VC Minute – quick advice to help startup founders fundraise better.
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Welcome back to another week of the VC minute. This week we’re covering reasons funds say no.
Let’s start by talking about your fundraising competition. I’m not talking about the competitors in your industry. Instead , there are two dynamics working against you at every venture fund.
First is that a VC is going to make a limited number of investments from each fund. If I’m going to make 30 investments and I see 6,000 startups over the life of that fund. I’m saying no to 99.5% of all startups. And this is not really insightful; you get this. But each fund does this differently. So ask, how many investments do you plan to make from this fund? How many do you have left?
The second dynamic is less obvious. Your competition in that moment are the half a dozen other startups that I have in my diligence process at the same time as you.
You’re not necessarily going to lose out on an investment just because a VC has a lot in their pipeline. But like you, we only have so many hours that we can spend working. So we always want to be sure that we are super focused on the funding rounds that are the highest priority. We’re constantly reprioritizing and refocusing our efforts.
If you’re getting the SHITS from an investor, it may be that they have a backlog of diligence and you’re somewhere in the middle of the stack.
The danger is that the longer you stay in the middle of the pack, the more likely you are to move down, or possibly never hear back.
This is where the pool party can help you or hurt you. Your fundraising process cannot be haphazard. Pack your schedule with meetings. And I’m going to talk about this in a future episode. But get in front of investors and keep the round moving forward.
Stay top of mind with the investors that you’ve already met with by sharing updates about your round and recent wins. Keep the communication flowing. And if enough has changed since you last spoke, suggest a 15 or 30 minute update call.
Keep scooting those investors closer and closer to the edge of the pool. Keep your investor process moving forward, because when your process stalls, your round dies.
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