6 Tips From An Investor For Raising Money For Your Startup

By Brad Pruente 

Some founders are natural fundraisers. Others see it as a necessary evil. Wherever you lie on that spectrum, there are several tips you should know that will help you run your process.

As investors, we see hundreds of startups every year. Some of the things we take for granted aren’t obvious to founders. Here are a few.

Show forward progress

Investor Mark Suster famously said that investors look for lines, not dots.

The first time I meet you, it’s hard to evaluate if you’ve made a lot of progress or a little, quickly or slowly. You’re a dot.

When we meet again in a few months, I can start to see a trend. Now you’re a line.

The single most effective thing you can do is to focus on growing your company. Keep showing progress toward your key milestones. A company that is growing quickly and consistently hitting its milestones is an attractive investment. Keep moving and stay focused on the metrics that matter.

Communicate

Keep me up to date on your company’s progress. Once you make a lot of progress, tell people. A pass today doesn’t mean I’m passing forever.

Send a quarterly update with your wins, losses and requests; this is helpful for several reasons.

First, it keeps you honest. Building a company is hard and the discipline of tracking that progress helps keep you focused.

Second, it keeps potential investors engaged.

Third, it will help you get to know investors better. When you have requests for help or feedback, which investors respond?

One of the companies I’m most excited about is one that I passed on a few months ago. I spoke to them again and they’ve made some impressive strategic choices that addressed some of my feedback.

Survive

Live to fight another day. Give yourself time to hit your milestones and run a competitive fundraising process.

I tell the CEOs I work with to start having initial conversations with a year of runway and start a formal process with nine months left.

You want to put yourself in a position where you have enough time to talk with the right firms, give them time to run their process, and you don’t feel pressured to take the first deal you’re offered.

Address objections

Be honest with yourself. Why are investors passing? Give them permission to be candid, accept the feedback, and then evaluate it.

Investors aren’t always right (duh) and you shouldn’t listen to every piece of advice you get, but you should seriously think about it.

Don’t ask VCs who passed for introductions

You’re better off finding a warm intro to an investor from someone else. Why? It’s a bad signal. If I love your pitch, I want to keep you to myself, at least until we get a signed term sheet. (Of course, once you have a lead investor you should certainly work with them to build the right syndicate.)

If I introduce you to another investor, the unspoken question is, “why aren’t you investing?” There can be situations where it’s appropriate but, in general, you should steer clear.

Reference-check your investors

When I spoke with Chris Tolles at Yard Stick PBC, he told me he had reference-checked us before we spoke. I thought that was a piece of advice worth sharing.

When you get a cold inbound from an investor, email someone in their portfolio and ask if they’re a top decile partner.

Reference checks are always a good way to hear an unbiased or less-biased opinion of what a firm and a partner are like to work with. You might not do this before every first call, but you should certainly do it before accepting an investment.

Brad Pruente is a partner at Prime Movers Lab where he leads deal sourcing and supports the diligence process. His work spans Prime Movers Lab’s six sectors, but he has a particular interest in agriculture, food tech and robotics. He serves on the board of directors for Robust.AI, Diamond Age, Upward Farms, Dalan Animal Health and Bandit (formerly known as Conscious Cultures), and as a board observer for Pyka.

Illustration: Dom Guzman