If you’re raising from VC for the first time, here are some experiences I learnt through our time fundraising. To add to the fun, we decided to start our raise in the middle of a UK summer and a massive tech market crash, so plenty learnings to share!

For context — I’ve been around the startup block a few times (>10 startups over 23 years) and fortunate to have seen my last company through to exit after bootstrapping for many years (with some angel capital ($300k) to start scaling). With Ramp, this was my first time raising from VC, so a very new experience after being on the other side of the bootstripe life.

** I’m in B2B SaaS, so some of my shares may not be 100% relevant if you aren’t, but should be easily adaptable**

While I experienced all of the below first-hand, I must credit Francois Mazoudier and Marcela Donatello, the team at Fundraising Bootcamp, who painted a very clear picture and path to success which prepared us for what was to come.

Big shout out to our partners AlbionVC and Eurazeo who co-led our round and Triple Point Ventures who followed, as well as our incredible angels, all who were exceptional throughout our fundraising process. Their approach and structure was a big factor in our decision in partnering with them. More on our round here

Don’t test the waters

Francois will kill me. We literally didn’t listen to his first lesson — we thought we had the greatest thing since sliced bread, and could speak to a handful of angels / VC’s and we’d be made. Newsflash: you’re not that special, and neither were we.

We did this first, and it failed miserably. When you want to start your raise, make sure you are ready, and when you do start, go full tilt (warning, it’s an all consuming juggling act, so make sure you keep a close eye on the business while you do your raise). Trying to test the waters by speaking to 3 or 4 VC’s to “have a conversation” or “see what they think” will never work. When you speak to VC’s, you are always pitching!

Timing is everything. You want to make sure that the decision making timelines are aligned to all interested parties so they come to a decision around the same time. To do this, you’ll want to have had your first pitch with your top ~40 within the first 2–3 weeks after starting.

Why is this important? You don’t want to be under pressure to make a decision on a term sheet (TS) when you’re waiting on several VC’s to go through their initial deep dive. Not only will this mean you don’t get to choose the best fit for you, but it will also piss off the first VC who send terms if you make them wait (more on VC timelines later).

Be prepared

Before you start, make sure you have:

• 1 pager investment teaser (used to get you the meeting) — DM me and I’ll share ours as an example (Warning don’t shop this out for brokers to send on your behalf, as I’ve heard many VC’s turn their noses up to them — however we sending ourselves I found a decent hit rate on this)
  ‍
• Pitch deck (short version with annex). Always send before the pitch. It’s so much better when investors have an idea of what you are pitching and come with questions loaded. You’ll get way more value from the meeting. I tried both, and much prefer sending before (Check out the Sequoia template to start off)
  ‍
• Investor Memorandum or Additional info doc with all your data research etc. This will help the investor / analyst prepare their investment memo for IC
  ‍
• Data room set up and structured well — sent straight after the first pitch. Spend the time to structure it properly, with an index. Investors will appreciate this, and it makes a good impression

Best way to get in front of VC’s

I found the best approach was getting an introduction from a shared and trusted connection, but I also had decent success from cold mails. Most VC’s read them, so make sure you nail yours. Here is a link to some great strategies on cold mails from Jason M. Lemkin at SaaStr.

But! Before you start flooding the market, make sure you know who you want to pitch and why. It goes a long way to show a VC (or any sales prospect for that matter) that you’ve actually done your homework on their fund. It will also make sure you only pitch VC’s that fit your ideal investor persona. Yes, you need an investor persona!

‍

VC timings — know what you’re in for to get to a term sheet

Going into our raise, I didn’t fully appreciate all the time and effort required from the investor running the deal for the VC. It’s important to understand this, to provide context on what the person on the other side of the table is dealing with.

