After raising >$300m in capital across 14 funding rounds for @Segment and @CharmIndustrial, my fundraising process has gotten a LOT better. A thread 1/17
During @ycombinator we got programmed to focus exclusively on customers and code until demo day. No investors before then. 2/17
This is good advice during the batch, because demo day is a big event that guarantees a frenzy of investor interest. 3/17
But after @ycombinator this super-heads-down approach put us in a really bad spot for raising our Series Seed @Segment. 4/17
I remember calling @patrickchung in spring 2013 and telling him we had 8 wks of runway, so we were thinking about starting to meet investors for the first time (demo day mentality!) On the other end of the line I heard him fall out of his chair: “You’re raising NOW!” 5/17
So we started reaching out. It took a couple weeks to get first meetings on the calendar. A week to get second meetings. A week to get partner meetings. Before we knew it we had 3-4 weeks of runway left. Yikes. 6/17
Finally, we got one term sheet for a $1m raise. One. We were desperately short on cash now, and investors could smell it. The negotiation of the term sheet was teeing up to be brutal. 7/17
At the eleventh hour, @sama coached me through prep for our last meeting with the last interested investor. Incredibly, they committed to investing $1m alongside the other firm, matching whatever terms we agreed to with them. 8/17
Time to negotiate. The first investor still had the scent of blood and a laundry list of asks. I listened patiently and then said with 100x more confidence than I had: “actually we have another firm investing an equal $1m and the terms will be $10m cap, no board seat, etc.” 9/17
I’ve never experienced a more pregnant pause. The anxiety must have aged me 6 months over 30 solid seconds of silence. Just waiting… waiting… 10/17
“Okay.” 11/17
And that was that. Fundraise done, cash in the bank two weeks later (just in the nick of time if you’re keeping score of weeks!) and off to the races again. 12/17
But I promised myself I’d never raise “demo day style” without a demo day again. We barely knew the investors, the investors barely knew us, and the process had been super slow because it was the first time anyone was meeting us. Investors want to invest in lines not dots. 13/17
Every round after that I met investors multiple times in the 12-24 months leading up to a fundraise. I would share the strategy, product, anecdotal stories of progress, but never our financials. 14/17
By the time we got to the fundraise itself, we knew which investors we wanted because we knew them. And the investors were already stoked about us, our progress and our strategy. They had already seen the through-line of our improvement and growth. 15/17
Fundraising became just a financial reveal and term sheet negotiation, with all parties having much higher conviction. 16/17
So many founders with 2-3 months of runway left come asking for fundraising advice. My advice is to start 2 yrs ago. You can spare an hour a week for investor meetings all year. Then your fundraise will be 2 wks total, not months of agony, and everyone will feel better. 17/17
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