1/ Fundraising is a bit of a chicken and egg process, where once you get momentum it's easy and before that it's almost impossible.
Closing a funding round requires momentum, and there is an art to "creating" FOMO in a genuine way.
Here are some do's and don'ts:
2/
Don't: try to create pressure before the investor is excited about your startup.
Sometimes entrepreneurs will say things like "the round is almost closed", "we need a decision this week" etc, before they have met the investor.
You need to first get buy in from the investor.
3/
Don't: exaggerate your fundraising state.
Investors have a pretty tuned BS sensor and saying things like: "We are expecting term sheets next week", "we just talked to 10 funds next week" often backfire.
In those situations the investors might be tempted to just wait.
4/
Do: be honest about your stats and fundraising and have real momentum.
Things like "last week we had x, y, and z commit to the round", "we have had 20% month on month growth for 6 months".
Those types of concrete data points work.
5/
Do: have strong backchannels with those investors.
If you can, have one of your existing investors or a friend get/send useful information.
This may sound complicated, but ideally you spend time networking to relevant entrepreneurs months before fundraises.
6/
Do: run a strong investor pipeline. The biggest thing in your power is to get connected with or reach out to as many investors as possible.
For @BankMercury seed I talked to 150+ investors. For our series A, I talked to 25 VCs. Those were both relatively quick rounds.
7/
Creating momentum is hard but every fundraising process that succeeds has it.
We started Mercury Raise partly to help entrepreneurs get that initial momentum, so that's one other tool you can use.
1/ Before writing a startup deck or pitching investors you should identify the nucleus of your story and how it could be a $1b+ company.
This should be a two sentence story that you then build the rest of your pitch around.
And you should truly believe in your story.
2/ When I started @BankMercury in 2017 our story was:
"Business banking is a $300b+ market, but banks aren't technology companies. Tech companies will disrupt all of banking as seen in consumer. Serving startups 1st allows us to grow with them and they care most about product"
3/ The best stories show:
- How big the market is
- Why now is the right time for your startup idea
- Why yours' is the right approach
- why you are the right founder to do it
You have to pick the elements that are most relevant+important for your story.
We are going to try to make this a fast paced convo that skips the basics and goes deep on the subject.
Some subjects:
- why did European challenger banks fail on their US expansion
- will the big banks be able to keep market caps as fintech continues to grow exponentially
3/
- will more challenger banks get bank charters
- what’s the future of partner banks and BaaS
- will embedded banking disrupt challenger banks
1/ As an investor you are often making very quick decisions about startups.
Here are some questions I think about:
Team:
- have they built something impressive before
- have they thought about the problems deeply
- have they shown perseverance
- do they care about the problem
2/
Market:
- could this be a $10b company if things went right
- if in a pre-existing large market a) are the incumbents old/un-innovative, b) do founders understand customers enough to find a wedge
- if new market a) how big can this grow in optimistic case, b) why now
3/
Future:
- is it inevitable that this will exist in 10 years time
- are there likely to be lots of competitors
- is there strong network effect at scale?
- will it improve the world 🌎
In winter 2009 Paul Buchheit (@paultoo) gave a talk to our YC batch.
He said if you want money you should go work at Google/Facebook instead of doing a startup and you should do a startup if you enjoy the journey.
I thought he was crazy at the time.
2/ I thought:
A) I wanted the end result and didn’t care much about they journey
B) Startup founders seemed to have such great exits
C) It seemed like doing a startup was pretty hard
D) I didn’t think people got paid that much at big cos
3/ Between 2009 and 2015, Paul was proven extremely right.
All my friends who had taken jobs at those big companies or other high growth startups had done very well.
1/ My fav "how to sell" book is "Never Split the Difference" by @VossNegotiation
One particular technique in it has come in super useful as an entrepreneur. It basically talks about never accepting the first "No" you get and ask 4 times in different ways
2/ We at @BankMercury always want to help entrepreneurs succeed and one of the biggest asks we get is startups wanting to connect with investors.
Instead of trying to accommodate these asks on a one off basis we decided to productize the process.
3/ We ran a small beta last month and were surprised by the level of interest from both entrepreneurs and investors. Both sides are looking for better tools to connect.
The beta resulted in 20 intros between startups and investors and at least 2 checks.