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Fundraising is a scary word nowadays. A long hunt for "warm intros", hours of first meetings with very enthusiastic investors who disappear after that initial call, lengthy negotiations, and a lot of "No's". No wonder most founders (ourselves included!) see fundraising as something “to get over with” and move on to the next important thing.
We felt this way not too long ago before setting off to raise our seed round. The core of this issue is that even repeat entrepreneurs go through the fundraising process only a few times in their lives. On the contrary, investors see hundreds of processes every year. So there is a clear imbalance in experience and power that doesn't work in favor of founders. The good news is that there is a way to save time and fast-track the learning curve during fundraising. We used it successfully to raise an $8.5m seed round for Salesroom in under two weeks. The secret? Treating fundraising like a sales process!
You must start thinking about fundraising as you think about every other sales cycle.
You are now selling shares in your company to investors - just like you sell your product to customers. You've seen many of those processes - some more successful than others. Every time you get stuck with investors think back to why your customer interactions stall. Are you struggling to get enough excitement in the first meeting to move to the second one? Or are you losing deals to competitors in the late stage of the funnel? And suddenly, the fundraising process is not as mysterious anymore.
The first step is to structure your fundraising like a sales cycle. The number of stages will be different based on your maturity. However, all processes share some basic steps like "first call", "presentation to the investment committee", and "negotiation" (note that "coffee chat" is not one of those!). Every meeting you go into should bring you closer to your goal. To achieve this, every session must have an agenda agreed upon ahead of time, and you should spend adequate time preparing for it.
At the end of every meeting, a prospective investor either moves to the next stage or drops off from the funnel. Disqualifying unsuitable investors early in the process is just as valuable as moving a suitable one to the next step. Fundraising, just like sales, is a matter of prioritizing so that you can devote energy to the most promising prospects.
Many parallels can be drawn between qualifying customers and investors. We used the MEDDIC framework to guide our seed fundraising.
Any framework you choose to follow should cover these basics:
- Metrics: You need to learn quickly if your situation falls within the mandate of the investor in terms of stage, check size & ownership target and risk/return profile. Your pre-call research will help to eliminate obvious misfits (such as consumer tech-focused funds when you're a B2B software business). Use the first call to fill the gaps.
- Decision-making process: Similar to each customer following their buying cycle, each investor has their investment process. You need to understand how many stages are involved and the criteria for graduating from one step to the next. You also have to understand what will happen pre and post-term sheet, as it varies from firm to firm.
- Champion-building: Can the person you are speaking with sponsor a deal? Or do they need to build conviction with another, a more senior team member before moving forward? For any fund to invest, a team member with sufficient credibility must say "hell yes!" to work with you. Sector expertise and previous experience matter greatly - your champion must be excited about your market. Remember that it's always your job to empower your champion to build conviction within their team.
- Next steps: This is where the investment process is a lot more tricky than a buying cycle. On the one hand, you will often hear, “let me circle back with my team and come back to you". And on the other hand, investors will push you to move faster and meet with them again ahead of your timeline. You must be firm with both. In the first case, set yourself a reminder to follow up if you don't hear within 2-3 days. In the second case, hold off until you are ready to move to the next stage.
To achieve the best outcome for your company, you must master two skills: managing the progression of investors through the funnel at the same pace and prioritizing the most promising leads. Investors are notoriously hard to read, so you need an objective measure of their engagement with your process. Tracking email open rates and engagement with your shared content is a good start.
How Salesroom helps founders raise money quickly and without unnecessary friction
- Plan and structure all your investor calls
- Use the template we created to raise a $8.5 seed round in under two weeks to script your investor conversations
- Share critical moments of your meetings with Highlights
- Send quick recaps of your meetings to investors, for example, every time you give a demo of your product or answer one of the questions they asked during the meeting
- Your CoPilot automatically tracks questions and next steps, helping you follow up faster and with less effort
- Track engagement and prioritise your pipeline
- Use Salesroom to share files and track engagement on the files you shared, including highlight clips shared
Treating fundraising like a sales process will help you to be more intentional and analytical during the process. It's easy to get distracted, caught up in vanity metrics or stoke your ego with the investor interest you're getting. It's much harder to stick to a process, set goals and agendas for every meeting and translate that interest into term sheets. Salesroom can help! Sign up for a free individual account to see the difference yourself.
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