As many people associated with the Venture Capital industry, I get tons of cold emails and messages on LinkedIn asking for advice and referrals. Today I received a message from a frustrated young founder with a cold pitch and a very familiar statement: “Every VC I have met with has said that we are too “early stage” for them, even though most of the VC’s we talk to are early stage investors.” This is one of the most important things to understand and get right when first thinking about fundraising.
I still remember the early days and that is why I spend time mentoring the next generation of entrepreneurs. So here’s my answer and I hope it is helpful to a few more would-be founders out there:
Some quick pieces of advice:
1. You are in a tough, crowded consumer space that is filled with very experienced growth hackers working for large competitors. For you to win, you will need to show that you can consistently acquire customers/users at a low cost. Any investor that knows the space will be looking for this person (with track record of doing this) on your team and/or early unit economics (your business metrics) to prove that A. you know what you are doing and B. you have empirical evidence that it is working.
2. Pitch the right investors. Your first money (as it probably has) will come from friends, families, and your own pocket. Your second money will come from Angel investors interested in this space in the form of checks in the 10s or, at most, couple of hundred thousand dollars. VCs invest bigger amounts (500K+) in businesses that have already proven that their model is working and now need fuel to grow as quickly as possible. Do your homework and don’t waste your time meeting with big funds that you are not ready for yet.
3. Finally, raising money is very much a relationship business. To get through the noise you need to ask for warm introductions to investors from people who can vouch for you. Investors get a ton of cold emails and, especially with early-stage companies, it is near-impossible to ascertain a team without spending 25 hours a day reading those emails.
Good luck and don’t give up too early 😉
P.S. I usually never answer cold pitches either but who we are connected through made me do it this time.