Thread by @dunkhippo33

Tonight's tweet storm is about how a startup in our portfolio @HustleFundVC just raised $1.5m in 48 hours... and the fundraising journey to get there... 🤯

I've been involved in some fast raises before, but this is hands down, the fastest.

Read on >>

1) First off, some context: the founder didn't have network nor did he know investors from before. In fact, he only moved to the US relatively recently.

For many months, we were basically the only (institutional) investor + a few angel friends of ours who wrote small checks.

2) All of that said, in this round that just came together, he brought in @himinnie @MacConwell @AnnaBPalmer @immad @DSox & I believe @MikeMacCombie @chudson (I can't even keep up) + more.

A dream team I would love to raise from if I had a co.

3) So what happened?

Well we were the only check in for almost 8 months, because, frankly speaking he couldn't raise for a long time.

But the thing that many founders might find odd is that he actually had a fair bit of traction and kept growing quickly.

4) And many VCs actually wouldn't talk with him because his business was seemingly in a crowded space / not differentiated enough.

It made me think that this is a pt worth spend some time talking about tonight.

5) If you are getting the feedback that you are in a competitive space or that your product is not differentiated enough -- and if you get that feedback from at least 2 investors, you need to change your game plan.

6) Namely --

a) Model out a scenario where you can't raise at all / not very much

b) Figure out how to change a nuance of the business or the story to be differentiated.

7) There's a fine line here -- you shouldn't whimsically change your business just because external investors say "oh this is too crowded"

This is your company, and it's good to take in perspectives, but ultimately it's your life -- not the investors'.

8) That said, I've seen so many companies w/ traction really struggle to raise from investors, because they are in a crowded space. If you want to be a VC-backed co (there's no right or wrong answer here), you will need to think about how to rework the pitch OR parts of the biz.

9) First, let's say you decide you DON'T want to be a VC backed biz. Screw the VCs - I'm building this w/ or without them. That's great.

Your funding options are basically -- angels (many are not familiar w/ other players in the mkt) and revenue based financing-esque options.

10) These days, there are a TON of choices w/ the latter. And there are more and more ppl becoming angels or microangels everyday.

There's also crowdfunding such as @joinrepublic where customers can be a good source of funding.

11) But let's say you do want to go the VC-backed path, you need to figure out what is a better story that is peripheral to what you have?

Sometimes it's just a matter of changing the story.

12) For ex, a few yrs ago, we backed at a media co at my past firm. VCs were not excited about a media business.

The story basically turned into a "data story". We have all these subscribers and learn a lot about them, and that data can be useful for many things over time.

13) This sounds silly in writing this out, but sometimes it's just a differentiated pitch that stands out from the crowd.

As a startup, you don't realize how many ppl are pitching something very similar to your business.

14) To this pt, the reason early stage VCs are not interested in investing in cos in competitive spaces is that a) it drives up customer acquisition costs, b) they don't know which winner to back, and c) downstream investors may already have backed a similar co & are conflicted

15) So both *costs* AND *fundability* by other investors is affected.

There are exceptions -- in particular, if you are well-networked, just in general, a lot of these "rules of thumb" get thrown out the window.

16) Going back to my portfolio co, he couldn't raise. Investors said his space was too crowded & he wasn't doing anything differentiated enough.

He noticed at the end of last yr something interesting though. There was a new customer persona emerging in amongst his customers.

17) And that new persona was starting to attribute to a significant chunk of his business.

So he began to think "What if we can rejigger the story and the business to focus more on that customer persona?"

And that became the basis for a highly differentiated pitch.

18) From there, some tweaking on the story and the business, and then applying the usual advice of packing in mtgs to generate urgency on the round.

19) The crux of the story is that fundraising is predicated on having a really good differentiated story.

It helps to have traction. But the *differentiated* story is in many ways more impt (rightly or wrongly) than the traction to raise from VCs.

My bad - I meant @annawbarber !!!