Fundraising: timing
Part 2 of a primer on early stage tech fundraising based on YCombinator's guidance and my own learning in-the-trenches as a successful founder
There’s no single bullet strategy for timing your fundraise perfectly. That said, there’s a few guidelines to know about.
First, most investing slows down considerably in July/August and November/December, as the VC industry historically went on vacation in the late summer and slowed down for the holidays at the end of the year. Most VC firms make investing decisions by committee at the partner meetings that happen on Monday mornings. If there are too many partners absent, it slows decisions down. So, unless you are raising only from angels or single-partner decision maker funds, you don’t want to be caught mid-fundraise at these times. Even if you are only raising from those smaller funds, they’ll know there is less urgency these times of year; avoid them if possible.
That means you want to start gearing up for your raise in January/February or in late Aug/ early September. That said, the most important thing to help you actually raise money is fantastic growth, so time your raise to coincide with that. I copied my fundraising timeline from my seed raise below to give you an example. Since my business was an events business, we typically had a seasonal slowdown in Nov/Dec/Jan followed by faster growth in the spring, so I chose to push my time my raise starting in March to have stronger growth numbers going into the raise.
Start by picking a target kick off date for meetings where you will actually take money. That should be at least a month out, and backtrack everything to there. Between now and then, you’ll want to:
Build an outline of your story
Schedule and speak with every entrepreneur you know to ask for their feedback on your story
Schedule and speak with every existing investor and/or friendly investor (people you already know) who is likely to come into the round later
Turn that story into a pitch deck
(Optional but suggested) Have a pro make your pitch deck look good
Whether you should talk to new investors during this pre phase is up for debate. At this point, you’re really trying to get your pitch to be as dialed-in as possible with a friendly audience, and hopefully raise a bit before you really go out and raise. The expected conversion of people who don’t already know you is lower than people who do, so I’d index on people you already know. YC’s general advice here is to not spend a lot of time relationship building with investors vs making your company great; the expected value of a random “pre” meeting with someone you don’t already know is probably not worth the time since you want to be ready to accept investment from new folks the moment they get excited about you and your business, and you aren’t likely to build a meaningful new relationship with someone in one pre-meeting that makes them more likely to invest later.
The cornerstone of this strategy is having a date in the future that you can communicate to the people you are talking to as the date you will open to “outsiders”. During a YC batch, YC gives the advice to founders that if they are in the top third of the batch, they’ll close their full round before demo day (the day that all companies pitch to investors), and use that as the urgency to get people across the finish line quickly. Even though you may not have a demo day coming up, it’s in your best interest to manufacture urgency somehow especially in a slower market because otherwise VCs will take more time than you want to make a decision. You want to get out, fundraise, and get back to building your company. In the schedule below, I structured April 5th as the day I was going to open to “outsiders” - in hindsight, I wish I had given myself another week or two and taken a few more friend-of-friend introductions before that date. The energetics that come from strong friend-of-friend intros mean that those folks are more likely to invest and close quickly, and it would have been helpful to have more of those meetings before the deadline to get them across the finish line.
While you are fundraising, you should be only fundraising. Truly. As a solo founder who was responsible for all of our product design at the time, this meant that I also spent the weeks leading up to the fundraise making sure the team could fully operate productively on its own while I spent all day every day in meetings for a month and a half. During your raise, you shouldn’t be joining standup or anything in the day-to-day of the business. Put someone else in charge. If you have a co-founder, one of you should be fundraising and the other should be running the business. During this time, you probably want to keep your outside-of-work commitments light and restful. Do whatever you need to do to stay healthy - exercise, eat well, sleep well - but otherwise focus every cell of your body on fundraising. The main reason for this is the best fundraises move quickly. If you stretch your fundraise out because you’re spending half your time coding or on other things, investors will perceive your fundraise is moving slowly and will be less likely to invest. If ever there was a time to make your startup your life, this is it. Fundraise like your life depends on it, because your startup’s life does.
The schedule below is copied and pasted from my original fundraising notes. I had previously raised a pre-seed round so I had some existing investors I went to early on to try to get a sense for whether they’d come into my seed round and to get their feedback on my starting SAFE valuation. You may skip that part if you don’t already have investors; in that case, start with friendly entrepreneurs. I ended up doing a “first close” on April 11th so I could get the friends round across the finish line and know what I had left - and also be able to tell new investors that I had already closed $1M. The other reason I did this was I was sensing some instability in the markets at the time and wanted to make sure I had the folks who had already committed wire their funds so I wouldn’t lose them if I couldn’t raise the full round. Over the next two weeks in April 2022, crypto markets crashed and the early stage investing market froze over for a while. I closed the folks that had committed quickly as I sensed this was happening; more on language for how to do that in a later post.
Plura’s April/May fundraising schedule
Overall: Target kick-off date: April 5th (for investment meetings)
March 7-11: start investor target list, build deck / key bullets
March 14-18: Get deck and valuation feedback from existing investors + early commitments (no SAFEs yet)
Improve deck
Luna to build out investor list based on recs from existing investors
Tony to contribute data components
Tony to build out investor target list from similar non-competitive companies
Luna to begin outreach to entrepreneurs I know for feedback next week and intros to their angels
March 21-25: Get deck feedback from entrepreneurs I know, see if they’re interested in being an angel, ask them which angels I should talk to
Add angels to list
Continue to iterate on deck improvements
Make deck pretty
March 28-April 1: Rollover meetings from entrepreneurs + existing investors
Ask everyone to make the angel intros, schedule angels for next week
Update deck with end of March numbers
“Finalize” investor target list, particularly who I am asking for which intro
April 4-8: Angel meetings begin
Ask everyone to make seed fund intros ($100k-$500k check sizes)
April 11-15: Seed fund convos begin + additional angel convos
Ask everyone to make large fund intros
April 18-22: Large fund convos begin
Continue seed fund + angel convos
April 25...: Moarrrr meetings until I close the round
Next up: Telling your story
Luna Ray works with post-PMF founders as an executive coach. She is the founder and Chair of YCombinator-backed Plura and ex-Meta, Instagram, Faire, and Bain & Company.