One of my favorite founders in the world is Jeff Kahn from Rise Science. He and his partner Leon have been steadily working on their company for years and recently executed a phenomenal raise. When I asked him about his process, I was surprised to hear his unorthodox approach.
THE MOST IMPORTANT PART OF YOUR FUNDRAISE IS THE KICKOFF.
The ideal kickoff involves warm introductions to multiple funds, to the most senior partners possible. To add a rough number to this, you’re looking for 25-30 partner meetings. This creates a competitive dynamic, ultimately leading to an oversubscribed round with the best possible terms.
Here’s the problem: no fund is going to get interested right away, especially without incredible metrics in place. And once a round takes longer than a few months, it goes “stale”. It’s incredibly difficult to revive the excitement in the fundraising process from that point forward.
Let’s work backwards from the top of your funnel – what activities will lead to real interest from multiple funds?
COLD OUTREACH TO A TON OF FUNDS (SPRAY AND PRAY) IS TOO SLOW.
If you are a first time founder without a track record in leadership roles in other high-profile startups, you are wasting time cold-emailing VCs. I’ve done it hundreds of times myself, and I’m here to tell you that it just doesn’t work.
In the early stages, there’s plenty of risk in investing, regardless of the performance of the company. You might have great metrics, but not have a solid leadership team in place. You may address an amazing market, but the legacy customer acquisition costs might be too high. You may have awesome revenue growth, but miserable margins. The list goes on. For every reason there is to invest, VCs see ten reasons to pass.
We believe founders need to take advantage of one of the most underutilized signals: the warm introduction from other founders who have made the fund money in the past.
Six months prior to his raise, Jeff spent almost no time talking to VCs. His initial strategy was to research his ideal investors and understand which companies that the specific partner led rounds in. He diligently outlined which of those companies were the most successful and identified the leadership teams. Ali Tamaseb calls these people “Superfounders”. Even better than another investor who is investing directly, the best introduction to a fund is through a Superfounder that they trust. Most founders think that the lead investor from their previous rounds is the best path, but while that gives you meetings—it doesn’t put you in a position of strength.
SUPERFOUNDERS UNDERSTAND THAT THEY ARE SITTING ON THE SHOULDERS OF GIANTS AND ARE WILLING TO PAY IT FORWARD.
However, you have to work for that golden introduction! If you are reaching out to a Superfounder right before fundraising, you are too late. You need to establish real trust, and real trust takes time. I encourage founders to put together their target list of Superfounders at least six months before their fundraising kickoff date. The earlier the better—these folks are typically amazing mentors who can help you navigate the early stages of your startup.
In your initial outreach, ask for advice. Share why you deeply care about your company and your team and give them a reason to help you. There is something special about the spark in the eyes of a founder who is excited to win and create real impact for their community of customers. As operators ourselves at MATH, we spend a ton of time mentoring founders before they are ready to raise their round.
IF YOU WANT TO TURN A SUPERFOUNDER INTO A MENTOR, YOU NEED TO BE AN AMAZING MENTEE.
Follow up immediately after your meeting and show that you are incorporating their feedback to your startup. Don’t ask for investment or introductions—your goal is to genuinely listen and learn. There is so much nuance in building a startup. The ones that go the distance are the ones who approach their craft with discipline and rigor. Show that you are someone who is open to coaching and growth, this goes a long way.
Meet with them monthly and show progress. Investors invest in lines, not dots. Imagine the introduction that a Superfounder will make for you six months from now—you want them to say that you have grown in front of their eyes. Meeting when there are problems that the Superfounder is uniquely setup to be useful gets them excited and gets you, the founder, great advice.
What’s even better is if you can get an angel investment check out of the Superfounder. Most successful operators are active as investors or scouts for other funds. They might even be LPs in a handful of venture funds themselves. Typically, venture funds keep their investor list close to their chests. Imagine the weight of the introduction of someone who has invested in the venture fund themselves. I can guarantee that you are going to get the attention of the most senior partners in the fund right away.
DON’T ASK FOR THE INTRODUCTION UNLESS YOU HAVE IT ALL TOGETHER: A CLEAR NARRATIVE AND MATERIALS TO BACK THAT STORY.
The more prepared you are, the faster the rest of the process will be for your fundraise. Momentum matters. Ideally, you will have multiple Superfounders who can vouch for you in your initial outreach, each providing 5-10 introductions. Ask for the connections to be made in the same two week window; you want to create a real sense of urgency from multiple funds to establish a competitive process. Ultimately, you are optimizing for the best partner who will help you along your journey, with the best terms for your final outcome during the exit.
This method only solves for the gateway problem—you still need to deliver an amazing pitch with stellar fundamentals. I recommend reading Brad Feld and Jason Mendelsohn’s excellent book “Venture Deals” or Scott Kupor’s “Secrets of Sand Hill Road” to get a primer on the process—both have been fundamental in my own journey in navigating venture capital. In addition, the YC Series A Guide is a must read for every founder.
It is so much easier to build trust with other founders—you are one of us, and we all remember what it was like when we were just starting out. Ultimately, if you can’t impress other founders, you won’t impress VCs. Use this as a gateway to earn the trust of people who will invest in your journey.
If you enjoyed this piece – give us a follow @MATH_V_P and learn more about fundraising on our blog.
One Response
Valuable tips