Starter Pack
- 📖 Silicon Valley Etiquette: Read this to know dos and don'ts.
- 📅 6 months before the money runs out: Use resources or google for the investors you want to connect with. Aim for around 200 intros so you should maybe track 300, and have 100 meetings.
- 🔥 5 months before the money runs out: Rewarm your connections! Remember that guy/girl from high school that is now well-connected, ping him/her for a chat!
- 🚀 Accelerators: If you have no connections join an
accelerator. Try to get into one of these, (in order of best to
worse):
- YC
- Techstars, 500 Global, SkyDeck, AngelPad, Plug and Play, Pear VC
- Entrepreneur First, Antler, OnDeck
- 🎯 Planning: Plan intros and find connections to the investors you would like to connect with.
- 🪵 Deck: Build a deck. Thinking that you will just present and people will throw money at you is a mistake. Negotiation tactics and creating scarcity are very important.
- 📨 Outreach: Push out all intros at a similar time!
- 💰 Valuation: If you are raising in the US for the first time and you have no clue about valuations just do an 8mm cap for SAFEs.
- 🤝 Commitments: Build commitments using the method below, then start converting the commitments to signed SAFEs.
- 📈 Leverage: If possible move the cap higher with time as you are getting less desperate for the money.
Tactics
More for a VC round but can work with angels too — I think a party round can be a better choice if you are not experienced.
🐎 The Horse Race
The traditional method of fundraising.
- 🎯 Select 6-8 desired funding firms (way more if you are not "hot").
- 📝 Prepare introductions to these firms.
- ⏱️ Release all introductions simultaneously to keep firms at a similar pace.
- ⚖️ Aim to have multiple offers simultaneously for better negotiation leverage.
- 🚫 Avoid letting one firm advance too quickly in discussions; keep them in sync.
🐇 The Rabbit
A variation of The Horse Race.
- 🏃 Engage with one VC (the "Rabbit") a week before starting the Horse Race.
- 💨 Use the Rabbit's involvement to expedite other VCs' interest and availability.
- 🤝 Ensure the Rabbit is a VC you genuinely are interested in partnering with.
- ⚠️ The Rabbit should not be just a bluff but a real negotiation alternative.
🗣️ Heads Up
A direct negotiation approach with a single VC.
- 🎯 Approach a single VC with the proposal to raise funds.
- 🔒 Make it clear that a good offer will seal the deal without involving other VCs.
- 🤝 Ensure a strong pre-existing relationship with the VC for this method to work.
- 🚫 Make the VC understand there will be no second bid; they need to present their best offer.
🔀 Mix and Match
- 🧩 These techniques can blend based on specific scenarios and timing.
- 🔄 Soft versions of Heads Up can be similar to The Rabbit. The Rabbit can transition into The Horse Race as timing aligns.
FOMO and Trigger
You need to constantly be working on the Fear Of Missing Out and create triggers to make sure you create some deadline for people to take the decision. It's in the best interest of investors to wait!
I also personally try to get to a NO rather than Maybe. I feel a lot of founders like to have a bunch of Maybes but that's fake traction. The closer you are to the end of the raise, just push and try to convert maybes. A lot of them will fall apart but some people will be part of the round!
Rolling Round vs Closing with a Lead
If you don't have VCs throwing money at you, do a rolling round closing SAFE documents as you go.
Documents and Terms
- 📄 Preferably do a SAFE, best pre-money but the standard is post-money.
- 🚫 Preferably without pro-rata (as it can be a bad term for early founders).
- ⚖️ HAVE A LAWYER TO LOOK THROUGH THIS, I CAN'T TAKE ANY RESPONSIBILITY
Forwardable Emails
This is the bread and butter of every round. So you know somebody who knows somebody. Now you need to ask them for the intro, once they forward your intro and the other person will be keen to connect, they will connect you and you can schedule a call.
An example scenario:
I know Surbhi (my founder
friend) and she is connected with Reid on LinkedIn. I ping her on LI
if she could do the intro, she says yes so I send her an email like
this:
Subject: Intro request from HeyDaily to Reid
Hey Reid,
I'm Filip and I am a second-time entrepreneur, Surbhi recommended you as a great investor :) I have been bootstrapping a project for the last couple of months and now the sales exploded and we have 68k MRR projected based on contracts signed with 21 influencers and a 5.1mm people reach.
The project unlocks messages (SMS, messenger etc) as an easy way for influencers to deliver exclusive content (voice notes, video, images) behind a paywall without having to create a separate app. Think OnlyFans via direct message for everything apart from sex :) We currently signed contracts with a couple of niches like mom influencers (think recipes for babies and general advice), fitness influencers (workout of the day), spiritual influencers (daily horoscope) etc.
Here is the Deck: [Docsend link]
Let me know if you would like to chat :)
All the best,
Filip Kozera
Founder & CEO at HeyDaily
Closing Angels and Small VCs
If the call went well and you feel like they want to be in, don't waste momentum, close them! This can even be the first convo but would normally be the second or third. I would always try this at 3rd convo, if they are not in, its probs a waste of time.
The purpose of this is both to get money (of course!) and get commitment to prove traction on the round and create FOMO.
You: .....
Angel: Wow all of this sounds great, I have a couple of comments but I really like it!
You: Awesome, what's your typical check size for a company like mine? Do you have any numbers in mind?
Angel: I previously invested 350k (It would normally be in 15k-150k range) into a company at this stage, but I would encourage you to raise as little as possible.
You: Great so can I count you in as a commitment for 350k in this round?
Angel: Well, that's not what I meant, you would have to have the round together. + A list of other conditions
You: Okay so given that I satisfy (insert list of conditions) you are committed for 350k?
NOW WAIT FOR THE ANSWER, THIS MIGHT BE UNCOMFORTABLE + they may make up more conditions
Angel: yeah that sounds reasonable. What about valuation?
You: We are thinking 20MM
Angel: Oh no that sounds way too high.
You: Is there a number when you would come in straight away/you would be comfortable with?
Angel: 12mm is something I could work with.
You: Okay so I hear your commitment of 350k at 12mm valuation (specify pre- or post-money!). Thank you so much for your faith in our company and me! I hope you understand that this might end up being a priced round and we have quite a lot of interest so it might end up higher but nevertheless I really appreciate it! Would you mind if I share this with some people who are already committed?
Angel: Yes go-ahead
Send an email confirming this in writing!
Most Common Mistakes
- ❌ Not being decisive and not running a proper process.
- ❌ Thinking that you will just present and people will throw money at you. Negotiation tactics and creating scarcity are very important.
- ❌ Hoping for a lead.
- ❌ Raising for more than 4 months — go back to building the company instead and try to keep the burn very low. Learn skills yourself in order to advance.