The 7 Phases of Fundraising

An article we liked from Thought Leader Gigi Levy-Weiss of NFX:

Everyone’s fundraising experience is unique, but there are common processes that lead to success.

Below we’ve provided a 7-step detailed template to help you maximize your efficiency, preparation, and learning as you fundraise.

Phase 1: Make A Target Investor List

Think of this list like a personal CRM of your fundraising efforts. It will help you plan throughout your fundraising so that you can maintain efficiency and focus.

This will help you avoid choosing the wrong VCs (ones who are not investing in your stage, geography, or field), which will only waste your time. It will also prevent you from choosing the wrong VC partner, which could dramatically reduce the chance of raising from that firm. Once one partner says no, it is very rare that another partner in the same fund will engage before some time passes and the company has more proof points.

So put the time into your preliminary research, and make sure you have a great list of the funds and the specific partners you are planning to engage with.

Who should be on your target list? VC firms that are:

Focused on your stage, or your business type, your geography, and are interested in your problem.
Known to give simple deal terms, and have good reputations.

NFX’s fundraising platform Signal has 10k+ investor profiles and counting is a good place to find VCs interested in companies in your stage and sector. Once you have your list of target funds, it’s time to choose a specific partner to target before you reach out.

Also, speaking to fellow founders and getting their recommendations on investors they think are relevant for you is another great source of information for building your target list.

When building your list, be sure to consider that:
a) Each partner has a different taste and focus.
b) To suss out a potential match, you can try talking to other Founders the target partner has invested in.

The last step in completing your target list is to rule out VCs with competing portfolio companies. This is an important but often overlooked step that will save you a lot of time and wasted effort.

Why these VCs are not desirable is because they’re less likely to invest in you if they’ve already invested in your competitors. What’s more, they may share some data you give them with your competitor. They might even take a meeting with you for that reason, even if they have no intention of investing.

In most cases, they’ll ‘ask’ the current portfolio company if they care that they invest in you. They almost always do care, so your chances are low to start with. Unless you have no choice, it’s smart to try to avoid such conflicts of interest by taking such VCs off your target list entirely.

At the end of this stage, you will have a list of at least 20 (but preferably closer to 50) target VCs with the identified preferred partner in each one of them. For each one, it’s also wise to have a backup preferred partner in case you can’t get a warm intro to your first choice. You are now ready to start the process.

Phase 2: Fill Your Meeting Pipeline

You’ll want to manage the process of reaching out with the Target Investor List you built in phase one. Here’s a sample list we’ve built as a template.

Within that list, create an investors sheet that is shared with all the people who can refer you (or use Signal).

Include columns for the investor’s name, firm, status, owner (the person in charge of introducing you to this investor), key objections, notes, next action items, and reminders of actions you need to take.
Update this document daily and chase “owners” for the intros.
This CRM spreadsheet is the main tool you will be using to drive the process forward. Not updating it, or managing it improperly reduces your chances of successfully fundraising.
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