Why Fundraising is a bit like dating
To find out more about the Start Up Dating Game and how to get it right — join me for my webinar.
Back in the day I thought I ‘had game’. I would head out into town, put on my ‘mask of superiority, prowess, and arrogance’ and approach unsuspecting prospects asking them nothing, and telling them everything about me — since I was clearly the best thing on the market.
I would kick off a conversation, inject energy, speak quickly, and have all the answers…
…and then get rejected at best, or at worst, ghosted by ‘the one’.
Now, I’m not talking about my dating ‘game’ here (all that wasn’t any better) — but my fundraising strategy.
It would start with me feeling full of hope for my future, but desperate for my current situation. I desperately thought that finding the right partner would not only sustain me, but validate me.
This approach was torturous, exhausting, and frankly pretty pathetic.
The only solace was that everyone was doing it that way and enjoying similar sky high rates of failure.
You see, in many ways, pitching your start-up is like dating — with the obvious exception that a shareholder — start-up relationship is a pretty open and polyamorous one.
But…few founders think of it like that, which is fair enough, but I think they should.
Not because it is any easier to crack, but because our relationships, and the way we approach them, are often our greatest teachers and show us more about us than we can see ourselves.
So approaching it this way turns fundraising into a process of ‘becoming’ a great company and founder rather than just ‘achieving’ your fundraising goals (for more on the process of becoming see my article here.)
Ultimately, in both dating and fundraising, we are seeking a partnership within which we can co-create a happy, supportive and successful future together as we navigate life’s trials and tribulations. Both relationships, and start-ups, have plenty of both!
So, what are the 10 dating mistakes that founders ought to be wary of when fundraising and how can they be avoided:
An introduction is always better than going in cold: Whilst blind dates can be very intimidating…getting introduced by a friend to a potential suitor comes with a lot more receptivity than the cold approach in the coffee shop / straight into the inbox. If you can get a mutual, and credible, connection to introduce you fully and properly, making it clear why you’re relevant, you’re much more likely to get a hearing.
You’ve got to get to know them: Your startup might be looking good, and your chat might be compelling, but investors are approached hundreds of times a year by start-ups all wanting to skip the dating and get straight to the joint account bit. Unless you really are the Casanova of start-ups, it is important for you to start building a relationship with the investors you are pitching so that they can know, like and trust you with their capital. Before you pitch them, research them on Crunchbase, Linkedin or Angellist and when you are pitching them, ask questions that will help you gauge whether or not they are a good long term fit for you and what they look for in an investment
Thinking we just make them laugh, so we can keep it focused on us: We often think our path has been the most interesting one to walk down. It is certainly the most vibrant in our own minds. But investors at best have heard it all before, and at worst have switched off because you’re just talking about yourself, rather than talking about your future together. Once investors have waved you through to a second date, start talking about the future you want to build, with your company and in partnership with your investors. Get them excited about it, use this vision of a future to share more about your values, and get your investors involved in co-creating that vision.
Not knowing yourself or what you want: Alas, the hapless romantic who says all the right things but actually, is so busy pleasing others they don’t fully appreciate the impact they have on others or what they want. They are in the investor dating game knowing it’s a part of start-up life, but unsure what they really want deep down.
Investors want to get into serious relationships with start-ups who are clear about what they want out of the relationship, what they look for in a partner, and where they need help around the house (i.e. extra legal, sales, HR or finance support).
And equally, they want, and need you to have done some of the reflection on yourself — what are your challenges, where do you see your opportunities, where do you see yourself in a few years time, what are your key metrics?
Take the time to get your own house in order before inviting others into it.
Pretending to be someone you’re not: startup investors are up for the ride and they often know there is going to be a short-lived honeymoon period before your first big pivot together. But, what makes this so much easier is if you are clear about your strengths and weaknesses as well as your traction and progress to date.
No one likes the trickster who acts like they can afford the caviar, but before too long you realise they are actually scrabbling around for chips. There have been some dramatic stories of startups who have overhyped themselves only to come crashing down to earth leaving founders and investors alike severely burned.
Balancing ambition and delusion: We are all inspired by those partners who dream big and have the compunction to try and change the world. And we all want to be with the people who dare to dream big. However, after a while, the dreaming wears thin and it becomes clear that they are just a dreamer.
Seasoned investors spot this sooner rather than later.
Therefore the challenge for founders, at a mindset level as well as at a presentational level, is how do they balance demonstrating their ambition with reality so as not to come across as delusional. There’s no hard and fast rule here, except to maintain your curiosity about the ‘how’ you going to achieve your goals — lean startup philosophy 101. Have a sensible plan, based on reality rather than the classic “if we just take 1% of a huge number, we’ll be billionaires’. We all love a dream, but that doesn’t mean we’ll trust them with hard earned cash.
Getting defensive — rather than leading with curiosity and humility: Building on the point above, as Brene Brown says, “we’re here to get it right, not be right”. People are put off by arrogance, early on in any relationship, as we know that it’s just too early to know any of these things — we know that we’re still trying to figure so much out.
