One of the founders I work with recently kicked off his fundraise. He decided he wanted a well-run, tight process to boost his chances of completing his fundraise before the holidays. One of the things he’s doing is sending a weekly recap of the week’s activities to all his existing investors.

I really like this. My favorite part of the recap is that his fundraise process is displayed as a funnel, and he quantifies how many venture capital firms are in each stage. As an investor, I can quickly understand, looking at the funnel, where he is in his process and gauge the likelihood of it being successful as it progresses.

In addition to the funnel, he includes in his recap a few bulleted highlights and planned activities for the upcoming week. 

In a minute or two every week, I get a good idea of where he is, what he’s planning to do, and how I can help (if I know some of the investors he’s about to pitch or already has pitched).

I’m a fan of this fundraise update email. It’s a great tool to help founders focus, run a tight process, and keep stakeholders informed throughout the fundraise process.

Fundraising season is in full swing, and founders are having lots of meetings with VC firms. Many are trying to complete their fundraising before the holiday season begins in November. And many think, because of the rapid decision processes in the 2020 to early 2022 period, that that’s plenty of time.

Getting a quick decision isn’t a given these days. Some firms may still say yea or nay quickly, but many have adjusted their internal processes to spend more time evaluating a company before deciding whether to invest. Said differently, some firms are taking longer to decide.

The best thing founders can do is not assume. During initial meetings, they should ask, “Assuming an investment will be made, what steps are left in the firm’s decision-making process?” “What’s the average time frame to complete those steps?” Who else will I need to meet with before a final decision is made?”

These simple questions help founders set loose expectations and give them a better idea of where they are in the firm’s process. This helps the founder run a better fundraise process and, hopefully, increases the chances of success.

A few days ago I shared my big takeaway from an article about Andrew Bialecki, founder of Klaviyo: he bootstrapped his company at first and advises founders to raise the least amount of capital needed to get traction in the early days.

Andrew owned 38% of his company when it went public, which is a bigger share than you normally see. I usually consider 10% to 15% a big win for the founder.

Digging into Klaviyo’s early fundraising, I learned that the company was founded in 2012 and didn’t raise capital until 2015. In that three-year period, it surpassed $1 million in revenue and became profitable, per Forbes. The company then received a $1.5 million investment from Accomplice and a few angel investors, according to a press release.

Andrew’s advice about raising minimal capital early on sprang from his own experience in doing so, which likely was a material factor in his ability to maintain a large ownership stake. Andrew’s advice and his outcome are useful things for early-stage founders to consider when they’re thinking about their fundraising.

When early-stage founders pitch investors, the process can be long and exhausting. They end up pitching countless investors in hopes of one or two saying yes. By employing a bit of scheduling strategy, they can improve their chances of getting a yes.

Great pitches are the result of practice. The more you pitch, the better you get. The more you pitch, the more you realize what isn’t resonating and adjust. The more unanticipated questions you get, the more you incorporate the answers into your deck (or an appendix). After countless reps, the pitch flows smoothly and you’re more confident. The chances of getting a yes are better.

Most founders aspire to have a particular investor on their cap table. Maybe it’s an angel investor or venture capital firm with industry expertise and relationships. When you pitch your first-choice investor, you want to put your best foot forward. You want them to be blown away by your pitch (or at least interested enough for another meeting).

Because practice leads to a great pitch, it may not make sense to schedule your preferred investor early in the fundraise process. If you do, they’ll get a pitch that still needs work. Instead, pitching the investor you really want to land after you’ve done more reps pitching other investors and fine-tuning the pitch can be a good idea.

Scheduling meetings with several investors is great, but you want to be thoughtful about when you reach out and schedule time with your first choice.

In many VC firms, someone leads each potential investment. This deal lead develops conviction about the company by learning as much as they can about it. Once they’re convinced the firm should invest, they turn their energy toward convincing others in the firm of the merits of investing.

This effort usually involves preparing an internal deal memo that details what the deal lead has learned about the company and lays out the case for an investment. To those who see them, these memos provide a rare glimpse of how VC firms evaluate a company for investment.

