While there are many factors that influence seed fundraising, your behavior during the process makes a big difference. Here’s the most common traits of founders who successfully close their seed round.
1. They take In-Person Meetings. Phone calls rarely work for first meetings with investors as it’s hard to get their full focus. If you really can’t get an in-person meeting, then fall back to video chat. For example, a founder I recently coached was struggling to raise after ~40 phone meetings without a yes; once they began asking for in-person meetings, the round was closed in a couple of weeks.
2. They do all the work for Introductions. Take the time to comb through LinkedIn, Angellist and Crunchbase, looking for potential warm introductions to investors. When you ask for an introduction, make sure the introducer only has to click ‘forward’ to do their part. Most founders only partially complete the work for the introducer but if you make it simple for them, you can get 10x more meetings.
3. They’re courteous. No matter how much demand for your round, it never helps to be rude. Even if an investor doesn’t respond negatively at the time, they will almost certainly talk about their bad experience with others, reducing the opportunities available to you. Instead, avoid being defensive and playing too much “hard to get”.
4. They ask for Money. If you don’t ask the investor “Are you interested in investing?”, you are wasting the meeting. If you’re very early in the process you can ask “Where would we need to be for you to be interested?” but whatever happens: you must ask.
Working with Investors
5. They don’t brag about investor interest. Don’t discuss other investors you’re talking to, even if a different investor asks. Given most investors will pass, you’re likely giving the investor a negative reference. However, if both investors are interested, you risk them colluding on terms without your involvement.
6. They evolve their Pitch. Keep a document of common and difficult questions you’re getting from investors. Prepare strong answers in advance, add appropriate slides to your deck’s appendix and create a small ‘data room’ of materials online. In 2016, I saw a founder change their pitch focus from a technology advantage to bookings revenue; they went from struggling to raise $250k from Angels to closing $3M from a top VC.
7. They’re Responsive. Respond to investor emails within 1 business day and provide data or new materials to an investor in a timely manner. Responding to investor questions may push them to a yes. Plus, investors will only have these interactions to judge how you work together.
Closing the Round
8. They Follow-Up. Send regular follow-ups, every ~3 days, to undecided investors. Update them on round progress, new investors and product or sales wins. This will drive ‘fear of missing out’ as the round’s availability dwindles. Ultimately, you have to accept that ‘maybe’ is worse than ‘no’ and push for a decision.
9. They Confirm Yeses. A yes isn’t real until you’ve confirmed it in writing. Confirm the investment and high level terms over email immediately and then get straight into the document signing and funding process. Once the money is in your bank, and not before, scour your new investor’s network as detailed in point 2.
10. They Look After Themselves. For most founders, fundraising is a marathon not a sprint. You need a healthy, sustainable routine to perform everyday for the ~90 days it usually takes to close a seed round. Nobody pitches at their best when they’re exhausted and almost nobody can survive on 3 hours of sleep a night.
All of these traits require little talent. No matter how nervous you are about the fundraising process, you can drastically improve your chances by choosing to put in the effort when it matters most.
Bonus: 11. They are Tough. You should expect to hear no a lot. In many cases, founders can successfully raise a round hearing ‘no’ 90% of the time. Although it’s incredibly disheartening, the founders who keep working to generate investor meetings often find success.
This article is part of a series on Seed Fundraising.
1. When to Raise Money
2. How to Build a Deck
3. VCs vs. Seed Funds vs. Angels
4. How to Get a Meeting
5. How to Request an Introduction
6. How to Get Early Momentum
7. How to make a Good Pitch Great
8. The 5 Most Common Pitch Mistakes
9. Meeting Requirements
10. The Basics of Meetings
11. How to Handle an Angel Investor Meeting
12. Know these Numbers for your VC Meeting
13. 4 Investor Gotcha Questions
14. How to Follow-Up After an Investor Meeting
15. How to Close the Lead Investor
16. The 4 Stages of a VC Process
17. How to Raise a $2 Million Seed Round
18. Go from Investor YES to Cash in Hand
19. When Investors Say Yes but Mean No
20. When and When Not to Use an Investors Name
21. Stop Making These Common Fundraising Mistakes
22. How to Avoid Bad Terms that Kill Startups
23. What to do After Receiving a Term Sheet
24. Term Sheet Problems Part 1 — Money Talks
25. Term Sheet Problems Part 2 — Boardroom Blues
26. Term Sheet Problems Part 3 — Side Letters
27. 10 Traits of Successful Founders
Sterling Road invests in pre-seed B2B startups based in North America. Full process here: sterlingroad.com/process.
You can reach me here: firstname.lastname@example.org
Thanks to Kaego Rust, Alec Barrett-Wilsdon, Ashish Dua and David Smooke for their help on this article.
Photo by Edwin Andrade