Founder Guide for Raising Capital
Insights on raising capital for startups, based on our experiences as founders. We cover warm intros, where and how to find investors, and more.
Fundraising is a necessary evil. It’s usually a long, frustrating, not-very-fun process. We are by no means experts. But, we’ve gone through it before. Here are some tips for raising capital that we’ve learned along the way. Hopefully, they help you on the journey.
No matter what the investor says on Twitter about welcoming cold emails, warm intros are nearly the only way you can get a response. Bonus if it’s from a founder they invested in previously. They obviously trust that founder with their capital, so they are more likely to trust them with intros. If you do cold emails, be brief. Describe the problem you are solving, a quick teaser about what you’re building, and include a deck. The deck should be as brief as possible while still generating interest. The goal is to share enough info to pique interest and get a meeting. Your intro deck doesn’t have to explain everything in great detail.
Establish relationships before you start fundraising
It’s always better to reach out to a prospective investor before you are raising. Most investors will have been founders, or have some interest in your space (which is why you are reaching out to them in the first place). So, when reaching out initially (hopefully by warm intro) describe what you are working on, and ask if they would be able to give you feedback on some specific challenge - go to market, the technology, the market, how/why similar companies have failed in the past. Once you’ve built a bit of rapport, and you are ready to fundraise, then the next email you send is much easier. This is a longer-term project, but it pays off. This process sucks. Unless you’re an experienced founder with exits, then it’s going to be a grind. Expect to have 99 no’s before getting to a yes.
There are a few databases you can go to and search for investors.
Try to make sure you are starting your outreach to investors in your network. Go to LinkedIn and find all your first/second connections that have ‘angel’ in their title. If you follow this link you'll run the search on your own network on LinkedIn. That gave us over 2000 results. I have a lot of connections though (I once accidentally sent connection requests to the 2000 people I had in my contacts).
Search Crunchbase for investors who invested in companies at your stage and in related categories, or even with direct competitor companies that might have failed in the past. That way you know they are interested in this space, and it gives you a good excuse to get their feedback per my previous point. “Hey, I noticed you invest in the future of work space, I’d love to get your feedback on my future of work product, and how you see this space evolving in the near future” (or something like that).
The right time for raising capital
Someone once said to me “raise only when not raising becomes a blocker.” If you fundraise, that is going to be one founder’s full-time job for anywhere from a few weeks (if you are lucky and have a track record) to a few months or more. Be sure that’s the best use of your time. Can you go on longer bootstrapping/working on it as a side project? It’s better to go to investors when it’s a no-brainer to back you. This could be once you have revenue or a certain number of active users, or some big partnership. If you are early stage, I’d look at applying to accelerators as well. Most of them invest ~$100k and provide support and guidance on everything from marketing, to the product, to raising future rounds. Here's our our guide to accelerators.
- Warm intros with investors work best
- Establish relationships with investors before you start fundraising. Build a rapport, and the process will be easier when you actually go out to raise money.
- Try LinkedIn and Crunchbase searches to find investors in your network and industry.
- The process isn’t fun - expect to have 99 no’s before you get a yes.
- Be strategic about when you go to raise money - can you bootstrap longer, and reach a tangible milestone to present to investors (like revenue, number of active users, etc.)?
- If you’re early stage, look into some accelerators - here's our guide to accelerators