Lesson: Fundraising Series Seed with Jenny Lefcourt

Step #1 Process: For best results, treat fundraising as a process

When you have an idea and maybe you even have a partner, there’s a lot between here and your vision. And it’s good to sort of chunk it out and think about, “What are the risks?” And how do you keep crossing those risks off because every time you do that, you make it easier for an investor to come in and you actually increase the value of your company. So if you can raise a small round and prove something to your future investor, that’s really helpful.

That is money well spent because they will see you in a different light. And they’ll say, “Well clearly, these guys know how to build a product,” or “Clearly they’ve proven demand.” So you’ve taken some part of the equation and they can sort of cross that off of, “What are the risks?” So you want to continually sort of see your business in, “What do I need to prove at each milestone?” Make sure that you raise enough money to do so and be really clear about what that is.

So many times, it’s proving that there’s demand. It’s proving that you can build a product. It’s proving that if you enter one market, you can get the dynamics and the economics to work. And now, someone wants to give you money so you can expand into eight markets. So it’s just being thoughtful about, every business is different. It’s being thoughtful about what are the different milestones and what can I prove at each step?

And making sure that you don’t get caught in no man’s land, that you have just started, if you just had six more months, man, you could have proven that. A lot of people find themselves in that spot and that’s just a really hard spot to be in.

Be really clear of how much you want to raise, who you want to raise from, the story you’re telling. Have yourself together and go out and run it like a process because a lot of times, if you’re just sort of a free for all and you’re weaving in investor meetings and your business and you’re not exactly sure what your end game is, it often ends up being a full time job and you’re running yourself in cycles. So I think, be really thoughtful about how you’re going to run your process and holding as true to that as you can, is the best advice I could give.

I’ve always heard that the rule of thumb is three to four months to do a fund raise or that you should at least allow for that. I think there are plenty of people, depending on the size of the round that they are raising, how successful they’ve been in the past, how far along they are, what their metrics are, where that could be much shorter.

So I think you really have to have an honest view of, “Where am I? Am I super early? Or do I have those numbers that are up and to the right? And have I been there, done that and therefore people really want to back me?” Or, “Am I new to this game and I’m a first time entrepreneur?” Those factors really affect speed as well as, is it summertime? And things just move slower in the summer than they do at other times of the year.

An entrepreneur has to sort of feel the energy of the room. They have to hopefully not have too many VCs that they’re talking to at the exact same time. They have to write down or remember when this person’s going in and out of town. And then hitting them when it’s relevant is really nice and important.

So when someone says, “Oh, I’m out of town starting tomorrow until next Wednesday,” then maybe you ping them on Thursday to say, “Hey, great progress on our side. You know, we launched an app store.” Or whatever little update on the business side you can have. And then, check in where they are, ask them what they need, what are the next steps. So you have to be top of mind but you can’t just ping for ping’s sake. It’s much better to ping with an update. It’s much better to ping with a question of, “Do you want to take some next steps?”

I think when you’re an entrepreneur you think that you need to ping with your fundraising status. Sometimes you do if it’s real. “Hey, I really enjoyed meeting you. I think you’d be a great investor. However, things are moving really quickly on my side and I wanted to kind of check in with you and your level of interest.” If that’s a true statement you can make, then I think you should make it. But for the most part, what happens is entrepreneurs are using that over and over again. That now, it’s a little bit the boy who cried wolf and you hear that. But you don’t really know if someone’s in motion and VC’s just kind of are going to go at the pace they’re going to go at.