going to war
the right mindset for raising money
Hey,
Welcome to the new people on the list. As a refresher, I am Dragos from Project Arrow, where we guide founders with what to do and who to talk to in order to get funded.
Let’s talk about the mindset you need to have in order to start raising money from investors.
If you really want to work with VCs (and that is a big IF), selling to them is like going to war - you will have to understand the rules of engagement, and be prepared as a consequence. Or else you won't succeed and will only get frustrated.
You cannot leave any detail at random - treat the process seriously, and consider all scenarios, like in any important business situation. Yes, I know, selling shares in your company to VCs is not part of building a business, it is just a distraction from the real thing, and can be a waste of time in many cases. But the secret to tackling it is doing homework extremely well, being patient and persistent - it makes you more resilient and gritty, at the end of the day.
And this brings me to something that most founders I talk to on daily basis don't really understand. 95% of the time in the investment process, a successful deal is not founders raising but investors closing. An important distinction - most of the times, founders have no idea how or why they closed and hence difficult to extrapolate learnings from that.
Getting money from VCs is very contextual - not founders closing because what they sell is hot, it is rather they found investors in the right moment at the right time looking for something in particular. Investors' minds about new business are in context modes looking for situational opportunities not for generic shit. They have an agenda and are not driven by serendipity most of the times. A few cases:
1. Investors may look for a particular kind of business (i.e. producer of alternative bread) or a particular space (alternative food producers) or model (marketplace for alternative bread/food sellers).
2. Investors may be simply on a learning mode - ie. not decided to invest but want to understand how the bread is made and talk to as many founders from the bread space as possible. Sure, they will tell founders they want to invest even though it's a lie (we 'might' invest after all) - otherwise founders won't talk openly to them.
3. Investors can be involved in a similar deal and want to gather competitive intel from the space, talk to top 5 competitors and make the decision upon what they like best (like going to the fruits market - you browse around and buy from the shop with the nicest looking fruits).
There's many other situations but you get the point. And it may not be fair for founders most of the times but investors will ignore you or drop interest soon if you're not what they look for. How they do it - that's a different matter but most deals are closed by investors looking for that particular something at that particular moment.
Raising money is a basic sales process - you need to understand the investors you sell to and how they do business. How they're wired and what contexts they're in. You custom your pitch to each investor because you don’t sell a one size fits all product. Figuring those out is not easy, by all means and btw that is why raising is a numbers game - meet as many people as possible to find investor context/startup fit, not to mention intangibles i.e. people with similar values that really get 'you' on top of what you build.
Do the right things, talk to the right people, and plan before executing - map and segment the ecosystem, prepare the pitch in detail and have clear selling points for situational VC contexts. And - so it happens - helping founders with exactly this is something that I do every day over at Project Arrow. If you’re looking to raise and feel lost, give it a try.
Community
Startups that just raised pre-seed
🇩🇪 Basebox - compliant, secure data management system (Munich)
🇩🇪 Epigenics - food supplements for aging (Berlin)
🇫🇷 Differs - plug & play software retail solutions (Paris)
🇸🇪 Numa - video marketplace for midwives (Stockholm)
🇬🇧 Olie - audio wearable enabling hands-free communication for athletes (London)
Read
Who becomes an entrepreneur?
- teenage vandals
- those with a community
- the under-compensated
- 41.9 year-olds
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How to network - The 2-Hour Cocktail Party: How to Build Big Relationships with Small Gatherings (Amazon)
Think
Hire - incompetent but nice
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Inside a bank run (33 minutes)
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