Lesson: Fundraising Series Seed with Jenny Lefcourt

Step #4 Use of Proceeds: Convey a clear understanding of the capital required

As an investor, I really like to see that people know what they want to raise and they know exactly how they're going to spend it and exactly what it's going to get them to. And then they buffered it. And so I like to see user proceeds. I'm going to hire four to five people at approximately this much. I'm going to spend this much on marketing because I think that will prove out this. They really discuss not down to how much their rent is but with broad strokes they understand how much money, where they're going to spend it and what that's going to get them.

I think that people need to spend money on what they need to spend money on to get to that next phase. For some, you don't even worry about your logo or your brand, it's irrelevant. For some, that really matters. You better nail that because your net promoter score will determine how your series A folks look at you. So it really is sort of business specific of how you spend your money.

I think you would be really thoughtful about what you're trying to achieve and how you're going to achieve it and work backwards, right? So I always tell my entrepreneurs, as soon as you raise that money you think about, what's my next deck? What is the deck of the future? What am I going to be selling? What numbers do I need in there and then work backwards and I'm going to spend to make those things happen. Because sometimes you just work forwards and you think oh, I need a logo. Oh, we need space, oh we need... and you're in the moving forward and it's much better to say, I need to be there in nine months. To get there, what do I need to do?

I think it is great when entrepreneurs forget that they don't have money. And so, they're fundraising because they need the money but they're doing everything in their power to move forward until they have money in the bank. Sometimes you meet an entrepreneur and they say, "Well, I haven't started looking for my team yet, I'm waiting to have funding." It's like, well, you can start looking for your team.

There is so much you can do without money and so, you want to go as fast as you can and only stop where you actually need the cash in the bank. There are those two different types of entrepreneurs and you meet them and you can see that difference. And the entrepreneur who thinks the money in the bank is the start, that's when the gun goes off, is not the kind of entrepreneur that most VCs want to work with.