Written By: Kelly Bryant
Repeat after me: “the purpose of the 1st meeting is to get to the 2nd meeting”
We drill this mantra into the heads of our Founders as they are preparing to go to market and meet with potential investors. As a cash-conscious entrepreneur, it can only be expected that you want to get the check in the bank as quickly as possible. However, it’s important to understand how the fundraising process works, so you know what lies ahead and can optimize your next raise.
When raising early-stage capital, you can expect about 5-7 meetings with a single VC Fund before closing the deal. Typically, the structure of those meetings goes something like this:
- Introductory analyst and/or principal meeting
- Single and multi-partner meeting(s)
- Full partnership meeting
- Term sheet offer
- Post term-sheet diligence
Within the structure outlined above, you can expect lots of back-and-forth on email, quick phone calls, deep dives into your data room and multiple diligence questions if the VC Fund is interested. It’s important to remember each fund is different, so don’t be afraid to ask whoever you’re speaking with how their process works. Most investors understand that Founders won’t have a deep understanding of fundraising, so it’s fair game (and encouraged) to understand what the next steps are (and if they see you being a part of whatever comes next).
According to a study conducted by YCombinator, the timing of the entire fundraising process varies widely, ranging from 1 week to 4 months. At Kerosene, we encourage all Founders to plan on the entire fundraising process lasting 3-6 months depending on how strong your VC network is and how prepared your materials are ahead of a raise. Your ability to respond to their requests promptly and succinctly will also have an influence on how quickly the process moves.
It’s not uncommon for investors to pass or even stop responding to you during the process. This is why it’s so important to have conversations with multiple parties occurring simultaneously. We aim to build target lists of 30-50 VC Funds for every startup we bring to market. Some only require meeting with 15 before closing the deal and others will hear “no” 30 times before getting offered a great term sheet.
When all else fails, have a backup plan. Know what you plan to do if you’re unable to fundraise. For example, can you raise a bridge round? Secure additional funding from an angel investor? Perhaps you need to give yourself enough runway to drive growth that is impressive to investors to increase your future chances of raising.
Whether you’re in the midst of fundraising or plan on kicking off your round later this year, do what it takes to get the 2nd meeting and remember that slow and steady wins the race!
Kerosene Ventures – Helping Great Founders Raise Capital