How to raise your Seed round 101 — Chapter 4: the Attitude to adopt

Maxime MANSEAU

Follow

6 min readDec 29, 2018

--

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

A plan you have been working on for a long time is beginning to take shape

As with everything in life, mental attitude is crucial to succeeding at fundraising

Raising money is easy

Usually raising money scares first time entrepreneurs; it shouldn’t.
Raising money should be easy; building a company is hard.
Raising money shouldn’t be the ultimate goal, but only a way to build a great company. So raise money quickly, and get back to work in order to build your company!

Be Formidable

A formidable person is one who seems like they’ll get what they want, regardless of whatever obstacles are in the way. Formidable is close to confident, except that someone could be confident and mistaken. Investors are not always that good at judging technology, but they’re good at judging confidence. If you try to act like something you’re not, you’ll just end up in an uncanny valley. You’ll depart from sincere but never arrive at convincing.

You wouldn’t use vague, grandiose marketing-speak among yourselves. Don’t use it with investors either. It not only doesn’t work on them but seems a mark of incompetence. Just be concise. Many investors explicitly use that as a test, reasoning (correctly) that if you can’t explain your plans concisely, you don’t really understand them. it has to work not just on the partner you talk to, but when that partner re-tells it to colleagues.

So here’s the recipe for impressing investors when you’re not already good at seeming formidable:

Make something worth investing in.
Understand why it’s worth investing in.
Explain that clearly to investors.

Truth

Convince yourself that your startup is worth investing in, and then when you explain this to investors they’ll believe you. And by convincing yourself, I don’t mean play mind games with yourself to boost your confidence. I mean truly evaluate whether your startup is worth investing in. If it isn’t, don’t try to raise money.

To evaluate whether your startup is worth investing in, you have to be a domain expert. If you’re not a domain expert, you can be as convinced as you like about your idea. Which in fact it will usually be. And investors can tell fairly quickly whether you’re a domain expert by how well you answer their questions. Know everything about your market.

But pausing first to convince yourself will do more than save you from wasting your time. It will force you to organize your thoughts. To convince yourself that your startup is worth investing in, you’ll have to figure out why it’s worth investing in. And if you can do that you’ll end up with more than added confidence. You’ll also have a provisional roadmap of how to succeed.

If you’re saying something you know is true, you’ll seem confident when you’re saying it. Conversely, never let pitching draw you into bullshitting. As long as you stay on the territory of truth, you’re strong. Make the truth good, then just tell it.

Market

In addition to formidable founders, you need a plausible path to owning a big piece of a big market. Founders think of startups as ideas, but investors think of them as markets. If there are x number of customers who’d pay an average of $y per year for what you’re making, then the total addressable market, or TAM, of your company is $xy. Investors don’t expect you to collect all that money, but it’s an upper bound on how big you can get.

Your target market has to be big, and it also has to be capturable by you. But the market doesn’t have to be big yet, nor do you necessarily have to be in it yet. Indeed, it’s often better to start in a small market that will either turn into a big one or from which you can move into a big one

Timing

Usually, you can find this by asking “why now?” If this is such a great idea, why hasn’t someone else already done it? Ideally, the answer is that it only recently became a good idea, because something changed, and no one else has noticed yet.

Be nice

Startups raising money occasionally alienate investors by seeming arrogant. Sometimes because they are arrogant, and sometimes because they’re noobs clumsily attempting to mimic the toughness they’ve observed inexperienced founders.

That will require some diplomacy if you follow the advice I’ve given here because the advice I’ve given is essentially how to play hardball back. When you refuse to meet an investor because you’re not in fundraising mode, or slow down your interactions with an investor who moves too slow, or treat a contingent offer as the no it actually is and then, by accepting offers greedily, end up leaving that investor out, you’re going to be doing things investors don’t like. So you must cushion the blow with soft words.

The only safe strategy is never to seem arrogant at all.

Be passionate and charismatic

This is the X-factor. It separates the men from the boys in fundraising. If you’re doing a startup, you’re trying to change the world, you’ve kicked your cushy job to the curb, you’ve had Ramen noodles for breakfast lunch and dinner as far as you can remember, and maybe you’ve moved back in with the ‘rents. You’ve definitely got the passion…why else would you be doing this? Don’t be afraid to show it. Every pitch could be your last one (i.e. the dude across the table writes you a check!), know that… give it all… listen to some music that pumps you up before you get into the meeting, think about all of the great shit you’re doing and could do. Focus on the positive, have confidence, be amped, bring passion to your game, and share the love with the person across from you… bring extreme positivity into the potential investor’s otherwise boring pedestrian day.

Keep going

Toward the process, the solution for this is to assume the worst — that an investor is just feigning interest — until you get a definite commitment

So even if an investor agreed, until the deal is closed, you have at best a 50/50 shot of it happening. Keep working new seed investors, keep the competitive leads warm, get your deal oversubscribed because until your deal is done, it’s just a nice fantasy in your head.

Now you got the good attitude, let’s finish by understanding better fundraising from an investor’s perspective.

Connect Deeper

Please add your 10 cents in the comments. You can follow me on Linkedin here.

If you like what you read, you can support me by being generous with “claps” below, following me if you want to read future stuff and sharing this article with anyone you think could benefit from reading it.

Thank you for reading! Have a wonderful day.