Raising Money When You Have No Idea What You’re Doing

People somewhat regularly ask me for advice on raising money, typically at very early stages (angel or seed rounds). I was lucky to be able to raise $7.1M in two rounds at Runscope, so I guess that gives me some level of credibility with the process. I don’t actually think I was very good at fundraising — my success rate was probably something less than 1% if you take into account how many pitches didn’t lead to an investment.

I went through seven major revisions of My Deck™ and about 50 meetings before we got a term sheet for the seed round. Each revision attempted to resolve the typical set of issues you hear from feedback of failed pitches:

  • Not enough market size data.

  • Not compelling enough problem statement.

  • Too focused on technical solutions over business viability.

  • Underspecified go-to-market strategy.

  • Poor competitive differentiation, etc.

I eventually settled on creating a narrative instead of trying to convince investors with an avalanche of facts, logic and pie-in-the-sky projections. The deck became an accessory to the narrative, not vice-versa.

I’ve only sat on the other side of the table a few times, so I’m not sure how investors in general would feel about this, but I know from the dull pitches I have sat through, a compelling narrative would have gone a long way. Below is a framework for thinking about your pitch as a story that I’ve sent around to people when they ask for advice raising. It worked for us. If you’re struggling with your pitch, it may work for you too.

There is a timeline from when you first had your idea for a company to the eventual conclusion of your startup as a big company. This is the story to tell. Whenever you are pitching, you are at some point on that timeline. Your deck should reflect that position in time.

Start with quantifying the problem (in real terms! e.g.“Companies are losing $X by [whatever solution you’ll replace for the problem they have]”), how you recognized it, and why you’re the best team to solve it. Pick absolutely the most important points for each of those. Talk about traction only as a reinforcement of the previous points. Do not overwhelm with info. Investors will remember basically nothing specific.

Once you’ve established that, the next part is working forward in time. The further out you get, the more “blurry” it will need to be. But you need to pick milestones. If your next step after the seed round is an A round, describe the resources you need to achieve the business milestones that will set you up for the A round, THEN mention that it will take $X in funding to get there. Work backwards from the next milestone. Pick only the 1–3 most important things you’re going to accomplish.

When you structure a pitch like this here are the things you don’t have to beat over investors’ heads: market size, competition, business model. If you’ve made a compelling case at the beginning of the story, those will all be readily apparent. You should absolutely have answers for those questions, but you don’t need to focus on them.

Instead, focus on:

  • This is a big problem.

  • There’s nobody better to solve it.

  • You should get in now to help us continue on to the inevitable next milestone and ultimate success.

Get them excited about the story, not any specific number.

Remember, investors will remember next to nothing (they get pitched A LOT) so pick your spots and make the few key things that need to be recalled over-emphasized. Repeat them at each stage and how it applies to the past, present and future. Imagine after your meeting they’re going to describe it to another investor in the hallway. What is the one thing you’d want them to say about you? Repeat that over and over again in your pitches. Have answers for everything, but keep the deck focused on the key points. In a way, the less info the better because there’s less chance you’ll get pulled off in random tangents.

Lastly, this is the single piece of advice that changed my approach to fundraising: Find true believers, not converts. Think of the process as eliminating anyone who does not believe in what you’re doing. When you find your first believers, you’ll wonder why you spent so much energy trying to convince people. The difference in behavior on their part is striking.