How to run a fundraising process

Over the last few months helping friends there are 2 trends that really stick out to me. One of them is that deals are getting done and another is that founders under prepare their process and assume investors will tell them what to do and what to give them in order to get a deal done.

I’d guess 90% of the founders I talk to who are not in a professional accelerator are missing a process entirely which was the motivation to write this blog.

The information here isn’t relevant for everyone. If you have a process that works for you then you don’t need this. If you’ve got no process and you’re going to be talking to funds managing hundreds of millions of dollars, get yourself a process and get ready.

Preparedness matters here just like when you ship a new product.

Getting Ready

Here is what I’d suggest having ready to go when you start:

  • 10 page deck
    • Commonly called a pitch deck. High level deck of what problem the company is addressing, the team, how you’re solving it, traction solving it thus far. Everything after the 10 page deck should support it. Ensure it’s consistent.
  • Extended deck (~50 pages)
    • An extended deck that demonstrates core operating metrics from cash-burn to customer activity. Many companies don’t do this but if you do and it’s done well, it’ll move your process along faster if you’re raising for the first time because it forces you to be prepared. I’ve seen it be 20 pages all the way to 100 and be effective. This deck isn’t about selling the idea, it’s about demonstrating an understanding of the operations of your business. It’s an extended deck of the initial 10 page deck. Many times the same 10 slides from the first deck guide what’s in this one. Each section is just unpacked in more detail.
  • A tracking document where you write down every conversation with every investor.
    • Some people use their CRM. I just use a spreadsheet. What matters is that you’re tracking who you’re talking to and what stage of their process (and your process) each investor is in.
  • P&L / Financial Statement
    • Don’t share this stuff until later when it’s necessary. You might share it in your data room but generally speaking for most startups this is not important until later in the discussion. You’ll get some grace and the assumption is that you aren’t doing anything silly with your money. If you are, they’ll find that out later anyway.
  • A Framework for your data room
    • Your data room has your company docs in it. Things like Articles of Incorporation, IP related stuff, historical financials, cap table, any previous financing info, and probably a few other thing. This becomes the place you keep things during diligence to share with the investor prior to their investment. Box, Drive, etc all work just fine for this. If you open up a data room for more than 1 investor, I would suggest making a copy for each so that if there are unique requests, each investor has what they’ve asked for.

Here is how I’d recommend managing your meetings and the associated info above.

Meeting 1 – Get to know one another

Share the 10 page deck and have a conversation about it. These meetings are normally hit and miss and you’ll do a lot of them. Ideally share the deck as a part of the discussion and not in replacement of it. For early stage funds that do endless meetings, that might be harder. If a partner asks for the deck just share it and don’t mince words.

Meeting 2 – Share the larger deck

The larger deck has things like user growth, revenue numbers, and other metrics that matter. It might only be a 20 page deck depending on the size but this is basically a supporting document or appendix to your conversation. Share the deck as a part of the discussion and not in replacement of it. See the trend? 🙂

Meeting 3 – An extended diligence meeting

This probably includes the financial statement and other internal documents. It’s really common that these types of meetings also include discussions with other team members and precede discussions with customers an investor asks you for. They are already having the customer conversations they aren’t asking you for.

Other meetings – These might happen and they are ok

An investor might to do a deeper dive on product, market or just ask for a partner meeting where you meet everyone at the firm. Don’t worry if this is new for you, partner meetings are really expensive for a fund because of the time and people involved. This genuinely means they want time with you and there’s no trickery.

Your process

Having a process that is consistent across investors/partners/sponsors is important to getting a deal done. I encourage Founders to think about this in the context of weeks until you develop your own framework. Weeks leave some variability to adapt to whatever is happening.

  • Week 1 – Build pipeline to take meetings in week Week 5.
  • Week 2 – Build pipeline to take meetings in week Week 5.
  • Week 3 – Build pipeline to take meetings in week Week 5.
  • Week 4 – Build pipeline to take meetings in week Week 5.
  • Week 5 – Start Meeting 1 meetings. Book your calendar and try to complete them all in a week.
  • Week 6 – Start Meeting 2 meetings. Book your calendar and try to complete them all in a week.
  • Week 7 – Start Meeting 3 meetings. Book your calendar and try to complete them all in a week.
  • Week 8 – Any other diligence requests and other meetings. Focus on partners who are likely to put in a term sheet or already have. Depending on partner schedules and the type of fundraising you’re doing this might be possible to do in a week. While you want to try there are some things you can’t get around. It’s important to be understanding and flexible with people you really want to be in business with.
  • Week 9 – Make a decision and sign with a partner.

If you’re getting into week 3 or 4 and you don’t have any funnel, obviously you know you have a problem and you need to extend that process. If you’re in week 5 and no one is moving forward you also know you have a problem. Running a framework isn’t a guaranteed way to get a deal done but it is a way to know if you’re likely going to get one done.

It’s a lot of work but that’s how a good fundraising gets done. It’ll take a company months (sometimes it goes a lot faster!) and if you think about getting 100+ investors to speak to in your target market you’ll likely find someone excited to work with you if you’ve got a good process. Someone might pre-empt the round and make it go faster. While that’s normal, you don’t want to rely on it.

Running this process gives you the ability to say to an investor something like “we are going to start talking to outside investors on Date X (Week 5) and here is how we are managing our process.” It also gives you an opportunity to say something like “How does that align with your expectations? Does that complement how you all make decisions about investments?”

Fundraising Process

Fundraising can be complex and this is just a suggested process to help you think about how to complete yours. If you find modifications that work really well (which I’ve found a number of MDs of accelerators have) please don’t hesitate to share them!

Thanks!

To Jami for reading a draft of this and Ryan for some early feedback on the data room section.