Thread by @dunkhippo33

Don't be afraid to ask would-be investors questions. Doing an investment deal with someone is truly a partnership.

Asking qs will not only help you understand the investor and his/her values but also your likelihood of closing that investor:

Some thoughts on this >>

1) First off, my $0.02 applied to both raising for a startup as well as raising for a fund. Just my opinion though - your mileage may vary.

Most ppl go into fundraising (whether raising from a VC or from a fund investor) w the mindset of "I'm trying to pitch for money".

2) That could not be further from the truth.

Both parties hold something valuable. One side holds money. The other side holds equity (or equivalent). The cash is valuable because well cash is cash. The equity is potentially even more valuable down the road.

3) So it really should be a balanced conversation though in practice I often see ppl go in with nervousness or even w a sense of desperation.

You're doing something you believe will be valuable, so own it. Don't be an asshole but be confident.

4) As such, as many ppl have said - it's a numbers game.

It truly is - you have to pitch a LOT of people. We pitched 700+ ppl for our Fund 1. Yes, it could be that many people, so don't get discouraged.

5) And the reason it's a numbers game is you don't know what someone is looking for. Many ppl think they do, but most ppl don't do enough customer discovery to understand what each investor - angels, VCs, fund-investors, etc is looking for.

6) So how do you find out what someone is looking for and likelihood of investing? Like how you do cust dev with your potential customers, do the same with the ppl you pitch.

Here are some qs to get you started (for anyone pitching):
elizabethyin.com/2016/01/22/wha…

7) Concrete example: we pitched a number of ppl for our Fund 1 who in theory invest in emerging managers.

We asked things like "How many more new funds do you think you'll invest in this year?"

And the answer was often 0-1. They were booked w/ existing commits.

8) So when these folks ask for follow up mtgs, you know where you stand -- they may be really interested, but the reality is they are building the relationship for down the road.

You can then better prioritize or even push off mtgs for when it's less urgent.

9) Another q to assess where you stand: how much money are you deploying these days? How many more investments do you think you will make this year?

Where are you in your fund cycle? etc...

In my experience, ppl are very open and honest if you ask.

10) And if they are mid-raise or liquidity is tied up, they could still be really interested, but they do not have money right now.

That doesn't mean that you don't try to seal the deal, but that info alone should give you a sense of how to prioritize your mtgs.

11) You'll run into a LOT of ppl who say they invest really early or in emerging mgrs. While this sounds promising, probe: "Neat - can you give me a couple of examples?" if they are notable people's cos, you can say "cool! it sounds like you focus a lot on notable 1st timers"

12) And for some funders, the answer is "Yes - we like ppl to have come from a well-known company/firm". If you don't (and I didn't), you know where you stand, and that's fine, but you know to move on. Just like in sales, don't spend time chasing leads that are not "qualified"

13) So now let's say you know you have a good shot and the funder has money and is actively investing. Now what?

Most funders try to be super nice and just say stuff like "I LOVE what you are doing!" and then walk you out the door.

14) That's good for the ego but you need to give your ego a hit - you need find out what the person's concerns are. How does the funder think?

If you can't answer that in walking out the door, you did not do enough cust dev.

15) How can you figure that out?

Just ask: "I'm curious what you think? What do you think would be the top roadblock in the growth of this company?"

16) Every funder has concerns. You will hear something.

I have concerns about each of my portfolio companies whom I've invested in -- even ones at the late stages! I have concerns about my own company!

There are always concerns. So you'll def hear something.

17) Then probe into those concerns. It is important *not to be defensive*. Some things you can change both in the funder's mind as well as in your own business.

Other things are areas where you are just fundamentally opposed.

18) Don't try to fix the latter. For ex: when we pitch, some ppl who are concerned about the geos we invest in. Others are concerned by the fact that most of our founders are not from "elite backgrounds". We are not going to budge on either. And that's ok - it's not a fit.

19) Some concerns that are "fixable" - esp if you hear them more than once are things that could be:

-storytelling related; change the story slightly to address the concern (we did 20+ versions of our pitch)
-or fundamental to the biz itself.

20) If the latter - you need to be honestly self-reflective. This is where self-awareness is impt. Sometimes you realize "I just totally disagree w/ the investor." And it's a walk. Other times it's a "I'm going to make some tweaks in the biz" and maybe will circle back later.

21) It's case-by-case what qs you need to ask, but a good rule of thumb is that you should really understand a) an investor's process in DETAIL, b) timeline, c) decision makers, d) your probability of landing the deal based on their cashflow, e) how bullish / bearish they are.

22) I.e. really no different from doing customer development.

Most founders don't ask enough qs to be able to assess any of this. Reading an investor's website is usually not good enough to get all this info.

23) Finally, if you are able to assess all this in 1 convo, that frees up time to get new leads. Fundraising is SO time consuming - how can you meet potentially hundreds of investors while running a biz??

That's why it's so impt to qualify ppl out early.

24) Figure out who you should NOT take a 2nd mtg with (or at least not right now) because it will be waste of time for the current raise.

This is the mindset you should have when fundraising. /end