Fundraising Strategies to Raise a Series A
Written by Dave Bailey
Are you trying to raise a Series A? Learn how to fundraise without reading millions of blog articles with these 36 fundraising tips.
In this essay, we’ll run through my Top 36 fundraising tips. But first, let’s make sure we’re on the same page.
Raising a Series A isn’t like raising your seed round. What probably took you a few weeks with minimal fuss is going to get a lot slower. Series A rounds can take months to close and involve a lot more due diligence.
You’re probably wondering what metrics you need to guarantee a Series A. NextView, an East Coast VC, published this table, comparing seed and Series A milestones:
These benchmarks are not hard-and-fast rules and in the real world there’s more flexibility than they suggest. The following chart from Redpoint shows very little correlation between Monthly Recurring Revenue and Post Money Valuations:
The other misleading thing about these benchmarks is that growth and revenues alone don’t always represent the investability of your startup. This slide by Pear VC shows a host of other metrics, aside from growth, that are critical to their investment decision—notably the unit economics.
Alternatives to Series A
It’s worth mentioning that Series A isn’t your only option. Around 40% of seed-funded startups will raise another seed round. Why? Because there are many more seed investors than Series A investors.
It’s possible that profitable startups might not raise money at all, and some startups will try to get acquired (I’ve written about how to get acquired here). With early-stage investing slowing down, the scary truth is that many startups will just die.
Okay, now we’ve got all that clear, let’s begin with my Top 36 fundraising tips!
Part 1: Before Pitching
1. Get your startup onto investors’ radars before you need their money.
Progress is power. Reach out, keep in touch, and show progress. As Mark Suster says, ’Investors invest in lines, not dots.’
2. Hire in connections and advisors.
Form an advisory board. You get to choose who you ask, and the worst they can say is, ‘No.’ Identify the most well-connected person in your network that you admire, and ask yourself, ‘What’s stopping me from asking them?
3. Less than six months runway? Control your burn.
Figure out how to reduce your costs or ramp up revenues. It takes a long time to raise a Series A and ‘we’re running out of money’ isn’t attractive to investors.
4. Play to your seasonality.
Are you expecting a spike in revenue or usage at a certain time of year? Consider timing your fundraise to leverage the momentum of increasing sales.
5. Avoid raising during the summer and Christmas holidays.
I always seemed to find myself raising in July and December. The holiday periods can be infuriatingly slow-moving as VCs fly to their holiday homes.
6. Know how to read a term sheet.
The legal terms for Series A are more complex than for seed rounds. For a comprehensive primer on term sheets, I recommend reading Venture Deals by Brad Feld.
7. Get your documents in order.
Ensuring you’ve properly prepared due diligence materials, like financial reports, forecast models and IP assignments, will save you time later on.
8. Get commitment from your seed investors first.
Start with your fans. If they won’t invest, you’re dead in the water anyway. Find out early whether they will invest, and how much.
9. Raise two times your early commitment.
Say you want to raise $5.0M and your current investors want to put in $1.5M. If you make $3.0M your first funding target, you automatically start with 50% of your target already committed. Once you hit $3.0M, you can always extend the round by $2.0M to ‘cater for surplus demand’. Nothing attracts investors more than, ‘Sorry, the round is full.’
10. Look for a lead investor.
When researching investors, check if they have a preference for leading or following rounds. Until you have a lead investor, followers will ‘wait and see’.
11. Approach less desirable investors first.
‘In-the-trenches’ feedback will improve your pitch and make you more confident. Save your polished and practiced pitch for the investors you really want.
12. Find a warm intro.
When approaching a potential investor—whether through a mutual connection, reaching out to their portfolio CEOs, or networking like crazy—always get a warm introduction from someone they trust. Personally, I treat cold intros as a red flag.
13. Create a mobile-friendly teaser deck
95% of the time, investors check their email on mobile. When your PDF deck is full of small text, it's impossible to read. Stick to one message per slide and the bare minimum of text.
Part 2: Pitching
14. Know who you’re speaking with.
There’s no investment without a human connection. Find out an investor’s job history, network, recent investments, and personal interests. Discover what you have in common so you can bring it up in conversation.
15. Lead the agenda.
Don’t forget: you are in charge of your fundraising. Be assertive and say, ‘I'm taking the next few weeks to meet key investors and get to know them better. We don't yet have a firm close date, but we expect it to be in the next three weeks.’
