Fundraising advice from a newly minted VC

I recently made the switch from operating to investing a few weeks ago. I have gone through ~75 pitches in that time frame and wrote down some tips for founders who are fundraising today:

1. Make your champion at the firm look good by having an FAQ doc ready: Most of the top funds receive a lot of pitches on a weekly basis, and only a few end up rising to the top. To get the attention of GPs, the associate/principal/partner you are chatting with is making a case for you. For every company that is brought up, that person is burning some social capital with the hope that this might be the next Stripe. If you can help them make their case by asking them what the risks or blockers are and having answers ready for them, it makes their job a touch easier. This will also help build a relationship to rely on said person to understand how you should prepare for the pitches to the broader investment committee.

2. Remember who's in your corner: You might think skipping over the folks asking a bunch of questions to talk directly to the GPs is a smart move. Sometimes, it seems like it might work, but watch out—it can blow up in your face. I had this happen with someone who was trying to get around me because I was asking a lot of detailed questions. They tried to go straight to the top by getting famous people to vouch for them, all while ignoring me. But here's the thing they missed: I was their biggest supporter in the firm, digging deep to help their case. When they tried to skip over me a few times, I stepped back and essentially stopped helping. Being bold and sticking to your guns is great, but it's also smart to really get what's going on behind the scenes.

3. Understand the worldview that a particular VC might have: There's usually enough data and content online about most people you are talking to understand how they think and what kind of questions they will have. The best VCs are fairly opinionated in their worldview, how they invest, and are generally not afraid to share it. If you are going against their worldview, it's important to explain why this time it's different and be prepared to challenge them. If you are going with their worldview, be prepared to have extremely thorough answers to the questions since they have probably spent a lot of time in the space.

4. Look at the portfolio companies to see if funds put their money where their mouth is: Similar to the above, it's often surprising that founders will go pitch their hardware company to a firm that has never invested in hardware companies. Or a healthcare company to a seed firm that has primarily done only consumer investments. Yes, there are often cycles (like AI and deep tech right now) where firms will entertain a meeting, but it's important to know that the likelihood of those deals happening is very little. It's a much better use of your time to talk to the firms that will invest their time and experience.

5. Calculate your overall dilution if you have SAFEs: As an angel, I didn't have a lot of detailed cap tables to look at. I was mostly investing in the early stage on SAFEs with a valuation cap and some discount rate. Given how easy it has become to raise money on SAFEs, founders don't realize the amount of dilution they have started to take, especially when they raise their first priced round. It's quite shocking to them (and us) when we convert all these SAFEs at various valuation caps to sometimes see a litany of small shareholders often hold 15%+ of the company. These can often become blockers for investment decisions, especially as some funds have strict ownership targets. Make sure you run some scenarios on the valuation you are seeking to understand this ahead of time.

6. Don't lie: This seems obvious, but just know that the VC industry is exceptionally small. This happens rarely, but founders have lied that they have term sheets with deadlines in the next few days from fund ABC. VC is a co-opetition - we compete and cooperate all the time. If you lie about something, there is a very high chance that the funds will chat with each other, and it will bite you back very quickly.

7. Be clear on why you are raising now: Many founders struggle to explain what the new money will help them do. You should be relatively clear about what goals you'll reach with the funding, what your key risks are and how you plan to use it. This plan will also help you ensure you raise adequately especially if you are in the lucky position of having multiple offers.

8. Do your diligence: It's truly surprising how many founders don't do their own diligence when taking money from investors. Just like every employee should do references and diligence on the company you join, founders should probe and chat with other founders in the fund's portfolio. Bonus: Talk to the founders whose company went under - if they still have generally good things to say about the partner (and firm), that speaks volumes about them.

9. Assume no one has read your deck: Some founders expect that everyone has read everything ahead of time and jump straight into the tactics. VCs, unfortunately, are context-switching every half-hour to 45 minutes. There are days where I have had 6 pitches back-to-back (never again). So even though I had read the deck the night before, my mind was swimming with other thoughts from previous pitches. I'd stick to a deck and pretend like it's the first time they are seeing this.

10. Assume everyone will read your deck: Many founders are dismayed that decks and memos are often leaked to other constituents. The default expectation should be that the deck will be shared with everyone in the firm, and yes, it sometimes happens that people outside the firm read it for diligence. Please let the person you are chatting with know how sensitive it is, and the good ones will adhere to that. Regardless, if you have a deck (DocSend or not), be comfortable with the fact that it can be distributed widely.

Finally, in the VC world, "no" is unfortunately the default answer. But, hopefully, these thoughts could tip the scales from "no" towards a "maybe" or a "yes." May the odds be in your favor!

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Thanks to Bala, Deedy, Terrence and Nabeel for reading and providing feedback on early drafts!