The premise of Andrew Farah’s startup is pretty simple.
He and his team designed an anonymous people counter that helps companies monitor how many people use different parts of their buildings. It’s the sort of thing that makes you wonder why something like it didn’t already exist.
Andrew’s company, Density uses infrared lasers and real-time depth processing to secure data. The product gathers usage statistics on large facilities to help companies use their spaces well, whether they’re looking to expand, downsize or simply let employees know how long the line is in the cafeteria.
Density closed their third round of fundraising with a total of $16 million. Its investor list includes many recognizable names, such as Founders Fundpartner Cyan Banister, Mark Suster of Upfront Ventures and Jason Calacanis.
Jason took Density on from the very beginning. Andrew flew out to San Francisco to meet with him — even before he began a process. In that first meeting, Jason pushed Andrew to move to the West Coast.
“He asked, ‘tell me, why are you not in the NBA?’” Andrew says. “I said, ‘because I have a terrible jump shot.’”
“He said, ‘no, why aren’t you in San Francisco? You should come play in the big leagues.’”
Andrew hesitated, in part, because it would take a lot of capital to move his company’s headquarters from Syracuse, NY to the West Coast. So Jason offered to write Andrew a half-million-dollar check to make it happen. It didn’t take him too much time to take Jason up on the offer.
There’s a lesson here: Andrew emphasizes quality over quantity when it comes to making connections.
“Every meaningful relationship — all the ones that have led to a funding round — have actually come from one person,” Andrew says.
“Typically in a fundraising process, you’ll find one or two or three super connected individuals who are the reason why you’re able to raise capital or get a meeting,” he says.
‘You should love every sentence in your deck’
But here’s the truth: Connections only get you so far. Once you have the meeting, you have to craft the perfect pitch. Andrew has some concrete advice on how to build a solid deck.
His first pitch was a little … dense, he admits. He and his team shared their idea with a room full of founders and investors, who seemed impressed. Jason Calacanis was there too.
Ultimately, Jason hijacked the pitch to show Density what they were lacking, Andrew says.
Jason apparently asked the other investors to raise a hand if they understood what Density was doing and how they were doing it.
Not a single hand went up.
Jason asked a follow-up question about whether anyone thought Density was remarkable in what it offered.
This time, every hand went up.
Jason Calacanis looked at Andrew and gave him some invaluable advice: “Get to the product,” Andrew recounts. “Show what it’s capable of as quickly as possible, because you can have an actual dialogue around that.”
“A deck is your best friend,” says Andrew. “You should love every sentence in your deck. If you don’t, you won’t be excited when the next slide comes up. But if you’re stoked, that communicates volumes and dramatically improves the quality of your pitch.”
The other key is to keep it short. Andrew’s deck is more of a prompt than an essay.
In addition, investors shouldn’t need to focus on the slides. They should focus on you, and what you’re bringing to the table, instead of reading the exact words you’re saying.
Start with some information about your credibility, he says. Then dig into the product as quickly as possible. Only after you’ve done that can you prove the market validation and provide compelling metrics.
How to run a three-phase fundraising process
Andrew’s definition of a “good fundraising process” is quite rigid.
For Density, Phase 1 was taking a month to informally meet people Andrew already knew. Ostensibly, his aim was to get feedback on storytelling, but he found that those conversations led to great, organic introductions.
“Often, other founders and investors do that without asking you,” Andrew says. “You don’t necessarily need to ask for an introduction to get one.”
In Phase 2, he was careful to corral his initial meetings into a pretty tight timeframe.
“Most startups will take a meeting as quickly as possible,” says Andrew. Instead, he recommends holding off until you gather enough potential investors. Then, stack those meetings.
“You want all your investors starting around the same time. If one investor is hearing the beginning of your story and another is in the due diligence phase, they’re in completely different places and headspaces. They’re not actually competing for the same deal.”
When you’re scheduling, start with the meetings you care least about, Andrew advises.
“The first few should be ones that you are totally okay if those investors pass,” he says. “What matters is that you’ve improved your story and gotten feedback on what resonated, what kind of objections you need to handle.”
“Your last pitch is always your best,” says Andrew.
And then comes Phase 3. Andrew says to budget another four to six weeks to do final diligence and close deals.
“That is the absolute fastest a fundraising process will go,” Andrew says. “Assuming you’re not Bird, it’s going to take a minimum of three months to raise anything above $1 million. More likely, it’ll take you six to nine months.”
Throughout this process, Andrew points out that it’s a good idea to track the amount of time potential investors spend with you.
“The more time an investor wants to spend with you, especially a general partner or someone with check-writing ability at a firm, the more likely they’re going to want to write a check,” he says. It’s a reliable metric.
“They have so many other things they could be spending their time on.”
Andrew suggests taking as many meetings with different people from a particular firm as you can, and not being intimidated if some of them actually hate your pitch. Contention can be attractive. Some firms want to take on companies that spark big feelings.
“The thing that you never want to feel as an investor is ‘meh,’” Andrew says.
Nathan Beckord is the CEO of Foundersuite.com, a software platform that has helped entrepreneurs raise over $1 billion in seed and venture capital since 2016. This article is based on an episode of Foundersuite’s How I Raised It podcast, a behind-the-scenes look at how startup founders have raised capital.