2 Things Every Entrepreneur Needs to Know About Fundraising

There are a lot of things about the process that take you away from your main job, which is running your business.

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BY Quora - 13 Oct 2017

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What should all entrepreneurs know about fundraising? originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.

Answer by Aline Lerner, Co-founder & CEO of interviewing.io, on Quora:

There's a lot you should know about entrepreneurial fundraising. I've discussed elsewhere (about how to prepare for technical interviews) about embracing the suck. This applies doubly (triply, quadruply, n-ly!) for fundraising. There are a lot of things about the process that suck and seem arbitrary and dumb and unfair and take you away from your main job, which is running your business.

It's not just about the rampant rejections from people who couldn't care less about your business, don't care about your space, are sitting on autopilot and blindly pattern-matching while you pour your heart and soul out on the floor. It's not about the hours of preparation and identifying the right metrics for telling your story and practicing your pitch and strategically leveraging your network to get the warmest intros you can.

These things are all hard, but others will tell you about those things, and you can read about them on the internets. One resource I just found this morning comes from my friend Mark Goldenson; it's the best guide to creating a pitch deck I've ever seen. Read it.

So, instead of talking about the usual suspects, I'll talk about 2 things I learned while fundraising that I found to be completely unexpected.

1. For your angel round, you probably don't need a deck.

First, if you're raising primarily from angels or doing a pre-seed round where you don't yet have any meaningful metrics (and at this stage, if you think you do, you're kidding yourself), you very likely don't need a deck. I remember after I raised my first 100K for interviewing.io a few years ago, I went to one of my investors, who was also a close personal friend and one in front of whom I didn't care about looking stupid [1]) and told him that an investor I had recently pitched had asked me to send him a deck. Now, mind you, your mileage may vary, because by the time I was pitching, I had a working demo (my pitch was basically, "Hey wanna see what I made? Anonymous interviews can actually work! Look!"), which meant I hadn't been using a deck and had just been having lots of coffees with my laptop out.

So, this investor asks me for a deck, which seems like a reasonable request, and I spend a bit of time putting one together. Then I email my friend and ask him to look it over. I was shocked when he said he wouldn't and that it was a waste of both of our times. At this stage, he said, anyone who asks you for a deck is basically looking for a polite reason to say no. Of course, I was incredulous, but he was right. Of the 5 people who asked me for decks, all said no. So, if you have a demo and even if all you have is your reputation and a concept, a deck when you're raising from angels is probably a waste of time (unless it helps you focus your thoughts... but in that case it can look really bad or might as well just be a Google doc or whatever).

That said, when you start raising institutional money, you definitely need a deck.

2. The hardest part of fundraising for me was going back to my team and telling them that yet another investor decided not to fund us. You need to learn how to manage your psychology to mitigate the debilitating fallout that comes from failing in front of your employees.

I didn't realize how much this would take out of me until I raised our most recent round. When I was fundraising for interviewing.io the first time (an angel round), I was a solo founder who could absorb her humiliations privately. Having come from a recruiting background, I was comfortable with rejections/what it means to play a number games. And because I had an unflappable belief in what our business was doing (Recruiting is broken! Someone will fix it! Our way engages engineers really well, and they're the ones who are hardest to engage, so why not us?!), so no matter how many rejections I got, it didn't really matter.

Having a team is different because, though they share your vision and believe in it, they're not going to share it in the same singleminded, deluded, borderline psychotic way. They are rational agents who are not impervious to social signals, either about your business or about you. The best thing I can suggest is to keep reminding them what you're doing is the right way and the best way and to share both your successes and your failures, even when it hurts. And to tell them what you're changing about the pitch and what you're trying and why it's working when it works and why it doesn't when it doesn't.

[1] Third point: Have someone around you who knows about venture/fundraising/being a founder and is close enough to you such that you can ask them anything without fear of looking stupid. This covers everything from Uhhhh what's a convertible note?? to Waitttt, VCs don't invest their own money???? to What is CAC??? (All things I asked at one point or another and was lucky enough to not get judged too hard.)

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