If You’re Serious About Fundraising, Trust The Process.

Ryan Nash , COO , Gust INC

28 Aug 2024

This write-up was originally sent to subscribers as a part of our Mission Control weekly insights, a series where we share wisdom and quick breakdowns on topics from our entrepreneur support network. 

“I just need to find that investor” is a common refrain from founders who are perpetually stuck at the beginning of their venture. If you treat fundraising as just an opportunistic search, you’ll be lost in the woods for a long time. Instead, run a process that covers the whole forest and leaves no stone unturned.

What’s the Big Deal?

Successful fundraising is a sales process and can benefit immensely from being run as one. Using best practices like building a realistic funnel, setting a deadline, and working high potential leads while dropping ones that will waste your time can turn a year+ of wandering into a 3 month sprint that actually closes the cash and let’s you get moving on building your actual company.

The Details

Many founders fall into a trap of “always raising” while simultaneously trying to do all the other aspects of building an early stage startup. They treat fundraising as kind of a parallel track where they are taking opportunities as they come and often become frustrated that they never build momentum or get a commitment. Worse yet, the “other aspects” of the startup suffer since fundraising becomes an unpredictable distraction with existential weight that is hard to ignore—of course you’ll take a potential investor meeting out of the blue in place of whatever else you had planned that day.

The reality of fundraising is that you are going to receive hundreds if not thousands of rejections from investors which means you need the same volume of opportunities. Do the math: if you pitch just 1 or 2 investors per week you’re looking at a year+ to get one commitment. For most startups, one isn’t enough as one investor usually doesn’t fund the whole round, you’ll need a dozen+. Time kills all deals so you want many commitments in a short period of time.

To have a realistic shot, run a well-trod fundraising process:

• Get investor-ready—this is a whole process in itself but be sure you have a legitimate business entity (a DE C Corp likely), a pitch in many resolutions (90s, 5m, 15m, +), all diligence materials prepared, external validation of your efforts (traction), a financial model and forecast, a funding goal, and a clear use of funds. If you don’t have at least those together, you’re not ready to raise; focus on getting those together and not half-hearted fundraising.
• Build an investor top of funnel—find hundreds of potential investors that have a thesis that matches the industry, stage, and direction of your startup and are actively investing. There are tons of free and paid sources out there to build this funnel: Gust’s Angel Groups, NfX Signal, Crunchbase, Pitchbook, etc. There are 10s of thousands of investors in those sources, but only add investors that have a matching thesis to your company, e.g., don’t waste your time pitching investors that only invest in companies on a path to break-even if you are pre-revenue, enterprise SaaS investors aren’t interested in CPG brands, etc.
• Set a deadline—this is both for your startup’s sanity (the CEO should be focused on fundraising almost 100% during this time) and to build external momentum and urgency. Giving interested investors a timeframe to make a decision by avoids languishing in fundraising purgatory. Three months is a good starting point. If an investor doesn’t directly say no but can’t invest on your time frame, don’t be afraid of treating them as a rejection (see below).
• Begin outreach with warm intros—warm introductions are much more successful than cold outreach and eventual cold outreach benefits from already having some interest and commitments. Use your personal network & LinkedIn to find as many warm intros as you can to your potential investor list. You’d be surprised at how close you might be to active investors once you have that whole funnel built. Make a warm intro easy: write it for them to edit as they see fit.
• Work the funnel—investor conversations will move in stages, roughly: initial quick pitch/discovery, longer pitch/demo, deeper dive, due diligence, closing. After every conversation, move those investors along the funnel as fast as you can and follow up immediately. If someone shows interest in the initial pitch, get a longer conversation scheduled ASAP, investors will not apply the sense of urgency, you have to. It’s helpful to use a spreadsheet or sales CRM to track and automate parts of this funnel work.
• Drop the rejections and get feedback—if an investor declines to invest, believe them and remove them from your outreach efforts. If they are willing to provide feedback, be a sponge! Accept the feedback graciously and do not argue back or try to convince them to invest after-all (they won’t). Collect and reflect on the feedback but don’t treat it as gospel. You don’t want your pitch whiplashing around after every call but if patterns emerge the market is telling you something.
• Close the round—once you have commitments for your minimum funding goal execute the necessary agreements and get the funds wired. Equity rounds will often have a negotiated term sheet first, then stock agreements. Convertible rounds will usually just have Convertible Notes or SAFEs for each investor. There might be some stragglers, but it is best to close the majority of the round together. Don’t forget to tap counsel to file securities exemptions once you receive the money.
• Get back to building your company, but update your investors regularly—providing regular company updates post-investment is one of the best ways to ensure past investors will invest again in future rounds. Don’t leave them in the dark after you’ve taken their money.

Experienced founders often say “fundraising is a full time job” and they are right. Running a tight process can be the difference between being that founder who is just waiting for that first investor for years or the team that’s funded enough take that next near-impossible step along the startup path.

It’s a lot! Getting help to know if you are investor ready, the best way to approach warm intros, how to handle diligence, and all other parts of this process is hard to come by. That’s why we built Mission Control. It gives you access to the collective knowledge of people who have navigated these processes with thousands of startups in a multitude of different contexts. We help you cut through the noise, understand what matters, and avoid making the avoidable mistakes that jeopardize your mission.

Gust's Mission Control can guide early founders through all sorts of complex startup hurdles.

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