to decipher the right steps and build the right networks.

At FundBoard, we’re on a mission to make every founder an insider. We match founders with the right investors at the right funds to invest in your idea. We add crucial hours back into your day and change the probability that your fundraise gets done. It’s not going to be easy, and it’s certainly not fair. That’s why we’re not just helping you with the who, but also with the how.  

Our first stop, a breakdown of how to raise venture capital. We’re not the first ones to say raising venture capital is a sales and marketing process, but attracting investors to possibly give you millions, is a sales and marketing process – here’s a high-level step-by-step to treating it like one.

Not sure if venture capital is the right investment for your company? We got you.

The breakdown: raising venture capital

Build a national investor list 

FundBoard helps to match you with investors that fit the funding needs of your company. The optimal word here is fit. When building your list, investor fit is everything to set your fundraise off on the best possible path for success. To determine fit, it’s important to consider the following: 

  • Fund Focus 
  • Target Investor at the fund 
  • Location
  • Stage Focus 
  • Deal Frequency  

Do your diligence 

When adding an investor to your list, remember that you’re about to enter into a relationship that could last anywhere from 7-10 years. It’s a commitment. Take time to do your own diligence into the fund and the specific investor. Look at their portfolio, dig into their fund’s culture, and properly stalk social media to determine if this is someone you could wake up to for the next decade of your life.

Getting the intro

Venture capital is based on network outreach, or warm intros. There is a growing movement *cough* FundBoard *cough* hellbent on changing this truth about the industry, but until there is more widespread acceptance of direct outreach, emailing most VCs directly is not your best bet. Instead, you’ll need to adopt more indirect methods of getting in touch. Here are what we believe to be the most high-yield activities: 

  • Find their online life and become a part of it 
  • Develop a network connection to them through a more accessible contact. Hot Tip: we believe the most underutilized hack here is to get to a CEO that the fund has invested in.

Make no mistake, these methods take work. Identify your top 20-30 LEAD investors and dive deep into thoughtful and extensive research to get to a high-impact intro.

Build a relationship 

Getting an intro is your first step in building a relationship with an investor. Like any relationship, it takes time and tending. Don’t be afraid to meet potential investors early - even before you have an MVP or traction. This first interaction is really about you. Tell them that you’re not raising money yet, but will be soon and you want them to have an early view. Then create a sense of inevitability. Lay out clearly what you plan to have done at your next check-in, from hires, to product developments, or customer traction. Share progress in emails or in-person meetups that are brief, purposeful, and human. Remember, VCs are people too.

Run a parallel process 

FOMO is realest when you’re a VC. As a founder, recognize your power here and set up a fundraising dynamic that optimizes for this. To do that, start the process of actively raising with all of your target inventors at the same time - running a parallel process. Adopting this process, slows the spread of information through the market and forces investors to make decisions based on the limited information that they have themselves. This fear of missing an outlier forces a competitive dynamic and changes the power dynamic in favor of the founder. Warning that getting this right is easier said than done.

Get a competitive term sheet

You did it! You got a term sheet. Now you have a week to get as many as possible to maintain a competitive and founder friendly dynamic that you set up by running a parallel process. Your early-stage term sheets set the stage for future rounds and company control. Add on the fact that you’re likely doing this for the first time and the investors sitting across the table from you do this two to three times a month. Even though you’ve built a great relationship with your investors, navigating a term sheet is complex. Don’t skimp on investing time here to get the deal done.

Raising venture capital is not easy. It’s time intensive and risky for founders. What’s even worse, at the end of the day, your chances of success are really low. But at the end of the day, securing the right fundraising can change the trajectory of your business - in the best way. We’re here to help you successfully raise with software that helps you with the who and content to help with the how.

Help us help you with the how. Let us know what questions you want answered. 

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