Looking to raise a round for the very first time?
If you ever pitch to an investor as an early early stage startup, you’ll probably hear these lines and more depending on your product and industry (and dare I say, gender? ):
“Your market size is too small.”
“You don’t have enough traction.”
“You should include more on your team slide. Hasn’t anyone on your team worked for Facebook or Google?”
And really, all of these responses really translate to “You haven’t showed me how I can make money off your venture.”
The breadth of reactions I’ve gotten so far while raising a round for my company TheRightMargin has (facetiously) made me think that maybe venture capital is more risk averse than I thought.
But, demoralizing as it may seem from time to time, every week I talk to someone(s) I’m trying to sell on my vision, I glean insights and perspectives I haven’t thought about yet.
And my pitch and my understanding of an airtight business model grows more mature every few days. Almost to the point that I’m constantly embarrassed about the pitch I gave last week.
Here are some tips that might come in handy for the person thinking about raising a round for the first time:
1. Build momentum in leads by asking for mentorship.
At some point, when you’re asking someone for money, you’re going to have to make a confident sell, not bury it under the guise of ‘I just want feedback and direction. But when you’ve got nothing to start from except your own decidedly noninvestor connections, you need to set about talking to as many people as possible and winning them over. These people will lead to the people who will lead to the people who will lead to the people (times an unknown multiplier) that will eventually hear your pitch and say the magical word: “Yes!”. And since your pitch at the beginning won’t be nearly as good as it will be when you get there, you might as well be straight up about it and spin your emails and reach outs to be around asking for help, feedback, direction or advice. People love giving advice. You’ll be more likely get replies and face to face time by seeking people’s help until you transition into pitching like a rockstar.
2. Master the investor/product development yoyo effect.
It’s a wild feeling to go from having an ‘in the weeds’ daily stand up with your team in the morning to then talking to an investor about the high level 5 or 10 year vision of your venture in the afternoon...and then going back to working with your team on troubleshooting a bug that’s affecting one of your precious few early users in the evening. It’s the yoyo effect that you’ll naturally feel when you have to switch from pitch mode and having your head in the clouds, passionately defending a vision that you want to bring to bear, to taking a deep dive in the weeds of your product, facing the minute startup problems that make your vision feel like a million miles away.
So how do you go about overcoming that feeling? Try to segment your pitch time and product development time. And give it a lot of space so when you step away from business/product development, you can get into the headspace you’ll need to talk to an investor confidently and in large terms. That means not feeling the doubts and stress of the current product cycle and not speaking in details, but in vision.
Yes. Vision speak. It’s a thing.
3. Build a pipeline spreadsheet.
Mine looks something like the simple table below. Visit it frequently and break down your next steps in the cells. Use highlighting to manage when something gets done, is blocked or needs further thinking. It’s a great way to follow up on leads and relationships with people!
4. Separate yourself and your startup from the feedback you receive.
Being rejected is normal, everyone says. Developing a hard skin is a must, everyone says. I think it’s okay to feel whatever you want to feel (after all, your startup is your baby and no one will understand your vision as much as you, ever). However, it is important to develop the skillset of separating the problem from the solution. Take negative feedback and scrutinize it. Why did they give that feedback? More often than not, there were specific places in your pitch where you made your listener ‘lean out’. Figure out what they were and even consider asking the investor where they ‘ leaned†in†’ to figure out where your pitch was strong. Dissect the feedback and fix or improve what you can.
These have been great things to keep in mind myself, and I hope they’re helpful for the first time founder who’s looking to raise capital in the near future. And hey, check back in with me in a few months. Dropping knowledge or not, I’ll still be fighting the good entrepreneurial fight and learning a ton along the way!