A Beginner’s Guide to Raising a Seed Round

Overview: The 6 month road to money in the bank

The First Three Months: Passive Fundraising

  • Investor type (Angel or VC)
  • Organization
  • Primary contact: include their LinkedIn Profile and contact email
  • Priority (L1, L2, L3, or F1, F2, F3): “L” if they lead, and “F” if they follow.
  • Follows typically add capital to “fill out” a round, once the lead sets the price and the terms. Angel investors, for example, often will commit to invest a smaller check after a lead has confirmed their interest.
  • Average check size
  • Firm focus area
  • Who do you know who can make an intro?
Here’s what a target investor list might look like (all data is fictional)
  • Warm introductions: This is the number one way it’s done. Scour LinkedIn, find mutual connections with firms you’re interested in, and ask for introductions. If they agree, send that mutual connection a clean forwardable email that explains you, your business, and why you’re asking for the meeting. A sample forwardable email is at the bottom of this article.
  • Talk to non-investors: If you don’t know many investors, share your idea with anyone relevant and willing. Meet other founders, colleagues in your industry, and potential customers. Listen to their feedback, and ask if they know investors they’re willing to connect you with.
  • Cold outreach: A lot of VCs say they respond to cold emails. In practice, it’s hard to break through that bubble, but it’s possible. Here’s one article on the craft of cold emailing VCs.
  • Look smart on Twitter, then DM away: Spend 7 days writing interesting tweets about your industry to build credibility in the space. Then DM target investors on Twitter to see if they’re willing to chat. You could also write smart blog posts or reports, and then share it with industry leaders and investors who might find it interesting.
  • Here’s what I’m working on: Introduce yourself, what you’ve figured out, and what you’re still testing. You don’t need a pitch deck at this stage, though you might want some artifact to help structure your conversation (for instance, a Google doc outlining your idea and progress-to-date).
  • Gather early feedback: These meetings are an opportunity to learn about the market and other companies in the space. Take advantage of investors’ expertise. You might ask: Based on your experience with x company, how do you feel about y part of our strategy?
  • Make it clear you’re not looking for money yet: Tell them you’re planning to raise in a few months. Right now, you’re focusing on hitting a few key metrics and learning from people who know the space well.
  • Ask them to help set your target metrics: If you were to come back in a few months, what would need to be true for them to invest?
  • Get more introductions: Networking is a huge part of a VC’s job description. The investors you meet likely know other investors who may be helpful. Wrap up every meeting by asking for 2–3 other people who they recommend you speak to about your business. Remember, your target is to schedule up to 40 first pitches during active fundraising, so it’s important to use every opportunity to build your target list.
  • Figure out whether they’re a good fit: There are a lot of seed firms out there, but many don’t lead rounds or only invest small amounts. Follow-on firms that write relatively small checks can be valuable contributors, but you need to be sure that there are plenty of potential leads on your target list. Here are a few questions you can ask to learn about the firm or investor:
  • Prepare your pitch deck: The internet is full of good material about preparing a pitch deck, so I won’t say much here. Here’s one helpful resource from Sequoia.
  • Line up meetings: This can be the most daunting part of the process. Once you’ve developed a target list of investors and funds, the next step is to schedule a long lineup of “first pitch” meetings during your first two weeks of active fundraising.
  • Start assembling your ‘data room:’ Due diligence starts after you sign a term sheet. At this point, your lead investor will give you a checklist for your data room. Data rooms are typically a Dropbox or Google Drive with legal and financial documents that confirm your business is in good standing from a legal and financial perspective. It’s a good idea to at least start getting these documents organized before you go into active fundraising. Read more about data rooms here.

The Second Three Months: Active Fundraising

  • Stack meetings: Your goal is to set up 40 first pitches within the first two weeks of active fundraising. Get on everyone’s radar quickly so that you are the hot company and magical founder that every fund is romancing.
  • Find industry advocates to promote on your behalf: Building credibility can be difficult particularly when your startup is basically a larva. One way to build credibility is through others in the industry vouching for you or promoting you by sharing your pitch. For example, I spoke with one VC who has a PhD in computer science. He told me that he always takes meetings with people referred to him by friends from his PhD program, because he knows and trusts his ex-classmates’ expertise.
  • Time your fundraise with a major launch or other publicity push: Investors love seeing traction, and timing your fundraise with a major traction building event is a good way to generate excitement. For example, you line up your fundraise with launching in a new city or releasing a major report on the state of your industry.
  • Leverage your first term sheet to get more: You may have a term sheet from a firm that you’re not especially excited about. Leverage this term sheet with other firms in order to drive a sense of urgency with other firms. Email or text other investors to let them know that you have a term sheet and need to make a decision within the next 72 hours. You’re still very excited about working with them but can’t avoid a bird in the hand. Is there any way they can accelerate their decision process?
  • Run after a “quick win:” If you’re still trying to get your first term sheet, do everything to signal to other investors that you are moving fast. Try to zero in on a quick win you can accomplish in 1–2 weeks to impress investors with how effective you are and create a strong sense of momentum.
  • Open up a rolling SAFE and collect capital from “follows:” By now, you’ve probably met several investors who have told you to come back to them when you have a “lead.” Most of these people will end up saying no, but some of them will invest if given the right vehicle. Open up a “rolling SAFE note” and invite them to invest whatever amount. While this likely won’t total the full amount you were hoping to raise, it will buy you some runway. If you go this route, set a clear closing date, so that investors don’t drag their feet.
  • Stop fundraising, build for a few more months, and try again: Sometimes, the best answer is to press “pause” on fundraising and go back to building. As you make more progress, you can decide whether or not you want to try fundraising again. If you do, you’ll come back refreshed, with new relationships, and a strong pitch.

Sample Email Templates

  • Our value prop of [x] clearly resonates with students: We used one zero-cost acquisition channel, with the goal of recruiting 18 students in one week. We surpassed that goal by 33%, and, due to demand, had to shut down recruitment 3 days earlier than expected.
  • First revenue in the bank: Each of these 18 students put down a $500 down payment. They’ll pay an additional $500 at the end of their course, putting us on track to book $18,000 of revenue within our first 2 months of operation.
  • New team member: [Insert Name] has recently come on board as our Head of Engineering. [Name] has an impressive career, having run product at [y company]. She dove in head first and is spending 10 hours/week building the MVP of our product, and planning to transition to full time at the beginning of Q3.
  • Know someone looking to hire our students?: We’re arming our students with the ability to be productive on the job from day 1, even in our MVP. If you know anyone who handles recruiting at [x type of employer] and are willing to foster an introduction, please let us know.

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Founder @GlowDotFM, believer in a robust media & the power of storytelling. Obama & Hillary alum. Creator of the Backyard Cambridge podcast.

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Amira Valliani

Amira Valliani

Founder @GlowDotFM, believer in a robust media & the power of storytelling. Obama & Hillary alum. Creator of the Backyard Cambridge podcast.

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