How to Raise Money for Your Startup

Your seed fundraising strategy

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Hey friends 👋 ,

Happy Monday and welcome to Through the Noise!

A startup is built to grow fast. Today we're diving into part 1 of the process for running a seed-stage fundraise. This is something that's recently got my attention building a startup of my own. So I'm sharing what I learn as we embark on this adventure together.

Let's get to it.

Read time: 3 minutes

Your Seed Fundraise

DALL·E prompt: "a sketch of a dude raising money"

‘Seed’ capital is typically the first portion of capital a startup raises. Even though startup funding isn't right for everyone, the majority of startups need to burn capital to sustain their growth ahead of becoming profitable.

So what does the fundraising process look like? If you're thinking of expensive dinners, schmoozing and elaborate gifts, think again. The fundraising process is hard.

Long hours, complex conversations, clashing egos. The list goes on. Ultimately, investors write cheques when the idea they hear is compelling. The form this takes can vary.

For some: story + reputationFor many: idea + qualified founder(s) + product + traction

So how can you find clarity? By building a process.

Running a process

The key here is to build a parallelised fundraising process. What on earth does that big word mean? Quite simply:

Don’t: Speak to one investor one week, speak to another investor another week etcDo: Set up all of your meetings quickly within a tight time band

The investor community is a set of interconnected nodes. Information moves faster than you and is passed at light speed. You can only move at the speed of sound. Consider a situation where you speak to only one investor. They pass. They speak to their friends. All of a sudden you kill an entire section of potential investors by pitching one investor badly. This is an investor-tilted market. They have the leverage– time and information.

Consider a different situation. You talk to everyone at the same time.

  • The information investors get hold of has less time to spread through the network → investors are forced to make decisions on their own

  • Investors are unable to get a sense of whether or not the market is moving quickly, so they need to make decisions under the assumption that it is

  • You create a competitive dynamic in a group of people– your prospective investors– who are naturally extremely competitive

This time you're operating from a position of leverage. By creating a situation where multiple individuals are seeing the deal at once, you increase your probability of a successful outcome. You create a ‘buzz’ around your fundraise. People are actively talking about it and liking it. This wavefront travels in a positive direction. More investors hear about your deal all at once and want to get in.

Takeaway: Stack as many interactions as you can within a week. Create a founder-tilted market to build leverage.

Emailing investors

Once you've built structure to the process you intend to run, it'll be time to send your first outreach emails. Make them short & informative. Do your research on the individual and make sure they're the right fit.

I’ve seen you work with a bunch of companies that have done X

We’re working on X. We built a product, launched it a month and a half ago, here’s the progress we've made and what we’ve learned:

It's important to say something interesting you’ve learned alongside the progress you’ve made. Investors don't just care about traction. They're more interested in how much progress you've made relative to the amount of time you’ve been working on it.

“I’ve been working on it for 4 years, just finished the alpha…” – NO!“I’ve been working on it for 2 months and we’ve got our first 100 customers” – YES

Next comes the ask. Make it clear and concrete. Don’t immediately ask for 30 mins of their time.

Here’s what we’re doing. Here’s how much we’re looking to raise. I’d love for you to be an investor. What else can I tell you / what else would be interesting. Can we meet to discuss an investment?

Avoid beating around the bush: “Can we meet to catch up?” People catch up with friends, not with new people on a first interaction where there is a clear agenda.

Takeaway: Be direct. People are busy.

Failing to prepare is preparing to fail. Running a tight process will put you leaps ahead of your competition. Next week in part 2 we'll be looking at how to structure your initial meeting and tell your story.

Sources

A Little Something Extra

  • 🗞 Newsletter: My friend Kurtis Hanni writes Frameworks & Finance. He breaks down financial concepts in a way that makes business finances approachable to the masses.

  • 🐥 Tweet: Synthesis is doing something incredible with education.

  • 🎥 Video: Charlie Puth is legendary.

    That’s all for today friends!

    As always feel free to reply to this email or reach out @thealexbanks as I’d love to hear your feedback.

    Thanks for reading and I’ll catch you next Monday.

    Alex

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