If you don’t want to do it, don’t run a startup. Because it won’t last for long.

In my first startup, I was on the executive team of a company called vcapital. We were a 2-sided marketplace connecting venture firms (and organized angel groups) to startups looking for venture capital. My team managed relationships with more than 350 venture firms. This was before AngelList, and during the time of Garage.com and OffRoad Capital. There were a lot of things we did really well. Unfortunately, closing deals wasn’t one of them.

The Law of Lemons?

There was a critical reason the model never worked during this time period. There was a perception that companies raising money via our platform were trying to outsource it. In other words, venture firms perceived an adverse selection bias amongst our clients. And they weren’t altogether wrong. If you talked to the founders of the thousands of companies that we worked with, one comment we heard more than most was “we would be successful is raising money was easier.”

Venture Capital flows to people, not to business plans

And that’s the problem, in one “victim of circumstance” comment. If you aren’t willing to do the work to become effective at raising capital, investors can smell that and believe they are far less likely to make a good (or any) return on their investment.

What if your Chief Revenue Officer said “I could close more deals if sales was just easier? Would you outsource your sales function? Of course not!

So own it. You can’t outsource fundraising. Your new investors want to know that you will run a successful company, with or without them. They want to be along for the ride. You will raise money, and you won’t let your fear of being turned down keep you from running a smart process.

10 Steps to Run Your Fundraising Process

Only because 10 is a round number, not because this is a magic list

1. Treat fundraising like sales. Run a process. Build a pipeline using staging categories. (Name the stages whatever you like, but the following can work: Lead -> Prospect -> Soft Circle -> Hard Circle -> Investor.) You don’t have to probability-weight your fundraising pipeline. But if you are 60 days from running out of money and you are only cold-calling potential investors, you’ll need luck. A lot of it.
2. Target potential investors that “fit” with your deal. Know that a venture firm invests in your stage of deal, sector, geography, size, etc.
3. Ask for help. But do it thoughtfully. You should know who you want to talk to, and you should know the rationale (more than ABC Partners writes checks). Then, share this with entrepreneurs, investors, advisors, and Board members when you ask them to make specific intros.
4. Don’t exaggerate lie about customers, forecasts, product launch dates, or partners. When you are talking to prospective investors, they remember your promises. When you achieve the things you said you’d achieve, that builds excitement for the investor. (Note: This goes for Board communications as well.)
5. Build a communications plan — 30 or 60-day updates depending on the level of interest.
6. Begin fundraising before you need money.
7. If you are talking to corporate venture groups, be sure they can articulate their goals and targeted investments. Do they invest to acquire? Do they restrict you commercially? What does their past venture investment history show?
8. Remember, venture firms rarely say no. You need to understand when they are getting closer to yes. If they aren’t, don’t even include them in your soft circle stage.
9. The conversion rate from soft circle to a check is very low. Having 20 investors “soft-circled” isn’t 10x better than having 2 investors “soft-circled.” Until you have a firm commitment, you aren’t close to closing your round.
10. An term sheet doesn’t mean yes. Keep meeting with investors.
    

Note: We did many things exceptionally well. We worked with more than 350 venture firms, and we knew their targeted sectors, portfolios, geographic preferences and deal sizes — usually down to the partner level. We also ensured companies could frame their strategy, size their fundraising ask based on past metrics and milestones they needed to achieve, and manage their fundraising pipeline (which included venture firms they sourced on their own). And we could get meetings.