How I Gamified Raising VC Funding
I love raising capital. I know - it sounds insane for anyone to say that but I absolutely love it. It didn’t start out that way though.
Growing up we had very little money, all of the time. I could probably write a book about how to handle being evicted every other month at the age of 10. My parents were divorced and my mom was swallowed up by such a severe depression that most days she could barely move from the corner chair she sat in all day. We lived on all things government support. From standing in lines to get free cheese blocks and cereal to food stamps and disability checks.
I grew up in the ghetto projects of East Los Angeles, CA. I was promoted to head of my household at 14 when my mother fell into such a deep depression she could no longer take care of us or herself. In my neighborhood, asking for money was humiliating. It was looked at as weak and desperate. We were all desperate but NO ONE asked for money. You didn’t borrow money, you didn’t say you needed money. Like most in my neighborhood, I had a ton of stress and pride. I would scrub the public school toilets and eat a light bulb before I asked anyone for money.
I didn’t realize I still had some of this thinking about money deep rooted in me until I started to fundraise for my own company. Although this was my first tech company, this was not my first business. I’d previously built a successful consulting business that took on projects that Deloitte and McKinsey had failed at. I led a team that implemented large scale $50M+ projects that were driven by the boards of directors at health insurance companies. I was quite good at negotiating capital on behalf of large organizations.
We had just finished a grueling 3 months stint with Techstars NYC’s accelerator. The program had pushed us hard to build our company quickly. Even though I was feeling on top of the world with the progress we had made during the accelerator, it all started to dwindle away as I started to fundraise.
I felt small.
I was suddenly ashamed of asking for money. It wasn’t apparent on day one. It slowly started to manifest itself over the next two weeks. I procrastinated following up with folks. I’d talk super fast during pitches to quickly get it out of the way. I’d gloss over talking directly about my fundraise. I started to get anxious when someone wouldn’t get back to me. I got moody. I got scared. I no longer felt like the powerful executive who could walk into a boardroom to negotiate a tough deal.
There wasn’t a ton in my favor at the time. I didn’t come from Facebook or Google. I wasn’t an engineering prodigy and I was an unproven founder (female no less) in the very unsexy health insurance industry. I did however have 15 years as an executive in the healthcare industry.
Clearly I had to figure out how to change the odds to be in my favor. I had to unlearn how to be ashamed of asking for money to grow my business. We had enough cash to last us 3 months. There wasn’t time for anything but action. There was serious mental blocking going on here that I needed to figure out very quickly.
Jerry Seinfeld's Streak Strategy
So I reworked the entire process to gamify it. I needed a way to make this not only enjoyable but fun. I had remembered reading about Jerry Seinfeld’s streak strategy. He used to create a chain of red x’s for every day he wrote. It was his way of pushing himself to stick to writing consistently, even when he didn’t feel like it. His goal was not to write everyday. His goal was to not break the chain.
My goal was to close a $1.5M seed round within 3 months. I was fundraising in 2016. The venture capital world was in a frenzy about “winter coming”. At the time I really didn’t know what they were talking about. I only knew that they were all skittish about investing. This obviously added to my already large mountain of items to overcome. We now had to add “winter is coming” to the list.
Building My Process
First, I needed a strong process that could help me cut through the noise. I knew that the more prepared I was the more confidence I’d have. The last thing any of us need when fundraising is a sloppy process. I created a well researched list of 150 investors who invested in our company’s market and stage.
I prepped all of the emails that I would send ahead of time, including the ones that were typically tough to write. I had forwardable intro emails that included what we did, our traction and why we felt the investor would be a good fit for us. I drafted up a sequence of follow up emails that started off with “It was so great to talk to you” immediately after the pitch. The sequence included the tougher emails following up days later to directly ask if they were interested in investing in our company.
Fundraising is not a game of luck. It’s a numbers game which means you should be prepared to pitch as many investors as it takes. This is where persistence really pays off. Pitching to 100 - 150 investors is not unheard of.
Understand what you’re looking for in an investment partner, both short and long term. Ask yourself what kind of investors do you want. Think about who is most likely to find your business opportunity appealing to them. This process should be similar to any sales business development process. Once I got the list together, I created a pipeline to track where we were in the sales process.
