Advanced Fundraising Strategy:
For most, fundraising is a chore. These days, more companies are fortunate to have competitive rounds.
What do you do when you have options? How do you optimize a competitive round?
@wes_kao and I had options... Here's how we approached it.
👇🏾
We named our priorities up-front: 1. Involve investors who backed us in the past 2. Find a Lead who would help raise the A 3. Leverage Lead + large syndicate to create traction (our market is aligned with this strategy as many investors can be instructors or help promote courses)
To make room, we had to raise $4M. If we raised less, we'd have to exclude too many people. If we raised more, the company would be over-valued or over-diluted.
I do not believe in having a valuation over $25M for a pre-seed company. Too hard to beat those expectations.
I asked my fave Series A investors and founders who the best seed fund partners were.
3 people floated to the top. If they give permission, I'll publish them later.
These funds differentiate on:
- Founder-friendliness
- Brand
- Services
Cold e-mail only. I hate warm intros; they are a waste of time and reinforce elitism.
So if the partner didn't respond cold, I probably wouldn't have met them.
Bill did. So did the other 2. We were lucky.
Line them up.
I made a big mistake and had disjointed timing. It almost killed our round.
Fund A I met in T-10 weeks. Too early; lost momentum by partner day.
Fund B I met T-1 week. Way too late; couldn't build enough rapport.
First Round I met T-3 weeks. Goldilocks timing.
Ideally, you are highly regimented about your timing.
Week 1: All first meetings.
Week 2: Second and third meetings.
Week 3 Monday: Partner meetings.
- Share timeline along the way to create momentum.
- Never over-state your funding traction.
- Do not over-rush investors.
Heavily reference check. (5-10 calls with current PortCo CEO's.)
B/c of active relationship, they won't say bad things so you must read b/w the lines.
These are unlikely to disqualify an investor, and more about knowing how to use them best.
Life is a long-term game, and I believe strongly in playing it with long-term people. (thanks @naval)
After that, we 100% focused on people who would add unique value. We grilled investors on what they are willing to do and asked them to make written commitments. Codified these commitments into an email.
Each investor provided written confirmation of their commitments.
Examples of commitments:
- Agree to teach a course on platform
- Market us on Twitter or via Email list
- Interview our product co-founder or first engineers
- Do bimonthly 45 min calls with us
Also asked them to follow us on Twitter + agree to read every single investor update
When pitching, we used a deal memo to save time.
A 5-page doc that tells what the company does and why. 30 min calls with prospective investors.
First 15 min: Q&A for us.
Second 15 min: Q&A for them.
Extra call when necessary.
Important to have diversity. Not just race, sex, and geography.
Also diversity of:
- expertise (product, growth, engineering)
- personality (cerebral, tactical, positive, critical)
- fame (too many famous names are a waste; need people who are up-and-coming to actually dig in)
There's a huge difference in mentality of angels who are from pre-2015 era. New school angels are far more willing to do work and understand what that actually means.
We decided to have a mix. Old school investors have wisdom you will need at critical moments.
We got everyone's text and WhatsApp. Already, that has increased my engagement by 4x.
We created a WhatsApp group of our investors too. Still trying to figure out how to use it, but will keep you posted!
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I’ve been thinking about co-founders a lot lately.
In 15 years of building companies, I’ve had >10 different co-founders.
They’ve fired me. I’ve fired them. But I’m still friends with 100% of them to this day.
... 15 Rules on Co-founder Relationships
**Read On**
Rule 1: You don’t have to know each other in advance.
@erenbali and @caglaroktay didn’t know me when we started @udemy, but I think all of us would agree the company wouldn’t have happened without any one of us.
Rule 2: Create a pre-nup through role definition.
99% of companies should have a clear CEO. If you are not that person, you report to them.
Co-founders firings should not be done lightly, but if it happens, the CEO decides.
Most investors add no value, but when they do, it can be company-saving.
In 2010 as @udemy was just picking up steam, eBay-owned PayPal was cracking down on marketplace businesses for violating ToS. Without warning, they shut our entire payments system down.
**Read On**
We had a few months of runway and were starting to raise our Series A. It would take weeks to implement an alternative system, and that would've killed our traction story.
It was all-out panic mode.
We asked everyone for help - many were experiencing the same problem.
PayPal was notoriously bureaucratic at this time and was completely inaccessible to small startups like us.
The "best case" scenario, we heard, was 3 months of downtime.
In the 2001 recession, my parents lost everything, marriage included.
My dreams felt like they were slipping away; I was depressed, angry and had nowhere to turn.
This is a story about how I turned crisis into opportunity by fusing education and entrepreneurship.
**Read On**
I was in a tough spot. We didn’t grow up wealthy, but I certainly had enough. I went to good schools, traveled internationally, and had all the tech and books I needed.
The crisis threw a wrench in everything.
Like many people today, I started to question the status quo.
Slowly, I started to get pissed off. The world felt like it was out to get me. I questioned if the “adults” in the room knew as much as they purported.
My grades slipped and my rebellious nature came out.
It's so easy to devolve into anger when times are tough.