Seed Fundraising — 10 Traits of Successful Founders
While there are many factors that influence fundraising, your behavior during the process makes a big difference. Here’s the most common traits of founders who successfully close their seed round.
1. They take In-Person Meetings. Phone calls rarely work for first meetings with investors as it’s hard to get their full focus. If you really can’t get an in-person meeting, then fall back to video chat. For example, a founder I recently coached was struggling to raise after ~40 phone meetings without a yes; once they began asking for in-person meetings, the round was closed in a couple of weeks.
2. They do all the work for Introductions. Take the time to comb through LinkedIn, Angellist and Crunchbase, looking for potential warm introductions to investors. When you ask for an introduction, make sure the introducer only has to click ‘forward’ to do their part. Most founders only partially complete the work for the introducer but if you make it simple for them, you can get 10x more meetings.
3. They’re courteous. No matter how much demand for your round, it never helps to be rude. Even if an investor doesn’t respond negatively at the time, they will almost certainly talk about their bad experience with others, reducing the opportunities available to you. Instead, avoid being defensive and playing too much “hard to get”.
4. They ask for Money. If you don’t ask the investor “Are you interested in investing?”, you are wasting the meeting. If you’re very early in the process you can ask “Where would we need to be for you to be interested?” but whatever happens: you must ask.
Working with Investors
5. They don’t brag about investor interest. Don’t discuss other investors you’re talking to, even if a different investor asks. Given most investors will pass, you’re likely giving the investor a negative reference. However, if both investors are interested, you risk them colluding on terms without your involvement.
6. They evolve their Pitch. Keep a document of common and difficult questions you’re getting from investors. Prepare strong answers in advance, add appropriate slides to your deck’s appendix and create a small ‘data room’ of materials online. In 2016, I saw a founder change their pitch focus from a technology advantage to bookings revenue; they went from struggling to raise $250k from Angels to closing $3M from a top VC.
7. They’re Responsive. Respond to investor emails within 1 business day and provide data or new materials to an investor in a timely manner. Responding to investor questions may push them to a yes. Plus, investors will only have these interactions to judge how you work together.
Closing the Round
8. They Follow-Up. Send regular follow-ups, every ~3 days, to undecided investors. Update them on round progress, new investors and product or sales wins. This will drive ‘fear of missing out’ as the round’s availability dwindles. Ultimately, you have to accept that ‘maybe’ is worse than ‘no’ and push for a decision.
9. They Confirm Yeses. A yes isn’t real until you’ve confirmed it in writing. Confirm the investment and high level terms over email immediately and then get straight into the document signing and funding process. Once the money is in your bank, and not before, scour your new investor’s network as detailed in point 2.
10. They Look After Themselves. For most founders, fundraising is a marathon not a sprint. You need a healthy, sustainable routine to perform everyday for the ~90 days it usually takes to close a seed round. Nobody pitches at their best when they’re exhausted and almost nobody can survive on 3 hours of sleep a night.
All of these traits require little talent. No matter how nervous you are about the fundraising process, you can drastically improve your chances by choosing to put in the effort when it matters most.
Bonus: 11. They are Tough. You should expect to hear no a lot. In many cases, founders can successfully raise a round hearing ‘no’ 90% of the time. Although it’s incredibly disheartening, the founders who keep working to generate investor meetings often find success.
This article is part of a series on Seed Fundraising:
1. When to Raise Money
2. How to Build a Deck
3. The Basics of Meetings
4. VCs vs Seed Funds vs Angels
5. How to get a Meeting
6. The 5 Most Common Pitch Mistakes
7. How to get Early Momentum
8. How to Handle an Angel Investor Meeting
9. How to Close the Lead Investor
10. 4 Investor Gotcha Questions
11. 10 Traits of Successful Founders
If you’re a B2B company at the seed stage looking for help, you can reach me at firstname.lastname@example.org.
Thanks to Kaego Rust, Alec Barrett-Wilsdon, Ashish Dua and David Smooke for their help on this article.
Photo by Edwin Andrade