Tl;dr: Fundraising is hard. Just do what everyone else does and don’t do anything that is new and shiny. It will not help you. Famous founders have their own rules
Occasionally there is a new fundraising trend announced by a famous founder, which is swiftly followed up by 3 or so no name founders who want to ride it and get a Medium post up.
The current one is writing an investment memo rather than a pitch deck.
I’ve posted the investment memos on my blog (E.g. Raising without a presentation deck to pitch) and explained why I don’t like them, but I wanted to have a general blog on fundraising as I take you through how to raise.
Don’t do anything fancy. People used to make websites for their pitch deck. They’re just a novelty.
Don’t’ chase trends.
The boring way of how fundraising is established and it works.
If you’re famous and or know better then do what you want.
Why investors like famous founders
Famous founders are safe bets.
First-time founders simple don’t know what they don’t know that they don’t know.
Failed repeat founders statistically are a worse bet than first-time founders.
Successful repeat founders are the darlings of investors.
They are a known quantity. They can get their “band back together” or proven staff. They are more likely to get press… I can continue but this should all be obvious?
Worked together before
More than likely, the first investor that this famous founder will raise from is their last investors, you know, the ones they made money for?
Those investors know how the founder works. They’ve sat on the board for years.
They know how the founder will react when shazam goes Pete Tong (wrong).
They don’t know you.
They look good when they invest
There are two Tweets investors love to post:
- “Delighted to announce…” when they invest in a company
- “Humbled to announce we had a small part…” when that company exits
When they invest in a celeb founder they get to make the first Tweet sound awesome.
When they are raising their next fund they can tell prospective LPs that they have access to the top founders.
They can justify it when things go wrong
VCs bury their dead quietly. Yup, they’ll take you off their website.
If a startup founded by someone fails, they don’t look like total morons.
Justin Kan’s Atrium was destined to fail, but the dude has charm and he owns it. He’s on Tik Tok talking about it to make the blow seem less for investors.
When investors are on Twitter they can talk about their belief in the founder.
When they have to write investor updates to (or probably take calls from) LPs they can explain “Justin is a great founder bla bla”.
Famous founders will raise anyway
Famous founders can afford to take risks. Can you?
VC’s will have said “we’ll fund whatever you do”
If you have made money for people, they want to make more. It’s the Devil you know.
If Conrad wants to write an investment memo, sure whatever, send it over and we will send the check back.
Some don’t need even a pitch deck
The reality is if you are a big deal, people will throw money at you up to a point.
I reached out to a lot of founders over the past 7 years to try and get their pitch deck. Many said “we didn’t even need a pitch deck” so there is no pitch deck to show you.
They have rich friends
I know a lot of people who are nowhere near famous, but they can ask their friends and get a million without too much effort. Of course, they don’t take it because they like friends.
When you are in the la la land of being a bit of a big deal, your friends have a bit more dosh.
I did a call the other night with a dude who is embedded in SF and he’s not famous. He mentioned his crypto bro buddy who is worth $12b that “was going to write the whole $20m seed round, but he just doesn’t know how to evaluate the tech”.
Let’s say they do some weird thing and VCs pass, they can still get $5m from friends which most could only dream of. Am I right?
They can fund their own round if needed
You can afford to throw a couple million to get going if you really make a fool of yourself, so no bother.
Investors have expectations
Investors are busy and dealing with you is tedious. They have workflows
Being a VC is a lot of work. If you do a lot of deals a year then everyone knows how things work. There are steps and processes for approvals.
If you come around with something new, they have to adjust. If you’re not super compelling, the system would rather reject you than adjust.
Deals involve work
VCs have to write investment memos. They may write presentations to pitch the partnership.
Some monkey at the bottom (Associate etc) will probably have to make the first stab at drafting it. If the founder has a deck, the associate can steal slides and get the job done faster.
You might think “wait, lazy sod, do your job!” You want to do everything you can to make an investor’s life easy since you are on the clock and they are not.
Wait, you have no pitch deck?
Let’s you are creative and make a website instead of a deck. What now. Hey, investor go to the site and you can attempt to read it!
The investor is used to getting a deck he can open on his cell.
He asks for a deck.
You respond “we have something better, we have a website!”
You have to explain you don’t have a deck. You could be explaining why you are awesome instead.
Do what investors expect
Fundraising is hard. Founders struggle at just doing the basics on average. Don’t get in your own way. Go be creative with customer marketing instead!
There is no upside in being different
If you are reading this blog, you probably don’t know the basics. Trust, me that there is a lot to learn! Even at expert knowledge level, it’s still hard.
All investors want is quality content structured logically.
Surprise them with your traction.
Most startups are running out of runway and are as screwed as the new guy in prison if you can’t afford protection money.
Do you really want to make a bet on doing things differently?
Fundraising is a task, not your job
You run a startup to make customers happy. You do fundraising just to do your job.
Just get it done. I will tell you if you should do something differently.
You can learn how to do what’s expected
There is a list of things you need to do to raise but they are known quantities.
- There’s a lot of content on the internet
- You can ask your startup friends how they did something.
- You can even try getting feedback from investors
You do something new and there are none of the above.
Trust me, people still struggle to make their pitch deck.
You can buy help if needed
There are people like me who will set you straight.
A French founder who I helped raise his first round reached out on FB and asked me to help write an investment memo. I told him I never wrote one and didn’t want to.
You’re probably not capable of the new thing…
As an example, the main reason I hate investment memos is I know people. They are totally incapable of getting to the point. Given half a chance they would rather write ‘War and Peace: Rise of the startup’ than write a few bullet points that get to the flarking point!
Investment memos are Word documents that offers endless opportunities to start writing and never stop.
But here’s the thing. Let’s say that founders miraculously start writing the best memos in the world, you have a problem. Investors don’t want to read them (or at least I don’t). In a pitch deck, you can flick to see if a startup is interesting or not. In a memo, you have to allocate time and read.
Whenever you create a situation where the easy answer is “I’ll read this later” you are creating an outcome that is never.
“I deserve the respect of investors allocating the proper time and their full attention to my memo” is about as hilarious an idea as Fyre Festival.
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