In so many ways, dating and investing are both bets on the future based on what we know about the person in front of us right now. And one thing we all know is we don’t have all the answers — even if we hope we have a pretty good idea! It’s so much easier to get behind the person who employs curiosity and humility, rather than presumes arrogance, as we believe these are the people who ultimately will get it right. They’ll question themselves until they find the right answer, pivot when they need to, and know when the right time is to leave a market — that is the person we want to enter into a long term founder-investor relationship with.
Not being vulnerable: Believe it or not, behind the lack of response and data-driven questioning, investors are humans too and they want to know deep down who they are dealing with
Sure, they’re looking for financial returns, but they are also looking for authenticity, trust, and connection from the people they do business with — like we all are deep down.
And that needs to be built on the courage to be transparent, to be vulnerable and in the future, to fail in front of them. Investors look at startups knowing they are not the finished product. If they wanted that they would be investing in IPOs or bonds. They know there are things you need to work on and challenges you are overcoming so be upfront about it, ask for their help and if they aren’t willing to give it, then perhaps they aren’t the right investors for you anyway. At some point, your challenges are going to manifest and warrant a conversation so get out in front of it, and get this stuff out in the open — maybe not on your first date with a gorgeously capitalised investor…but don’t pretend you can hide it!
Shying away from the tough discussions about your future: We have all put off uncomfortable conversations, fearing that we’re not going to like what we hear. However, often, they actually bring us closer and we’re strengthened as a result. At worst, we learn things about the other person that reveals that they aren’t the person we thought they were and we leave relieved that we found this out now, rather than in the future.
Whilst this is well at least third date, term sheet phase, investor discussions, it is absolutely worth having similar discussions with your investors. Have frank discussions with them about follow-ons, exit aspirations, attitude to debt, future salaries and options pools.
Whilst these discussions are definitely more serious than any of the light-hearted, early pitch, flirting, having these discussions helps you to really understand who you are dealing with and who you are getting into a cap table with.
Get to know their friends: As we’ve alluded to above — the investor < > founder relationship ought to be a two-way one, especially with those investors who are going to make sizeable investments and potentially take a board or advisory positions. That’s why when with VC investors, it’s not really just about the firm that you’re getting but the partner who is going to be sitting on your board, helping you when you’re up against it, and the one who is holding your feet to the fire.
So, really get to know that investor and that firm (if necessary). Meet other portfolio companies, get references, meet the other partners and investment committee members who will also, at some point, be the jury as to whether to support your follow-on, a bridging round…or heaven forbid a down round.
Getting dressed up and remembering your manners: Every touch leaves a trace. Granted, you hardly need to roll out the chivalry for investors, but we do need to appreciate that many investors will believe (as I do) that the way we show up in one place, is the way that we show up in every place. So, put your best foot forward and by this, I don’t literally mean putting your best heels on or smartest jacket — tech investors are more than comfortable investing in the team who only wear Star Wars T-shirts.
But remember that you are demonstrating your credibility, your attention to detail, and your ability to present to customers and excite people with your vision.
So, send follow-up emails, come prepared, set agendas, get data rooms set up, and polish your pitch decks.
Every touch leaves a trace, and you want this to be love at first sight.
If we don’t want to end up alone, and more positively, if we want to enjoy who we spend our time with, then its worth thinking long and hard about who we really want to share this startup journey with, not settling for who we have got because we were too desperate to prepare ourselves for what lay ahead.
I know start-ups need cash, and as an ex-founder, I know that sometimes we don’t have the luxury of choice. But what I am saying is that we need to focus on more than just the ‘what’ or ‘how much’ — but also, if we want to build really great start ups with amazing investors, it’s just as much about the ‘how’ and the ‘who’!
To find out more about managing the how and the who — check out my webinar on April 26th where I’ll break it down for you in detail.
How I can help?
I am a prolific and impact-focused, venture capital investor, leadership coach, sustainability, and fundraising consultant. I’m also a serial founder who works with dozens of sustainability and cleantech founders and investors.
VC Investor: I am a professional impact investor at Vala Capital, where I lead their UK-orientated sustainability fund. I sit on a number of boards and advise countless more.
Coach: I’m a Venture and Leadership Coach to sustainability CEOs around the world and coaches clients from the Far East, Europe and North America in sectors as diverse as Hydrogen, Circularity, BatteryTech, Retail, Hospitality and Energy Storage, WaterTech and Media.
Adviser: I’m also an adviser and mentor to Third Derivative in the US, and Bethnal Green Ventures in the UK, as well as being on the steering committee at VentureESG.
Serial-Founder: I am a serial founder and have raised multiple investment rounds from notable VC investors including Anthemis and Axa Venture Partners for my start ups Attis Ventures and Goji Investments
Corporate Finance: Prior to founding Goji, I worked for one of the UK’s most prolific corporate finance firms, where I advised on several $bn of transactions across public and private markets for some of the world’s leading investment groups.
Find out more about how my 1:1 Venture Coaching helps Sustainability-orientated CEOs to become the best leaders they can be at www.Jakewombwellpovey.com