Getting to 5 No’s in a Day
The next thing I needed was meetings to pitch at, which after doing a couple, I realized was what caused me a great deal of anxiety. I had to figure out a way to get over that while also mastering how to pitch my business. Using Jerry Seinfeld’s streak strategy, I decided that instead of focusing on how awful it was to get a “No”, I’d focus on how great it was to get a “No”. It sounds counterintuitive but it’s not. You’re not going to get 150 people investing in your company. You only need one to kick it off, and a few to wrap up a round. Using your time to focus on investors who you have a true opportunity to explore with is much more valuable than focusing on investors who aren’t excited about your business.
I turned this into a game. I was winning if I got at least five “No’s” in a day.
To do that, I needed to pitch to at least 5 investors and follow up with those I had already pitched. I had to be direct in asking if they were interested in investing in my business, otherwise I wouldn’t get the “No”.
I was relentless in getting those meetings booked. By the end of my first week, I had nailed my pitch and understood what the concerns were from investors. As you pitch, iterate like crazy on it. Write down the first two to three questions you get asked. These are usually clarification questions on your business. Then iterate to include a better approach in your pitch to answer those questions. You want to get to a point where you are pitching and the questions you’re getting are about the opportunity and how you see the market.
Iterate your deck and pitch until it is bulletproof. Use every pitch the first week to learn about how clear and compelling your story is, as well as the market appetite for your business.
I was never very good at dating. I hated waiting by the phone wondering when they would call. It was grueling. I wasn’t going to repeat that with investors. This approach was humming so well that I rarely thought about them after the pitch. I had a full calendar and was not going to break my streak.
Raising capital requires two things: a fantastic story and persistence. You can’t sort of fundraise, just like you can’t be sort of pregnant. You’re either fundraising or you’re not. If you don’t have time to fully commit to it, wait it out for another time when you do. You want to be in and out quickly so you can get back to building your business.
Investors are hearing pitches all day long. That’s their job. The best thing you can do is to help them love your investment opportunity. Cut through the noise by being well prepared, following up quickly and consistently. This is everyone’s chance to date each other. No one wants to commit to someone who is lazy, a jerk or self-centered. Help investors get to know what it would be like to partner with you. This is also your chance to learn about whether you’d like to partner with them.
Questions to Ask Investors During Your Pitch
Here are some questions to ask investors during your pitch. These will help you get to know what kind of investment partner they would likely be as well as give you insights into what their first reactions are to your business:
What do you think? What concerns do you have?
What do you see as the risks of the business?
What’s your process for making an investment decision in a business like ours?
Who are the decision makers?
What’s your sweet spot investment for a company at our stage? How much do you reserve for following on in future financings?
Do you lead/co-lead? If so what firms do you think would love to take a look at this deal with you?
Do you take board seats?
What fund are you currently investing out of, and how many investments have you made in it?
How do you think you’re most helpful to companies at our stage?
Fundraising is hard. It will eat at you and you will be exhausted. This is when it matters most to have a good support group of peers to help you keep your head in the game. Don’t buy into the whining and complaining from other founders on fundraising. It won’t be helpful and will feed on what you’re feeling. Keep your head down and focus on the end goal. Remember that most of the investors will say “No”. That’s how this game works but it’s not time wasted. I have tons of VC’s who passed and have helped with hiring, intros, advice, etc.
My first seed round included 180 investor pitches. I closed a $1.5M seed round in 2.5 months, pitching 5x a day. It was my persistence that helped me overcome my fear. Anyone who pitches that much will get good at pitching. It naturally builds confidence in you. I don’t think you need to pitch to that many investors, but you do need to pitch to as many as it takes in the shortest amount of time possible.
This crazy game to help me avoid the anxiety of getting a “No”, helped me eventually raise $30M in venture capital for that business. I now get ecstatic at the chance to pitch. I love talking about what we’re building and why. I crave the feedback, the varied viewpoints and colorful discussions. It’s our job as founders to tell a good story. Not just to investors but to future employees and partners. Jerry’s streak helped me refine that story.
We just might be able to take this awful task of fundraising and turn it on its head to make us excellent storytellers while growing our business at the same time.