How to raise your Seed Round 101 — Chapter 1: the plan

10 min readDec 29, 2018

This story is part of the “How to raise your Seed Round 101” which is actually divided among those 5 Chapters:

Have in mind that raising money is similar to sales. You need to have a clear plan !

Step 1 — Set a timeline

You need to define your own timeline.
Keep in mind that if an investor is asking a founder“ when do you plan to close your round? ”and he doesn’t have the answer, there is a big chance he never closes.

Commit to a date and put 200% of your energy.

Step 2 — Build your Pipeline

You will need to talk to many investors.
Considering the hit rates around 5%. Thus you should start with around 200 names.

Here are the tools i use:

free tools: AngelList, Foundersuite, where you can search by industry and location; Crunchbase, where you can search similar (but non-competitive) companies and see who invested in them; and Quora.
Paid databases: PitchBook, Mattermark, CB Insights and others, which offer a variety of search and filtering tools.
Newsletters that reports deals: TechCrunch, PE Hub, Term Sheet, Inside Venture Capital, Madyness and Venture Pulse.

There are now sites like FundersClub and WeFunder that can introduce you to investors. Raise money first from leads you get yourself, treat them as auxiliary sources of money.

Step 3 — Qualify your leads

Aim to cull around 30% percent of your original target list. Doing so will significantly improve your hit rate when you start the outreach process.

Qualifying leads are vital: Imagine spending time and energy to end up to an investor meeting which invests only to Round A, Round B or latter…when you are looking for your Seed Round.

Use the following elements to help you cull leads of your funnel.

Little Step 1 — delete your original list following those reasons:

Little Step 2 — rank them through their expected value.

Expected Value = (how likely an investor is to say yes) X (how good it would be if they did)

So for example, an eminent investor who would invest a lot, but will be hard to convince, might have the same expected value as an obscure angel who won’t invest much, but will be easy to convince. Whereas an obscure angel who will only invest a small amount, and yet needs to meet multiple times before making up his mind, has very low expected value. Meet such investors last, if at all.

I built my own tool to calculate the expected value of my potentials investors. Feel free to contact me and I will share the excel sheet with you.

Be sure to be disciplined about assigning probabilities. You can’t let how much you want an investor influence your estimate of how much they want you.

Step 4 — Map your contact Maps

Now, you gonna need to find out the best way to reach each qualified lead.

If you are aiming to get VC in your seed round, get an intro to a partner from someone they respect (to a partner, not an associate or analyst !).

The optimal way to get a warm introduction is via a mutual connection (The best type of intro is from a well-known investor who has just invested in you. The next best type of intro is from a founder of a company they’ve funded).

To map your contact path, simply plug the investor’s name into LinkedIn and see if you have any first- or second-degree connections.

If you don’t have a mutual connection, a “hack” is to look at the portfolio of the investor and cold-email two of the founders. Build a rapport first then ask for the intro.

Here is the type of email i sent in this case:

Once you are able to have the conversation with those founders, wait they tell you “ Wow, that’s amazing ! How can i help you ?”. Then just answer “ you know, if we are raising money we notice those 2 investors invested in your Round, would you mind introduce them to us ?” Take the opportunity to ask what the investor has been like to work with, their value add; etc… Be sure to no ask for intros directly if those founders to ask you how they can be helpful.

As a very last resort, you can cold-email the investor. I’ve seen startups do this en masse, and it’s rare to get a response rate of more than 1 percent or so. You need to realize is investors are pummelled with garbage introductions all day long.

Don’t ask investors who say no for introductions to other investors. That will in many cases be an anti-recommendation.

Step 5 — Set up a tracking system

Basically, here the idea is to use a tool to be able to follow up and track the status of your current leads.

I m using Salesforce, you can also use Trello in order to build your clear pipedrive.

Build steps as in my pipedrive below:

Every investor has some track they need to move along from the first conversation to wiring the money, and you should always know what that track consists of. Never leave a meeting with an investor without asking what happens next. What more do they need in order to decide? Do they need another meeting with you? To talk about what? And how soon? Do they need to do something internally, like talk to their partners, or investigate some issue? How long do they expect it to take? Don’t be too pushy, but know where you stand. If investors are vague or resist answering such questions, assume the worst; And use your tracking system to manage all this !

