I want to share publicly the advice I've been giving so many of my portfolio companies of late.
1) tl;dr only fundraise now if you are wrapping up a raise or really need a little bit of money. But NOW is really a horrible time to be raising.
>>
2) First, there's the usual issue of the end of the year. US Thanksgiving is in a couple of weeks. Major holidays are in Dec.
If you don't wrap up your raise by Thanksgiving, it's going to be tough to get things over the finish line in Dec.
3) In addition, this year is a CRAZY yr! There's just so much more going on at a macro level. There's COVID. There's the elections today (which will be a big thing on people's minds for many days or weeks)
The mindshare for your round really isn't there.
4) So if you're out raising & even if there are investors interested but they don't seal the deal this yr, it will look bad if you're on the mkt in Jan.
People will wonder, why didn't you close your round? There must be something wrong. This has happened to portfolio cos before
5) The truth is - a lot of investors are not working on new investments. Many ppl are out phone banking or glued to election news. Others are trying to check in on family and make sure they are ok with COVID. And then there's just the usual checking-out because of the holidays.
6) There's a rush right now for companies that are *wrapping up* their rounds. If you have been actively fundraising in Oct, I would really try to push to get answers this wk or next wk.
7) Even for investors who are usually active (such as us!), our top priority right now is in helping our existing portfolio companies with their raises so they can get across the finish line in time. And the ppl they are pitching are doing the same with their cos.
8) So what do you do if you are running out of money? Maybe you try to raise a small round - just to tie you over until Feb. And then go out in Jan and do a full-fledged round then.
Focus on quick checks even if they are small.
9) This means mostly angels. Maybe a handful of microfunds. Ppl often ask me - how do you meet angels if you're not well connected? These tips might help:
10) tl;dr
if you've been doing investor mtgs, wrap them up - by Thanksgiving if possible.
if you need $$, do a small tranche w fast $$ to tie you over
doing a full raise ($1m+) starting now is a BAD idea IMO. I have advised all my port cos NOT to do this. but just my $0.02
• • •
Missing some Tweet in this thread? You can try to
force a refresh
Now I want to talk about the legal ramifications of fundraising this time of the year. (Yippee!!) This is something NOBODY talks about but will affect all entrepreneurs who are raising now.
Quick thread today on the biggest hurdle after your seed raise
Read on >>
1) One of the things that throws entrepreneurs for a loop is just how quickly you need to level up on new skills that you knew nothing about before and now all of a sudden have to know.
2) In the beginning, it's learning almost *all* skills because it's just you or you and your co-founder(s).
So you have to be reasonably ok at sales / mktg / prod / engr / and get all the legal & admin stuff figured out.
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.
As an investor, it really bums me out (most of the time) when I have to pass on a company. As a human being, you want to help wonderful ppl as much as possible, esp as a former entrepreneur.
more thoughts >>
1) And the worst pass is when there literally is nothing wrong w/ the business.
You meet the team -- they're thinking about things in the seemingly right way. They have drive and hustle and have made things happen in a focused way. Etc.
2) The reality is that for every investment check I'm able to write, there are ~4 additional companies I meet who are at the same caliber.
Since a lot of people were asking for more details, today I want to do a quick case-study on Modus and how we invest cold generally speaking (or "direct" as someone suggested I use instead)
1) First off - let's establish baseline. 15% of the deals we do are direct.
So, if we invested in your co & someone (ANYONE - your friend / a VC / an acc / your dog) referred you, you are marked as a referral even though we often don't even know our referrers well / if at all..
2) 1 of these 15% was Modus who closed a very successful exit last week.
Let's walk through the timeline and the interactions.