16. Meet later in the week.
Most VCs have their partner meeting on Monday mornings. If you’re the last person to meet them on Friday, they’re more likely to remember you.
17. Present a beautiful pitch deck.
Think of your pitch deck as an extension of your product. Iterate it continuously to make it as clear, concise and compelling as possible. If necessary, get help from your designer to make it really stand out.
18. Tell a story.
As the adage goes: facts tell, but stories sell. Use storytelling techniques such as the ones in this article to transform your presentation from flat to fantastic.
19. Identify investment killers in the first meeting.
The goals of the first meeting are (a) to get a second meeting, and (b) to identify what would make them say, ‘No,’ and address it before that second meeting.
20. Sell the problem, not the solution.
Investors judge an investment by the value of solving the problem, not the solution. Spend a significant amount of time emphasising the problem and the difficulties faced in solving it, to build up its importance.
21. Repeat your one-sentence product description.
Investors are herd animals. If your company can’t be summed up in a sentence, it will be hard for investors to talk about it. Work on your version of Uber’s, Tap a button, get a ride.
22. Show how big it will be.
Present your vision by focusing less on your product and more on the macro trends and watershed moments that will make your success inevitable.
23. Keep the pitch short and interesting.
You don’t need to say everything about your business. Leave out the minutia and focus on the most important parts of the investment case.
24. Present your metrics dashboard.
A dashboard of the most important metrics in your business speaks volumes about your company. Show it to your investors (and use it with your team too).
25. Have a traction chart.
Charts that go ‘up-and-to-the-left’ have a big psychological impact. Even the most sceptical investor can be convinced by data that shows improvement over time.
26. Calculate your bottom-up market size.
Ditch the vague industry reports that say you’re in a ‘100 billion dollar market’. Make it a simple calculation: bottom-up market size = number of potential customers x price.
27. Be clear on why your raising.
Decide where you need to get to in terms of revenue and customers for your Series B in 12–18 months’ time. Then, work backwards to figure out the recruiting and product milestones for each quarter.
28. Bring up risks proactively.
Investors don’t expect your business to be perfect. But they do expect you to be aware of its imperfections, so be proactive and say, ‘You might be worried about X. We were too and here is our plan . . .’
Part 3: After Pitching
29. Update your FAQs.
The same questions tend to come up all the time. Rather than make your main presentation more dense, create an appendix with extra slides for each question. You’ll come across as highly organised if and when those questions come up in the pitch.
30. Keep investors updated.
Once you make contact with an investor, keep them in the loop with short, data-filled updates. No updates (or data-free updates) are red flags.
31. Get proper feedback when you get a ‘no’.
Don't settle for the standard ‘it’s not for us’ email. You have nothing to lose by calling the investor and asking, ‘If you were me, what areas would most concern you and why?’
32. Understand the investment thesis when you get a 'yes’.
Once an investor says, ‘Yes,’ ask for their investment thesis—the argument they use to justify their investment. You can use this thesis with other investors to help them do their job.
33. Collect intentions to invest.
When investors ask you to ‘get a lead investor first’, add up their conditional commitments and use it to attract that lead investor.
34. Create an investor update list.
Ask investors whether they would like to receive updates, and then email them every two months. Regular contact increases trust—the foundation of a long-term relationship—and that will help you with future rounds of funding.
35. Drive competition among VCs.
Competition is your only real leverage on valuation. As soon as you start to get genuine interest from investors, consider reaching out to any remaining investors in parallel.
36. Reach out to other founders in an investor’s portfolio.
Before saying ‘yes’, you want to get an honest reference from another founder who’s worked directly with the partner previously. You need to be sure that the investor's right for you, because once you sign, there's no going back.
There you have it, folks! I hope you find something valuable here, and if I’ve missed any tactics, please share them in the comments. Good luck, and when you need a Series A CEO Coach, let’s chat after you raise!
Continue reading about raising startup funds:
- Need to pitch your business? Here’s a handy guide on how to write the perfect pitch to wins investors over.
- Struggling to tell your startup story? Start by using these compelling storytelling techniques.
- About to send an update to your investor? Learn how to craft engaging investor update emails.
Originally published Apr 4, 2019, last updated Aug 20, 2021
About Dave Bailey
Hi, I’m Dave Bailey and I coach tech CEOs from Series A to pre-IPO. Join 20,000 entrepreneurs who receive my new essay every week.
I will never sell your information, for any reason.