Last year, my team and I raised our first round of seed financing ever. First-time founders ask me every week how we did it and what lessons we learned. Here are my thoughts organized in one location.
Pitch > Deck
Googling “Raising VC for the first time” leads you to believe a deck (powerpoint/keynote) is the most important feature a young founder should have. While the deck is valuable, I’ve found it’s nowhere near as important as people make it out to be. Your deck should simply be the marketing leave behind once you finish your pitch. It’s a PDF the potential investor uses to sell you to the rest of the partners. You may need it to get the meeting, but your goal should be to have a conversation — and you don’t need a deck for that. Every pitch I’ve seen or heard about goes better when the deck takes a backseat. Additionally, a one-sentence pitch is infinitely more valuable when it comes to a landing a meeting. Think of it like this: if products were marketed to you by sending a 10-page presentation, how well would that work? The first step is landing the meeting with a one-sentence pitch. The deck is for later, and only after they decide to give you the time of day.
Product > Pitch
It’s great if you can hand someone an app or send them a demo link. Again, think about marketing. “CHECK OUT THIS THING” is pretty much all you take in. An image, a video, or better yet a product you can touch, is always more successful than a pitch about why “THIS THING” is the “BEST THING.” Everyone believes their thing is the best thing. Show people a great product, and they will always want to learn more.
People > Product
This was the hardest idea for me to understand. Learning this required our pivot from Momunt to Zero Slant. Our investors were totally OK with the pivot, which made me realize they had clearly invested in our team, not the product we were building. The reality is that at an early stage, very little is known. Investors say they’re looking for the jockey, not the horse, and nothing is more true. You are selling you. Your team. Your resilience.
Spend Less Time Talking About Your Product
I found a pattern with investor meetings: the more personal and the less business it was, the more likely I was to close the deal. Investors see 100,000 founders a year and like #3 stated, people trump product any day. My belief is that the more you’re talking with the investor about your life, their life and what you both believe in, the closer you are to convincing the investor that you’re the right jockey to bet on. With that being said, don’t force it to become personal. These exchanges should happen naturally when the business talk is going well.
Yes Comes Quicker Than No — Which Almost Never Comes
I’ve only ever received a clear no from one investor, Brad Feld. It was for a previous company of mine that never successfully raised seed. Brad wrote a kind letter describing why he wasn’t interested. Chances are, you won’t ever get this. Almost zero investors will say no. Instead, they’ll ghost you like a promising flame after your first Tinder date. But if the investor wants you, you’ll get a a quick yes, like a promising flame that doesn’t dare let you get away.
Don’t Believe The Hype
The internet is full of bullshit. We all know this. But, somehow, there’s lots of crap out there about raising money that doesn’t make sense. If it looks like it and smells like it….well…you know what to do.
One Great Investor = Close Your Round
Everyone I’ve seen close a round closes a lead investor first. This is your goal. Many investors will say, “I’ll invest but I won’t lead.” This is a NO, with the caveat of, “Unless someone smarter than me is in…I’m not an idiot.” Find the smart person whom others will follow. Convince them to invest. The rest of your round will come.
They Want to Want to Invest in You
I talked about this previously — but everyone wants you to win. No investor wants to take a meeting with an idiot. You’re already halfway to your goal by getting the meeting. Again, it’s like dating: don’t show up unwashed, but don’t show up sweating from stress. The date is hoping you’re not just another fling. What a waste otherwise!
They’ve Heard Your Pitch 1,000 Times
Investors have heard more pitches than you. Orders of a magnitude more. You may think your pitch is unique, but it almost certainly is not. This again stresses the value of people over product.
Meet With the Lower Level Partners
The internet and other investors/founders told me time and again that meeting with lower level members of VC firms was a waste of time. It likely is a waste of time when compared to meeting with actual partners, but it doesn’t preclude you from getting the investment; it just takes more time. Each degree of separation from the man/woman who signs the check is just another person who has to pitch your product for you. It’s totally possible it can succeed, but think of it like a food chain. We only get 10 percent of the nutrients from eating the herbivores’ meat than they do from eating the plants. And the herbivores only get 10 percent of the nutrients from the plants that photosynthesis generates. Each degree of separation is a huge barrier, but we’re still alive and thriving on that meat.
Consumer Sales Vs. Enterprise
I believe it was Danielle Morrill who tweeted about how raising a seed round was like consumer sales whereas raising an A was enterprise. If it wasn’t her, I apologize to the adept analogizer. My friends raising A rounds have decks with specific data and numbers and projections, because they’re selling a product to a big company. The seed round feels more like selling a really expensive TV. It’s really just a TV with one new feature, but it looks good and the brand has a cool logo. And maybe, just maybe, it’s important. The investors know you’re putting on a show, but they don’t care. They love you, your team, and your vision.
Other Founders = Path to Investors
When you don’t know anyone who has raised funds, it can be confusing to know how to reach out to investors. Go to investor websites, look at the companies they’ve invested in, and find the ones with the fewest Twitter followers. Reach out to these founders directly. Don’t immediately ask for an intro, but do tell them you’re raising money, you know he/she has successfully raised, and because of this you want feedback on your product. If the product is good, the founder will pass you on to said investor.
Know Your Audience
What is the investor you’re meeting interested in? Fancy food? If you’re a product that helps people get a seat at fancy restaurants, that’s an easy pitch for that person. They may not like the idea, but they’ll instantly understand it. Getting an investor to understand the value of your product is a huge part of the battle. Knowing what the investor is interested in helps you understand how difficult that process will be. Again, the founder is more valuable than the product at the seed stage. But pitching someone who plays basketball a shoe that makes you jump higher is much easier than making the same pitch to a golfer.
Each Investor Has a Singular Expertise
One of my biggest screw-ups while searching for financing was assuming investors were smarter than me. I’ve yet to meet a stupid investor, but the average person who is successful enough to invest their own money or even other peoples’ money got to that position by being really, really good at one specific thing. Success requires expertise. Expertise requires many hours. Hours are finite. People can’t be experts at everything. Be confident that you’re the expert on your product, not the investor.
Do Research — They May Have Already Lost Money On You
I once pitched a product to someone who had lost $25 million on nearly the same product three years prior. He didn’t know me, but he knew my product. It was a huge hurdle to jump over. Just a reiteration that researching and getting to know the investor prior to the meeting is incredibly important for success.
You can reach me at [email protected]. If you’ve got any questions on raising your first round, I’m happy to help in any way I can.
