TBC: Answering Founders Questions About The Fundraising Process

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Hey there. Welcome to another episode of the back channel. In today's episode, we're going to go back into a topic that a lot of founders have reached out asking for my thoughts on, and it's a topic that is near and dear to my heart, which is how to create efficient fundraising processes. This is such a fun topic for me to be asked about because it's kind of the central theme of which all my content around fundraising seems to be focused around. The idea of how impactful a great process can be.

So let's jump into it. See what some of the questions are. And see if I can't give, uh, some directional feedback, if not incredibly actionable feedback. So first. How can we streamline the process of finding and reaching out to potential investors? [00:01:00] The thought was that there are so many out there and it feels super overwhelming.

This founder is super frustrated and concerned about what they had to do. So the first thing I'll say is. Maybe not a pleasant thing to hear, but it's certainly a reality, which is this idea of trying to find. Investors that you might reach out to, uh, being a long and arduous process is a reality. There aren't many shortcuts that will magically get you that list of people that you're going to go out to because. Everyone's list is going to be different.

Not only because different companies are different in terms of who would be appropriate for them, but everyone's network is different. And the network that gets you to these investors is really what impacts that final list. So the first thing you can do is you can go through lists or databases that people. publish on the internet.

So my company goes through a regular process of doing research and publishing free lists to make sure that founders have access to [00:02:00] things like the most active investors over the last quarter. There's also platforms like NFX signal who have aggregated. Investor information into a searchable database. These are both ways to do what I call top-down research to figure out who are some good names that seem like good fits based on criteria. And then figure out how am I going to get in touch with them?

How am I going to get an intro to them? The other thing that I think is more important is what I would call it, bottoms up research. And this takes a lot of time, but this is essentially you going into your existing network and seeing what investors you might be able to get to. And in this case with this activity, LinkedIn is going to be your friend. I get very intimate with the ins and outs of LinkedIn search, figure out what it means to go to advanced searches. So looking through things like second degree connections, keywords within profiles. And then after that, it's going to be a lot of clicking, a lot of saving and yes, that's just something that you're going to have to tackle on your own or with [00:03:00] help from someone on your team. Next. What's the best way to keep track of communications and follow up with multiple investors without it becoming a full-time job. I'm going to start again with something that isn't going to be pleasant to hear, but fundraising is a very big job. In, during certain parts of a startup's life cycle. A founder is going to have to take on a lot of this responsibility. And at least drive a lot of this work.

So fundraising does feel like a full-time job for seasons and periods of time. Uh, throughout the journey. Next in terms of like what you would do to keep track of it. You got to get a CRM system, something that helps you manage what communications are going through your fundraising process. I think one of the worst things you can do is assume that you're going to be able to do it on email.

Just kind of like manage your process via email. Look for the last emails you, you sent. Um, Search for things when you need [00:04:00] additional details. That can work. If you have a really small process and a really small target list. Which more often than not leads to bad outcomes. If you run a process, the way that I teach it, the way that the best in class fundraisers teach it. Your list is going to be large.

Your process is going to be very detailed and have a lot of different entities flying through it. So the only way you're going to keep track of that is if you keep it organized within a system. So your arm systems don't have to be built out software platforms like HubSpot, Salesforce, et cetera. They can be, and those will be very useful, especially if you have experience using those types of sales oriented CRM systems, but they can also be spreadsheets or relational databases of homegrown. CRM systems, um, using things like air table. As long as you have a list of your targets and you track them through different phases of your process, [00:05:00] like, have you figured out how you're going to get an intro to them?

That's phase one. Do you have them lined up with intro that's phase two? Have you requested the intro? Have you gotten a meeting scheduled? Are you on meeting one with them and a place to capture all your notes centrally for each investor that you're going after. If you can set that up, that will go a really long way in helping you keep organized. It is a bit of an effort to keep the data up to date. Um, you know, you can think about it as garbage in garbage out.

So you got to keep that data up to date. The one thing to feel a little bit better about is that this work is not throw away work. When you do the work to keep yourself organized for this fundraise. You're going to be able to access that for future fundraisers. And you'll probably be able to access that for things like business development and sales outreach as well.

Uh, next question. How can we create a sense of urgency among investors to keep the fundraising process moving forward?

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[00:06:00] [00:07:00] So the biggest thing about creating urgency is creating momentum in the process. And you can't keep momentum in a process. Without a large mass right. Momentum. Let's go back to physics.

You need mass in order to get to a momentum. So one thing I would say is in order to do that, you have to start with a significant number of targets. Before you can create any momentum. I would say. If you want to keep something moving. And if this question is based on the fact that you had a very light process to start, and you felt like the conversations weren't moving. Well, it's probably because you didn't start with a big enough list to start with so very hard to do this without a big list without. Momentum early on.