Step 6 — Craft your pitch materials

You should have a 10–20 slide pitch deck, a 1–2 page executive summary and a financial forecast tight and ready to go.

If you are looking for valuable tips and the process to follow about how to build your pitch materials , check this story : Part 2— How to raise your Seed Round 101 —Craft your Fundraising Materials

Be sure to present for feedback your entire pitch at least ten times to friends, advisors, your attorney and any “friendly” investors. Collecting and incorporating feedback is a good habit to ingrain now; you will tweak your pitch materials constantly throughout your raise.

Sometimes an investor will ask you to send them your deck and/or executive summary before they decide whether to meet with you. I wouldn’t do that. It’s a sign they’re not really interested.

Step 7 — Start having conversation (in parallels)

It’s time to start reaching out, talking to money folks and generating momentum for your deal

The best way to start is to email your connectors asking or confirming that they will make introductions. Call each connector or send them an email like this:

Next, for each investor that Jeff responds in the affirmative, draft a new, clean email asking for the intro. Customize the fields in <brackets> with your info:

Three sections describing what you do plus a key, exciting metric or other “teaser” and a brief reason why you specifically want to talk to that investor is all you need.

Now all Nico has to do is click Forward and ask the investor if he wants to be connected (the “opt in” approach). In this way, you’re making it easy for Nico; it takes very little time and he doesn’t need to spend valuable social capital.

Making it this easy for your connectors to do their job is extremely important, as there is a direct correlation between how busy someone is and how connected they are.

Repeat this process for all investors on your target list. If you’ve done your homework, and made a reasonably good match with what the investor is looking for and what your startup is pitching, your dance card will soon be full of investor meeting

Second, when the meeting happens, assume you have one chance to impress the investor.

Tip: Go for the advice: conduct advice calls. “Ask for advices get money; ask for money, get advices”

Step 8 — Hustle and drive it forward

Now your fundraise is in full swing. Your job is to generate momentum, and the best way to generate momentum is to have a lot of meetings. Every day. Every week. Until you’re funded.

Though you should probably pack investor meetings as closely as you can, there is one reason not to: if you pack investor meetings too closely, you’ll have less time for your pitch to evolve. Sounds good to schedule a handful of lame investors first, to get the bugs out of their pitch

Step 9 — Go for the close

Hopefully your meetings are leading to progressively deeper dives on the part of the investors. This means they’re interested, and if they’re interested, the discussion should start to veer toward valuation and terms. Next, you will receive a term sheet (use this template if you need one) or commitments if you’re raising a convertible note (use this template if you need one).

Fundraising is a numbers game — remember our “hit rate” from Step 2? If you’re averaging a 5–10 percent ratio of pitches to commitments, you’re doing OK. This also means you’re getting rejected 90–95 percent of the time. Accept it as the way the game works, and don’t give up prematurely.

Weak founders give up too soon. Smart founders know when to quit. As a general rule of thumb, if you’ve talked to at least 50 investors and if you’re still not getting any meaningful interest, it may be time to regroup and try later when you have more traction.

Otherwise, follow up frequently with everyone who’s still in your pipeline. Send regular updates on your progress and new developments. Your goal is to get them to decide one way or another — if it’s a no, so be it — at least you can remove them from your deal pipeline. But with a little luck and perseverance, your pitch will start to click.

Once you get the first term sheet, use it as a catalyst and push the other funds (or angels) to put one down too. When you get a verbal yes, employ Paul Graham’s handshake deal protocol. The more commitments and/or terms sheets you get, the more leverage you have and the faster you can move the round to a close

Tip: have in mind that it isn’t possible to add conditions to a handshake deal. For example, there is no way for an investor to use this protocol to offer, as some investors try to do, to invest if other people will — e.g. to say that they’ll invest as part of a larger round if you can find a lead.

Step 10 — Get the money in the bank and (quickly) celebrate

Now that you are done you should get back to work! Remember, raising money can be scary but it is just one “little” thing among others. What you should be focus on is building your company, and raising money is just a way to achieve your goal.

Now you have the plan in mind, i will give you my tricks to craft your raising materials.

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