From my experience I noticed:

• First meeting — You’re either getting a no on the call or shortly after if it’s not right for them. Push for feedback on declines, so you can learn. This information will be helpful for future pitches in this round, as well as future fundraising rounds, so keep track of it — this feedback has provided a clear path to our Series A for us
  ‍
• If they want to dig in, then some follow-up questions or a follow-up meeting will be requested. Track these questions, again very useful
  ‍
• If they’re still interested, then likely one more follow up with a partner and additional questions. Track, track, track
  ‍
• Once you’ve proven yourself to the investor, and they want to convince their VC to put up a term sheet, they’ll need to prepare an investment memo and present to their IC (Investment Committee) (this is IC-1). Make yourself available for questions ahead of this meeting to help build their case for IC
  ‍
• There might be additional questions from IC, or you’ll get verbal confirmation followed by a TS
  ‍
• Once you sign the TS (more on term sheets later), the rest of the non-commercial DD starts and you still have one or two more IC’s to get through. Expect a number of back and fourth meetings / questions after you sign the TS, this is where the real time effort comes in! It’s not done until the money is in the bank. Anything can throw a deal off, so keep operating as planned

DD your investors

This isn’t a one way partnership. You need to make sure the investors are a good a fit for you as you are for them. Ask questions during your meetings. Some that I like are:

• What does the first 100 days after investment look like
  ‍
• How do you deal with bad news
  ‍
• What traits do successful founders have
  ‍
• Who will sit on the board (if relevant)
  ‍
• How will you help me hire key VP’s

Once you have a term sheet, make sure you talk to portfolio companies to reference check the VC and the investor sitting on your board. You want to understand how to get the best out of the investor. Remember, you don’t work for your VC, it’s important to have a mutual relationship, not one where you are uncomfortable to have big conversations with.

If you can help it, have enough cashflow to not be under pressure to close your round

Raising takes time. Expect at least 2 months from when you start just to get your first term sheet. If you need followers to close the round, expect another month. Then at least 6–8 weeks of DD. All in, from start to cash in bank, budget for at least 6 months. It can happen sooner, but rather be safe.

If you can help it, you don’t want to be a month away from bust and waiting for a term sheet. The pressure will kill you, and you’ll likely scare otherwise potential partners. Remember, VC’s do this all day every day, they can see the writing on the wall.

Might just be me, but I also prefer an investor making a decision based on having the time to properly look into us, make sure we’re right for them, and them for us, instead of pressuring and making a mistake. This is a likely 10 year relationship, make sure it’s a good fit!

Pitch, learn, refine, repeat

You will be utterly shit the first time you pitch. Fact! Everybody is. You’ll go out there thinking you know everything, have the answer to every question, and BANG, you’ll be 2 minutes into your pitch and you’ll get a question that throws you, and you won’t have the answer. Believe me, it happened multiple times for me.

It’s ok. Learn from it. Update your deck. Incorporate critical questions into your pitch so you can get in front of them next time. Most importantly, it’s ok to say “I don’t know the answer but I’ll come back to you.” Unless of course it’s the “what’s your vision” question or any question about your metrics. Be sure to know that stuff at the drop of a hat!

Don’t be afraid to ask for feedback in the meeting. If it’s a no, ask why. Learn from it.

The stats

• Number VC’s Top of Funnel: 49
  ‍
• Investment offers: 10
  ‍
• Investors: 3 (+ several angels)
  ‍
• Time from starting raise to first term sheet: 2 months
  ‍
• Time from starting raise to money in the bank: under 4 months
  ‍
• Raise Target: $3.5m
  ‍
• Total Raised: $5m

Raising VC is incredibly hard, and while my shares above are just my experience, we went along this journey with many other founders from our Bootcamp cohort, and I followed a number of other founders who had shorter timelines and even longer ones than us. Check out this post from Chris Smith at Playfair Capital and the stats he presents on Kuai Commerce‘s recent raise.

To be continued

This is part 1 of 3, stay close for my next experience share, and feel free to drop a comment for any questions you have that aren’t answered here so I can add to my future shares.