5 Things You Need to know About Fundraising in Today’s Market
In our most recent Founders Workshop, January Ventures’ Partners Jennifer Neundorfer and Maren Bannon hosted a session with Lucy Deland, Co-founder and Partner at Inspired Capital, and Ramy Adeeb, Founder and General Partner at 1984 Ventures to discuss raising capital at the Seed and Series A. We talked about the key changes in the fundraising environment over the past 6 months, metrics founders should focus on, what a best-in-class process looks like and more.
WE’VE MOVED FROM A TRACTION TO A NARRATIVE MARKET
LUCY: “The most remarkable changes are the volume and speed of deals. Know that the investors you are speaking with are dealing with a greater deal volume than they have in recent history. That’s an important thing to keep in mind in terms of the calendars you are getting into. Then the size of rounds and the range of valuations has expanded in terms of the definition of what is Seed and what is Series A.”
RAMY: “We have moved away from a traction market into a narrative market. So in a traction market, which is where we have been for the past decade, you have to show traction and you have to show that you’re able to execute. Right now, we are in a narrative market that means you have to tell an amazing story. That story still has to be backed by data, just a different set of data than a traction market.”
THERE ISN’T A ONE SIZE FITS ALL APPROACH TO METRICS
LUCY: “Now more than ever it’s narrative matched with momentum. What are the signals that are happening with your business that are happening faster and better? What are the metrics you can point to telling that story? It’s not always revenue traction metrics, it could be hiring metrics, or the speed at which you’re bringing on one side of the market. Finding the piece of the metrics and the narrative that are the signal of momentum is a big part of landing a raise.”
RAMY: “The pace to get to the metrics is almost more important than where you are in the metrics. Alda Dennis has a great article on the metrics you need to focus on. ‘Our best days are ahead of us’ is the current mantra in startups and so what’s coming is a little more important than where you are at today.”
WITH DEAL VOLUME THROUGH THE ROOF, THE DECK IS MORE IMPORTANT THAN EVER
RAMY: “The best advice is meet the right folks, not the folks you can get intros to. Figure out who the right people are and put them in batches. Then, make sure you have a good deck. Part of the VC job is for us to sell the company to our partners. Go to your existing investors and ask, does this deck do me justice? When you look at this deck do you feel that my business is coming through? And if it isn’t, then work on it. Get it to a point where in just 5–7 slides, somebody glancing at it on their phone, they understand what you’re about.”
LUCY: “Practice, practice, practice before the first time you’re doing it live so that you have really stress tested whether the deck serves you when you’re giving the pitch and whether your narrative is really flowing, landing and easy for someone to understand. You want to practice so many times that it seems so natural that it’s the first time you’ve ever done it. The worst thing that happens is when I hear a good pitch and I know I’m in one of the first meetings. Then I’m trying to work out what is the fact that I’m early in the process and what doesn’t work about this narrative.”
EVERY TIME YOU’RE MEETING WITH AN INVESTOR, YOU’RE FUNDRAISING
LUCY: “Know that every time you are meeting with an investor you’re fundraising. There is no such thing as a casual check in, it doesn’t exist. Even if you end up raising six months later, that’s when the relationship with the investor started, that is when your pitch started, that is when they started to determine whether or not they were intrigued by your narrative or intrigued by you. Going into any investor meeting, think about what you want them to leave thinking and I always think about it as what do I want them to go tell their partners.”
RAMY: “Also want to add the importance of a seed extension. Definitely don’t call it a seed extension, just call it something else, but the best time for you to get that extra million is when you’re not looking for it. Do that to get a little bit more runway so your back is not against the wall.”
PUT YOURSELF IN THE RIGHT MINDSET BEFORE GOING OUT TO RAISE
LUCY: “We’re backing you. How you present, how you run the process, how you communicate, how clear your thought process is, how you explain to us how you went through the experimentation, all of that is really important for us in understanding how you’re going to run the company and work with us. So you have to remember you’re still selling yourself throughout every fundraising process, but particularly in Seed and Series A it is really about the team.”
RAMY: “You’ve got to believe that you can do it. You’ve got to believe that there is an amazing business to build. Every day you’re in the weeds, but take a step back and think about how much you’ve accomplished in a year. You’ve got to put your mindset into what this can become and how much you’ve accomplished. Once you’re in that mindset about how much potential there is, it comes through.”
At January Ventures, we’re committed to demystifying venture capital. This workshop was part of our Founders Workshop Series and aimed to give insight into today’s fundraising environment and how founders can best set themselves up for success. Thank you to our partners Oracle for Startups and AngelList for their continued support and for making this event possible.
