How to prepare for fundraising in a challenging environment

It is no secret that the fundraising environment continues to be challenging for founders at all stages.

According to Carta’s Q1 2024 State of Private Markets report, Seed stage deal count fell 33% from Q4 2023 and Series A deal count fell 36%. Additionally, total cash raised in the same period was 30% less at each stage suggesting rounds sizes are also getting smaller. In light of these challenges, it is imperative for founders to meticulously prepare and execute their fundraising strategies. Here are some considerations for effective preparation.

1. Begin early and don’t let company progress stall.

Fundraising rounds are taking significantly longer than most of you will have experienced. It is important that you begin the process early with enough runway to withstand a lengthy process while running your business. In a lengthier deal process, it is critical you continue to hit milestones. I’ve seen numerous deals unravel when company progress stalls during the fundraising process. In preparation, think about what additional milestones could be achieved during the process. Progress is an amazing way to push stalled conversations farther!

Pro-tip: Continuously cultivate your investor network. Leveraging these warm contacts will help accelerate your process. Plus, seeing your progress over time is more powerful than seeing it all at once.

2. Dial in your story and make sure it’s reflected in your deck.

Be sure you’ve methodically built your materials and put thought into your approach. Many of you will have existing investors and supporters around the table: use them. I love working with founders on fundraising decks and practice pitches. I particularly key in on the story. Does your story match the moment in time? Does it show a realistic view of the world? Are you representing all your strengths as a founder or founding team? Take the time to build your story and make sure to showcase the commercial vision and milestones you’ve achieved alongside your product or technical vision.

Pro-tip: When building your deck, be exhaustive with your slides first, then edit down to the right story. You’ll always be able to refer to an appendix or use them in your follow ups.

3. Target the right investors.

This is a big one. While it is relatively easy to find funds who generally invest in your focal area, the critical step is identifying individual investors within the funds who have invested in your space. Not all investors are created equal. Do your research and find investors who are a good fit for your company. Consider their investment philosophy, track record, and ability to add value to your business.

Pro-tip: Read Guy Vidra’s article The Art of the Well Made Introduction to learn a valuable approach to introductions.

4. VC to VC introductions may not be your best approach.

After you’ve prepared your target list, most founders initially think their investors will make a bunch of introductions and they’ll be off to the races. In practice, these introductions may not actually be your best approach. We’ve always found that introductions from other founders are the best endorsements. Don’t get me wrong, VC to VC introductions certainly happen, but funds will always be more excited to hear from other founders about your company, than other VC’s.

Pro-tip: Read Keely Anson’s How to leverage your most important asset: Your Peer Group. Bonus tip: Use VC to VC intros to get to know funds before you are fundraising to cultivate your network.

In a challenging fundraising environment, it is essential for founders to be well-prepared, organized, and persistent.

5. Build a tool that’s comprehensive and keeps you organized.

A simple, shared investor tracker can help with coordination. It’s a spreadsheet listing funds, contact information, connectors, and discussion status. Categorize by introduction status, conversation status and connectors to make the introductions. Though not new, many founders overlook sharing it with existing investors. This helps everyone monitor progress and offer assistance over your fundraising journey.

Pro-tip: On your tracker, make sure to provide your latest blurb and links to fundraising materials to make it easy for contributors to action introductions. Here is a sample tracker.

6. Move and schedule with purpose.

It is important to organize and sequence your meetings to generate heat around your fundraise. Ideally this is a virtuous cycle where a deal becomes ‘hot’, but sadly it can also translate to ‘cold’ when rounds linger too long. I always advise founders to first understand who they have connectors to, then carefully orchestrate when each of these introductions will occur. I like to set founders out on a few practice pitches, before triggering meetings with their ideal investors. It will give you a chance to hone your pitch even further before your most important pitches. Once you are ready to go, clear your calendar, and focus maniacally on setting and executing meetings. You want to organically generate the heat around your round by hustling.

Pro-tip: Don’t half step your way into fundraising. Be purposeful, clear your calendar, and ask for support from your colleagues. You need to be all in.

7. Listen and allow others to feel smart.

During your pitch, leave moments for questions, but control the flow of the narrative. You want your audience to ask questions and dig deeper. Remember those appendix slides we spoke about earlier, these can be valuable for those who want to do a deeper dive into a specific area of the business. Be conscious of time to be insure you’ll fully deliver your pitch, but don’t lose any opportunity to develop a bond with your audience.

Pro-tip: Get comfortable with pauses. Let the room breathe as your pitch. It allows for questions and shows your mastery of the material and confidence.

8. Create personalized follow ups for every meeting.

Prepare a personalized follow up email for every meeting. Be sure to highlight some of the areas of conversation that seemed the most engaging and sprinkle in reminders of the key elements of our pitch or progress. Include any additional materials that may have been requested during your meeting or access to your data room (if appropriate). If you haven’t already gained an understanding of their decision making process, inquire about it. Remember a quick no is always better than a long maybe.

Pro-tip: Always focus on developing rapport with investors. Investors want to work with founders they like and believe in.

In a challenging fundraising environment, it is essential for founders to be well-prepared, organized, and persistent. By following these tips, founders can increase their chances of success in raising capital. It is important to remember that fundraising is a process, not an event, and it takes time and effort to build relationships with investors. By being proactive, adaptable, and collaborative, founders can navigate the fundraising landscape and secure the funding they need to grow their businesses.