Tips From The Startup Fundraising Playbook

Editor’s note: Nathan Beckord is co-founder and CEO of Foundersuite, a San Francisco-based company that developed the first collection of software tools to help entrepreneurs launch, manage and grow their businesses.

I’ve been considering raising a seed round for my startup Foundersuite. So, to get my head in the game, I’ve been chatting up various startup friends who have recently been in the market for capital.

Here are a few of the best tips for running an efficient fundraising round.

1. Mine AngelList and CrunchBase to Build a List of Investor Targets

I’m a big fan of AngelList, and whenever I need to build a dataset of target investors, it’s the first place I go. Here’s how I do it: From the homepage, navigate to the “People” tab and use the “Role” header to select the relevant type of investor (seed, angel, VC, etc.). Next, scroll to the “Markets” field and enter the appropriate industry and vertical (e.g. “SaaS,” “e-commerce,” “Digital Media” etc.). Pick out names of people you’ve heard good things about, or who clearly get the space, then add them to a spreadsheet or dedicated CRM product.

An alternative, and somewhat more aggressive, approach comes from Dan Martell in an answer on his Clarity site. To paraphrase, he states, “Find other people [on CrunchBase] who have raised money and ask them who they got it from.” The process he follows is to first create a list of all similar companies that successfully raised money. Next, cold email the CEO/Founder and ask to schedule a call with them for advice. Finally, as you develop a rapport with them, consider asking who their investors are and if they’d be willing to make an intro. 

2. Aim for the Double Opt-In Intro

This is a tip I recently learned from my friend Richard Goodrun, COO of RaceYourself. The best intros come from warm referrals, but instead of asking your referrer to simply make an intro, suggest they first ask the target if she or he would like to take it. For example, send a personalized email to your connector asking for an intro to Ben Horowitz, and instead of making a direct intro, your connector first forwards your note to Ben, asking him if he’d like to take the opportunity.

Generally speaking, people dislike intros being “forced” on them; it creates awkward social pressure if they’re really not interested. Further, if they do say they’d like to take the intro, they’ve already said “yes” once and may be more predisposed to liking the deal. It’s a subtle difference – but an effective one.

3. Create Time Pressure

This tip came from startup wunderkind and Y Combinator alumni Shehzad Daredia, who recently closed a round for his startup “A tactic that’s worked for me when fundraising is to create the perception of time pressure so investors have a forcing function. A high-risk, high-reward way to take that one step further is to very politely and diplomatically acknowledge that the VC is probably not well-equipped to make a decision fast enough to meet your timeline.

For example, stating, ‘I know you guys must have a process to go through, so I understand if you can’t make our timeline.’ Issuing such a subtle, playful challenge to one VC resulted in them literally running after us in the parking lot shortly after our first meeting and saying, ‘We’re in for $2 million – is that fast enough for you?’”