Guest Editor: Sri Varre- Investment Analyst at Pivotal Ventures and the founder of Lazy Girl Capital
Prior to becoming an investor, I was an operator for various consumer and consumer tech startups from the pre-seed to series A stage. It was here that I was exposed to the countless fundraising hurdles founders dealt with. As I build my skills and personal thesis as an investor, I’ve started to identify archetypes of founders who can not only raise venture capital but successfully scale their company.
These are a few tips I’ve curated for founders:
Raise from stage-specific funds
When you are thinking about diversifying your cap table, it’s important to find investors with different skill sets and industry expertise, but it's critical that they understand how to support your company at the stage it’s in. The challenges faced by pre-seed companies are very different from those at Series A, and oftentimes require different skill sets and networks from around the cap table to solve them. Multi-stage firms’ incentives are not aligned with supporting their smallest portfolio companies and may struggle with understanding and helping you reach stage specific milestones.
Assume investors have zero knowledge
Even if the investor you’re pitching has extensive industry experience, assume they don’t have any knowledge around the problem you’re dedicated to tackling. Most investors have spent minutes preparing because they usually are getting pitched back-to-back all day. At the end of the day, you understand the problem best. You should be striving to be a walking encyclopedia around the problem you’re focused on. You're the expert, and there are probably some nuances they're missing as to why your specific product/service/solution wins in this market. Knowledgeable investors are often the most skeptical of solutions, given their experience and depth of research; use this as an opportunity to demonstrate your credibility in the sector.
If it’s not a yes, it’s a not worth chasing
I know the life mantra everyone’s taught is that a no is a not yet, but I believe 90% of the time it's not worth chasing after investors that don’t show interest early on. It's completely okay to send quarterly updates to investors if they said they were open to receiving them. However, I would not hold out hope that they will suddenly become interested and want to move forward with investing in your company. If the conversation isn’t progressing towards the diligence stage, I would move on to other investors. Besides, you want investors who are obsessed about what you're building and willing to fight alongside you when you need to pivot, make a major leadership change, or sign on more customers. Fundraising takes so much time that it’s not worth spending all your time convincing investors that likely will not come around.
Rejections should be taken with caution
Feedback is imperative in any job but as a founder I would be extremely cautious of implementing feedback from investors that pass on to your company. Every investor is underwriting a specific type of company solving a very specific problem with a specific business model that fits into their broader investment thesis. Most of the time, when an investor passes, it's not a knock on your ability to scale, but a decision based on your company not fitting into a niche gap in their portfolio.
Partnership comes before check size and sexy brands
When founders are trying to fill a round, most get caught up in the prestige of an individual angel investor or VC firm instead of focusing on their unique value add and long-term partnership. I would always be cautious of investors that are loud on social media because they may be focused more on their reputation and not be practicing what they preach. Diligence VCs as they diligence you. It's important to do your own reference checks through other founders that these VCs have invested in and ask about the relationships they maintain with later stage investors. Portfolio support is great, but if it's focused on community building it will have minimal value to your company growth. When it’s your turn to ask questions to investors, ask them to share examples of how they’ve tangibly supported founders and what their one or two superpowers are. Also, it is critical to know where they are in their own fund deployment cycle. As a founder, you want to understand when the pressure increases to get your company closer to an exit. Emerging fund managers can perform the best because they’re willing to get into the weeds with founders and are just as scrappy.
Own Your Ownership and Fundraise
Many founders' fundraise timelines have been prolonged and you have to stay focused. In this market, investors don’t care about what your valuation was at the earlier stages. All they care about is if you are building a business that scales.
When you're raising a pre-seed round, I would recommend doing a SAFE with a low valuation cap. Then, focus on finding product market fit and key traction metrics to set you up for your seed round.
Sri is an Investment Analyst at Pivotal Ventures and the founder of Lazy Girl Capital, a platform dedicated to closing the gender funding gap by amplifying the work of female founders and investors. Her work spans from high-growth consumer and tech startups to social impact ventures, and organizations focused on gender equity issues. She's supported over 10 female-founded startups, working closely as a strategic partner to ops, marketing, product, and the C-Suite teams and stakeholders to execute successful launches, achieve operational and growth goals. Her experience fostering deep and long-lasting communities at the intersection of business, philanthropy, and gender equity led her to being a Washington Business Journal's DC Inno 25 Under 25 recipient and a previous TEDx Speaker. She earned a BS in International Affairs and Economics from The George Washington University.
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