Fundraising is one of the two hardest tasks entrepreneurs undertake. The other, even harder, task is to spend the money you do raise wisely.
This short article will focus on the first: raising capital for your startup company.
As for my background, I have been on both sides of the fundraising table, entrepreneur and investor. As an entrepreneur, I have successfully raised capital for startups and venture capital funds where I have been a founder and executive or general partner. As a venture capitalist, I have invested in dozens of companies and entrepreneurs and decided not to invest in hundreds (if not thousands) more.
There are several fundraising stages: pre-seed, seed series A, B, C, and beyond. Each has a different strategy, set of requirements, and investor expectations. To provide a comprehensive or even introductory commentary on all of these is beyond the scope of this article.
Regardless of stage, one tactic that helps entrepreneurs fundraise successfully is what I call the “Seven Touches.”
“Touches” are thoughtful and purposeful interactions you have with an investor, whether they are a family office, angel, or professional venture capital fund. To be effective in fundraising, you need to interact with an investor seven or more times (depending on the length of time from initial pitch to a decision).
Why Seven Touches?
Notice the tactic is about touches, not “kicks”. These touches are gentle in nature, must be directly related to your company or the market your company is in, and are not confrontational.
Touches fall into two categories: The Essential Three and the Reinforcing Four.
The Essential Three – The minimum you should undertake.
This touch is all-important! Send a handwritten thank you note to each member of the investors team that was present at the initial pitch. Send it the day of, or after, your initial pitch. If handwritten, it should stand alone. If via email, and you promised to send follow up material, do both in one communication and try to personalize the “thank you” in some fashion.
Pro Tip: If you met the investor through a referral, consider sending the person who referred you to the investor a handwritten thank you note as well.
If during your pitch you promised to send additional information, (e.g. a full set of financials, copies of journal articles, etc.) send them right away, while your pitch is still fresh in the investor’s mind. Delay in, or failure to send, basic materials will show that you are not well prepared or just irresponsible. Both negatively impact your credibility.
Pro Tip: Keep a folder in the cloud or on your computer where you store key documents for fundraising to make follow-up tasks like this simple and organized.
You should have walked away from your initial pitch understanding the investor’s decision-making process. If they give you a date of when you should hear back from them, and that day passes (by a few days) without you hearing from them, follow up. You should send a respectful note asking if there is anything more they need to assist them with their evaluation of the opportunity. Blend in asking when you might expect to hear back.
Pro Tip: Don’t remind them that they told you you’d hear back by date X and you are looking for a decision. This is a gentle touch to bring your pitch top of mind.
Reinforcing Four
These are touches with a purpose. Use the opportunity to reinforce your value proposition, convey value creating progress, and build confidence in your team. Use a variety of transmission methods – email, overnight mail, phone calls/voicemails.
The “Reinforcing Four” touches can come from any number of the following interactions:
General Considerations
Following the Seven Touches does not guarantee success but, if used correctly, will put you and you company in the best light possible and keep doors open when the initial answer is no.
About Dan:
Dan is an experienced executive leader, investor, and mentor with expertise across venture capital, entrepreneurship, new company formation and strategy, due diligence and research, deal execution, and management guidance. He has specialized expertise in technology transfer, intellectual property management, licensing, and commercialization within agtech, bioscience, and healthcare.
Throughout his career, Dan has been an active and engaged leader, member, volunteer, and speaker within multiple industry-related non-profit organizations and academic centers, national professional associations, and regional networks. His experience has led him to raise more than $100 million for venture capital partnerships, and serve on the board of more than 30 organizations.