These deal memos are often protected work product that VC firms don’t publicize. Bessemer Venture Partners, though, has made deal memos about some of their successful investments—Yelp, LinkedIn, Pinterest, Shopify, and others—available for public viewing. These memos aren’t recent and likely have been scrubbed, but they still provide a great perspective on how Bessemer’s deal lead evaluated each company for investment.

If you’re interested in reading Bessemer’s deal memos, you can do so here.

I’ve spent time with a few entrepreneurs recently. One of them is gifted at finding undervalued assets. He buys them at deep discounts, improves them, and sells them for premium prices. He’s got a great eye for opportunity and has a top-notch business. 

He said his main constraint is capital. He doesn’t have a deep network of people who invest in projects like his. So, he has relied on a single wealthy investor to back his projects. This has worked, but it’s put him at a disadvantage in negotiating terms. It also has limited the opportunities he could pursue because the investor, who must sign off on each project beforehand, doesn’t understand the potential of some of the assets.

It amazes me that an entrepreneur with a decade-long track record of success is constrained by capital availability. I suspect there’s a large, fragmented market of entrepreneurs like this one. Seems like a big opportunity!

I found a report from Carta, the equity management platform, that’s full of data and very helpful. It’s called State of Pre-Seed: Q2 2023. Carta defines “pre-seed” as “any company that has yet to raise a priced equity round.” Lots of companies begin by raising capital on convertible instruments and do priced equity rounds as they mature. Carta doesn’t explicitly say this, but I assume it also caps valuation of companies included in this report.

The report is full of useful data. In addition to high-level data, it provides granular data broken down by the two most common convertible instruments used by early-stage companies to raise: simple agreements for future equity (SAFEs) and convertible notes.

One point that stood out to me was that 52% of pre-seed companies that raised in the first half of 2023 were in California and New York. These companies were also more likely to raise more than $2.5 million in their pre-seed rounds.

The report is a great resource for anyone curious about the state of fundraising for early-stage venture capital companies in the first half of 2023. The report can be downloaded for free here.

I recently reviewed an early-stage founder’s fundraise deck. He’s raising capital for his start-up. His first start-up was shuttered when he couldn’t attract paying customers. He mentioned the first start-up to me but positioned the idea behind that business as a success because another company executed on it and is worth $10+ billion. Even though his business failed.

Most start-ups fail. Failed start-up attempts, while painful, can pique an investor’s interest. The failure itself isn’t what they focus on. What they want to know is what you learned from it and how you’ll apply that knowledge to the next attempt. If you learned valuable lessons that will increase your chances of success and speed of execution, that’s a positive founder trait to many investors.

Founders shouldn’t shy away from their failures. Instead, they should own them, share what lessons they learned from them, and articulate how those lessons increase their chances of success as a repeat founder.

Today kicks off what I believe will be a memorable fundraising period for technology in public and private markets. With private companies going public through IPOs, start-ups raising venture capital, and venture capital funds raising from limited partners, we’re likely to see a lot of activity between now and the holidays.

I’m curious to see how receptive investors are to these varying investment opportunities and how much capital is raised.

This week I was discussing an upcoming capital raise with a founder. The company has pivoted, and its latest product is resonating with prospective B2B customers. These businesses have been searching for a solution to a problem, to no avail. This founder’s solution checks all their boxes. Prospects are converting to customers relatively quickly.

Things are looking good, and the founder wants to raise venture capital. His pitch is coming together, but we talked a lot about one part of it: the market. How many customers exist for his solution? I learned that his “known” market is material but not gigantic and not growing (as far as we could tell). There’s a clear path to building a company with seven-figure annual revenue. Beyond that, not so much.  

Markets matter a lot. It’s hard to build a big business in a small market—there just aren’t enough people willing to pay for the solution. It’s equally as hard in a static or shrinking market because companies grow by taking market share from other businesses—the market is cutthroat (and likely low margin).

Venture investors understand this dynamic and spend lots of time understanding the market a start-up is operating in before they invest. If the market won’t support a large company (now or in the future), the probability of an investment being profitable for the fund goes down drastically. If they can’t see the investment turning a large profit for the fund, they probably won’t invest.

Markets matter, and founders should understand their market and its potential. If a founder can’t articulate why a market will support a large company (or multiple companies) and how their solution will win in that market, they may not be able to raise venture capital.