Once you have momentum. Your effort will be to try to [00:08:00] nudge people in both directions. So what I mean by that are the people that are lagging behind and not getting back to you. You're going to want to reach out to them and have this confident feeling of upper out. A short note to ask them where they are to see if they want to continue the process. And if they're not it, you're not going to chase them and you're going to let them. Drop out of your funnel on the other end, if you have one or two. Investors who are really excited. And are jumping ahead and are trying to close the process out with them on their own.

You're actually going to want to drag your feet a little bit and try to keep the conversations bundled as much as possible. So again, in order to get this momentum going, I would say the biggest thing you do is start with a big list to S to begin. And then try to get to what we call calendar density, which gets triggered by your first set of meetings.

All being scheduled in a densely packed area on your calendar. From there, you can kind of let things flow on their own. Uh, and you should have the momentum that you, you seek. Now.

With [00:09:00] the processes. The next question I have. Is really more about how to talk to an investor, but I'll answer it anyways. The question is, is it better to focus on a few key metrics or provide a complete comprehensive set of data? During the initial pitch. I assumed as this question of like, how does this drive momentum in the process? And they ask, how can we strike the right balance? Really short answer here. I think it's best to wrap your metrics in a story. Think about how the metrics you want to focus on support a narrative of the company, validating hypotheses and getting to future milestones, as opposed to. Comprehensive set of data.

Let me just put it in front of you and you decide what it means. That's, that's a recipe for disaster. That's a very dangerous approach. All right. Uh, are there any tools or software you recommend that can help manage our fundraising process more efficiently? Ready to talk about this a little bit at the very beginning, but it's a CRM system. [00:10:00] In terms of being a little bit more efficient.

I always say. The best CRM system to use and people ask me for recommendations there. The best CRM system is the one that you'll actually use. So if you have experience in any kind of CRM system and you're used to a specific interface, that's the one I would use. So if you, if your sales team is already using. Salesforce.

And you had to manage a sales leads in there yourself, and you know how that works and you know how to customize it. You Salesforce. If you're marketed, the marketing team has stood up HubSpot. Well then. You might've already touched HubSpot. You might know that system. So use HubSpot. And if you haven't used their CRM system before, try to find some kind of system that you feel comfortable with. A lot of people end up relying on spreadsheets, Excel, Google sheets, because they've worked in something like that before.

It's not the most ideal [00:11:00] technology to use because it's not a relational database. But if that's the only thing that you're actually going to feel comfortable using and use that it's better than email. Okay. So figure out what CRM system you use. And then actually. Deeply implemented into your process.

What are some common mistakes founders make during fundraise that can slow down the process. I think the biggest thing they can do is not set up a process to begin with. A lot of people think they're setting up a process. But are really just saying I'm going to kick off conversations when I see people slow down.

It's because they haven't organized the way they're going to communicate with investors, the way they're going to set up meetings and the way they're going to follow up. If you think about this ahead of time, it will make, it will not make sure, but help you drive speed into the process to get to an outcome. And as an efficient manner as possible. And, you know, I say being efficient and getting to an outcome because, um, the best thing [00:12:00] you can do is quickly get to a deal, a term sheet. But kind of the next best thing is you get to the answer that it's not going to happen this time. Which gives you more time. To drive progress in your company. And then restart another process. Um, lastly, How do you prioritize which investors to meet with first, when you have a long list of potential leads? Well, if you have that long list of potential leads, That sounds like you have the right ingredients for calendar density and kicking off a great process. Now there is some advice that a lot of people give, which is. Take your meetings with your tier three investors first, then your tier two investors, and then your tier one, one investors don't schedule it out that way.

That's how you decide who to go after. I'm not a big fan of that. Piece of advice. Um, a lot of people give it so that founders have an opportunity to work out the kinks with tier three investors. So that by the time they get to tier one investors, they're [00:13:00] on their game. I don't like that for a couple of reasons.

First. How do you actually decide what's a tier two investor versus a tier Ridwan investor versus a tier three investor. A lot of things might be brand oriented, but you really don't know until you start talking to these investors, who's a great fit for you based on the firm. Based on the partner that you're talking to.

So I think it's actually pretty hard to define those things. And then secondly, I think by tiering investors in sectioning and off. Parts of your process. You are. Destroying calendar density, and you're destroying the momentum that can be really impactful. And actually getting to the outcomes that you're looking for. So instead in terms of how you decide who you schedule at first. Look on your calendar, set a kickoff date for when you want to start having meetings. And then look to schedule with everyone all the same time, giving them the option to find what's best for them in that start time. From there, just [00:14:00] let the chips fall where they may, that will help you actually build out the right process. For choosing which investors. You'll meet with first and how you'll keep driving the process. That will again, get you to the best outcome possible with your fundraise.

All right. I hope this discussion around how to create efficient fundraising processes was helpful for you all. We like doing this mailbag format. We love jumping into these topics and we love reacting to the questions that you all submit. So if you have another idea, reach out to us over email on social.

We'd love to take one of your topics and focus a Backchannel episode on that. So until next time. We'll see you on the back channel.

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