Learn how to get your first institutional check
You’re now full-time on your startup. You got your idea, co-founder, and prototype. You even have your company-branded mug. Finally, you’re ready to fundraise. Let’s get into it.
Come Prepared
Fundraising is intense. You’ll want to have a ‘Seed Package’ ready before you start. This ‘Seed Package’ should contain:
- A Pitch Deck: We recommend using the Sequoia pitch deck template. Design matters. If you don’t have a design-savvy team member, hire one from Dribbble.
- Financial Model: Don’t reinvent the wheel. For B2B SaaS, we recommend starting with Point 9’s financial model template. From there, you can customize how you please. Ideally, you build an Integrated Financial Model to generate an updated Profit-and-Loss Statement, Cash Flow Statement, and Balance Sheet every time you make a change in your model. Investors won’t dig too much into your model at this stage, so keep it simple.
- Recorded Demo Of Your Product/Prototype: Build a simple 5-min demo of your product. We recommend using Loom.
- A 5–10 Screens Figma Demo: This will allow you to show your vision’s end version, even if your product/prototype is still immature. If you want to animate or make your prototype clickable, we recommend using Figma.
- Executive Summary: A 1–2 page executive summary or ‘Summary’ Deck (4–5 critical slides of your Pitch Deck) will help you get meetings. We recommend using Guy Kawasaki’s executive summary template.
- Business Plan: This is purely an internal doc. Do it only to lay out your vision and execution plan.
- Email Template: You’ll want to have a short template with a few key bullet points:
- Who we are.
- What we have achieved so far, and in how much time.
- What we’re looking for.
- What our next milestones are.
Build a VC & Angel Database
As an early-stage startup, you’ll typically have access to these eight sources of capital (sorted by ease of access):
- Friends, colleagues, and family.
- Angels.
- Early-stage VCs.
- Micro VCs.
- Angel conglomerates, such as Syndicate One and Saxena Capital.
- Accelerators, such as Y Combinator.
- Crowdfunding.
- Government grants.
We recommend creating a targeted list of funds/investors per source of capital. If you want a headstart, we’ve curated 3000 VCs and Angels by region, industry, and round size focus to help you find the investor that best fits your needs. This list is available as a Template in Frame’s Wiki app. All you need to do is to signup for early access.
Don’t Cold Message. Get Intros
We don’t recommend cold messaging. Unless your startup is crushing it, sending cold messages will burn you with quality VC funds.
Instead, take the time to map out your target list of investors using Linkedin’s 1st and 2nd-degree connections mapping feature (2nd-degree rarely works but can lead to other exciting leads). The rest is a numbers game where you’ll typically send 100 intro requests, get 30 meetings, and end up with 1–3 investors (the conversion rates vary depending on your track record).
Getting introductions this way will net you bonus points with your target investor because it proves that (1) you’re connected and (2) you have the grit to make things happen.
Unless you’ve spent the last decade as a Monk in the forest, you’re likely more connected than what you think. You’re probably 1 or 2 degrees away from Bill Gates and Elon Musk. So, have the ‘I can open any door’ mentality and go for it.
Move Fast
Just because you’re fundraising doesn’t mean you should stop building your startup. You should be working to improve your company’s values, product, team, traction, and overall pitch while fundraising.
By doing so, you allow investors to (1) ‘compute’ that you’re moving fast and (2) catch a case of FOMO, since it projects a (probably legitimate) sense that you will close a deal soon.
Start With SAFEs To Get Momentum
Closing an equity round is unlikely without a lead VC. However, to find a lead VC, you need traction. To get traction, we recommend starting small and raising $50-$150K in SAFEs (using the YC SAFE template).
Throughout this process, you need to stay mindful of dilution. The goal is to keep around 55–70% of active equity before raising your Series A.
Focus On Finding Your Lead, But Keep Other Conversations Open
It is crucial not to close yourself off while you search for your lead VC. Take this time to continue pitching to other smaller investors and angels. Although they probably won’t invest straight away, having them in your back pocket will be helpful later.
In terms of valuation, the investor making the offer (Term Sheet) will generally be the one ‘valuing’ your startup. However, you’ll gain points if you show your investor you know your market. When valuing your startup, you need to account for your team, location, product, traction, market size & growth rate, current economic context, and benchmarks of other similar deals.
It Ain’t Closed Until It’s In The Bank
If you manage to get one or more Term Sheets, congratulations. However, it’s best to keep shipping fast during the Due Diligence process. That time is when investors look closely at your speed and quality of execution. You need to keep pushing until the money’s in the bank (and keep pushing after, too!).
Conclusion
Raising capital is not a question of luck. You must create something valuable and then be methodical about finding ‘buyers’ of that value. Ensure you’re prepared, keep an optimistic mindset, and leave little room for luck.
Nicolas is the founder of Frame, an all-in-one collaboration OS for startups. Frame offers pre-built collaboration apps like Notes, Task, Wiki, Whiteboard, and more. If you want to find a free ‘fundraising template’ on our Wiki app, sign up today!
