This is the first of a few blogs on our recent experience raising money. I’ll work to highlight how we approached things, what worked for us, and maybe most importantly, what didn’t.
Talk to everyone
Your cousin, your softball team, that friend of a friend who raised money that one time…
Everyone in your network should know you’re raising money. The investor network is surprisingly small and the more times they hear about you from a friend or colleague, the more likely they are to be interested in hearing the pitch directly from you. Don’t be shy. You’ll find folks love connecting you with others in their network. It helps them show they can add value to your company.
Accelerators receive a lot of flack, but one area I think they genuinely add value is for first time founders raising money. Most of them run you through an iterative pitch process to help refine your message and the good ones can connect you with a large number of potential investors.
At the end of the day, pitch as many times as you can. After each pitch, ask the person across the table for 3 contacts they can connect you with to pitch some more. Genuinely listen to feedback and tweak your messaging until you consistently impress.
Get smart
After my first round of conversations with investors I realized a great deal of confusion was due to the fact that VCs speak in code. There was an entirely new set of vocabulary I needed to learn. Upon the advice of a good friend, I grabbed a copy of this gem and got myself up to speed. Couldn’t recommend the book more- it helped tremendously.
Alongside reading anything I could find, I reached out and identified a few really smart, experienced investors that weren’t coming in on the deal. They acted as my reference point throughout the entire process, helping me identify issues worth negotiating and clarifying areas of uncertainty. I needed someone to help me translate and was lucky to have help from seasoned vets.
Finally, I think the whole thing is really tough without a legal team you trust. Luckily, we already built a strong relationship with some fantastic folks at Michael Best. A great legal partner is someone with relevant experience, but more importantly, is someone willing to challenge you and be challenged with the perspective that you’re working towards the best deal for the company.
Update your tinder profile – Who’s a perfect match?
It quickly became apparent we needed some way to evaluate investors and their potential fit. Just like an employee, we needed criteria to help figure out which ones we were most excited to work with. After many iterations and discussions we landed here.
- Personality and culture: Would we want this person to be on our board regardless of the checks they can write? This was not just about the firm. It was about the the actual partners we’d be working with.
- Their experience in healthcare IT and related industries: Investors bring a ton to the table, but perhaps the most important thing they bring is their network. We wanted to make sure our investment team had an existing, relevant network that we could leverage.
- Term Sheet: The terms of the investment, while critical, were not the most important criteria. Terms had to be in the ballpark, but at the end of the day, we cared more about points 1 and 2.
Interview as many portfolio companies as you can. You can quickly spot trends across their experiences. They give honest feedback on what it’s like to work with the investor.
Meet everyone in person, ideally more than once. Talking over the phone is nice, meeting in person gives you a much more accurate picture of what it could be like to work with that person.
All said, we talked to more than 50 firms. From those conversations we started to identify groups that we were excited to have participate in our round. In our next post I’ll write a bit about term sheets and finding your lead.
Thanks for reading!
If you have questions or want to share stories, feel free to e-mail me at: [email protected].
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