Dan Martell - How To Create a Fundraising Story For Your Startup

00:00:00.000 Hey there.

00:00:00.500 Dan Martell here, serial entrepreneur, investor,

00:00:02.120 and creator of SaaS Academy.

00:00:03.320 In this video, I'm going to teach you how to go boom,

00:00:06.600 raise some money, more than $100.

00:00:09.180 But I'm going to teach you how to create a fundraising

00:00:12.060 narrative to help your fundraising process be super easy.

00:00:15.240 And be sure to stay at the end where

00:00:16.560 I'm going to share with you an exclusive resource called

00:00:18.660 my Fundraising Like a Pro training,

00:00:21.060 which I break down the three phases of fundraising

00:00:24.280 and tell you exactly how to reach out and get connected

00:00:27.040 to investors.

00:00:28.080 Share those at the end.

00:00:29.040 Let's kick it. 0.91

00:00:30.000 So the other day I was on a growth session with a potential coaching client named Rodrigo in San Francisco

00:00:46.960 and he asked me, he's like, hey, we're about to raise some funding, but I don't understand kind of like

00:00:52.200 what do investors look for and how do I create the process and how do I make it so that it is,

00:00:57.440 it's easy, and I don't spend six to nine months

00:01:00.060 out there in the market trying to raise little bits of money

00:01:02.200 from a bunch of people, and it was such a great question

00:01:04.820 that I actually walked him through the things

00:01:07.640 that I think need to be present to actually create

00:01:10.940 a fast and momentum-driven fundraising process,

00:01:14.680 and really the narrative, the story that you kind of want

00:01:18.680 to craft to get investors excited about your startup.

00:01:22.440 You know, I've been super fortunate to have raised money

00:01:25.440 twice for my last two companies flowtown.com and clarity from some of the top investors in the

00:01:31.120 valley so steve anderson from baseline ventures and freestyle capital and just some amazing dudes

00:01:36.560 and what i've learned in helping other entrepreneurs raise over 150 million of capital

00:01:42.000 for themselves is there's definitely a process around the story arc in the narrative and that's

00:01:47.760 what i want to share with you in this video step one two peaks this is the big idea there are two

00:01:54.160 times, the best times, to raise money for your startup

00:01:57.600 before you're publicly available and after you

00:02:00.720 figure it all out.

00:02:01.580 Because here's what's normal in a startup world

00:02:04.020 is before you launch, you've got some early traction

00:02:06.920 and customers using it.

00:02:07.880 Maybe you're in private beta.

00:02:09.020 That's the best way to do that.

00:02:10.620 And things are feeling really good.

00:02:12.920 And then you launch publicly and you

00:02:14.460 expect, I'm going to get covered on TechCrunch

00:02:16.260 and all these media outlets.

00:02:17.300 And it's just going to go on product hunt.

00:02:19.320 It's just going to take off and rocket ship in outer space.

00:02:22.800 And that's just usually not what happens.

00:02:24.560 What happens is it kind of goes up,

00:02:25.920 and then it flattens, and it comes down.

00:02:27.300 You have churn issues, and you have monetization issues,

00:02:29.700 and you have product hook issues, and all these things

00:02:31.360 that aren't working out.

00:02:32.360 And you work your butt off for like another year and a half,

00:02:34.600 and then finally you get to a level of product market fit

00:02:37.960 where the product comes back and there's more traction.

00:02:40.180 Now, there's two of the best times to raise

00:02:42.740 is before you're publicly available

00:02:44.400 and after you figure it all out.

00:02:46.040 So what I would say if you're early stage

00:02:48.480 is keep the product in private beta.

00:02:50.680 have a way for people to subscribe to be notified

00:02:53.800 when you open up to the public.

00:02:55.800 And that way, you can create a lot of excitement

00:02:59.600 for what the potential could be around your product

00:03:02.460 and traction in the market so that investors can feel

00:03:04.720 like they're in early.

00:03:06.180 Now, if you've already launched, unfortunately,

00:03:08.740 you've got to go all the way through that trough

00:03:10.920 of challenges and get on the other side.

00:03:13.100 And at that point where you feel like you're starting

00:03:14.920 to get that growth curve, you can get investors back excited.

00:03:18.560 So I hate to be the bursar of bubbles,

00:03:20.500 But if you've already launched, you kind of got to go over here.

00:03:23.120 If you haven't launched yet, use that strategy.

00:03:25.720 Number two, pre-marketing.

00:03:28.420 OK, so most people don't realize that fundraising isn't like,

00:03:30.960 oh, I've decided to raise money, and now I'm

00:03:32.620 going to go and talk to investors.

00:03:34.600 There's actually a whole phase before.

00:03:36.820 There's three phases.

00:03:37.640 The first phase is pre-marketing.

00:03:39.500 This is where you actually start doing the research for who

00:03:42.600 are the best investors, who are the entrepreneurs

00:03:44.660 that can get you introduced to those investors,

00:03:47.400 and make sure that you time it the sequence to create

00:03:50.560 momentum in the conversations.

00:03:52.620 And that you're like, you're literally

00:03:54.160 meeting with one investor in the, maybe two or three

00:03:56.320 investors in the morning, and two or three in the afternoon.

00:03:58.740 And you're going maybe to San Francisco and Boston

00:04:00.820 and New York in a way that's very strategic

00:04:03.240 to create a bunch of buzz, because investors

00:04:05.880 talk to each other.

00:04:06.620 Especially if you're doing an early stage round,

00:04:08.240 you want to make sure that you get, you know,

00:04:09.900 maybe one lead and a bunch of other people

00:04:11.580 to help fill out the composition of your fundraising.

00:04:14.120 So to me, the pre-marketing phase

00:04:16.580 is how you create a narrative or a conversation in the market

00:04:20.720 to get people excited.

00:04:22.120 And that is around the research of,

00:04:24.120 and I'll give you the first tip, is only raise money

00:04:26.700 from people that understand your industry

00:04:28.660 or understand the problem that you're solving.

00:04:30.400 Too many people are pitching investors

00:04:32.280 that don't know B2B SaaS or if you're in mobile apps

00:04:36.640 or FinTech or whatever it is for you.

00:04:39.300 And they'll take the meeting because they want to learn

00:04:41.680 and meet great founders.

00:04:43.080 but they probably would never have invested.

00:04:45.040 So there's a whole strategy around that.

00:04:46.260 Again, I'm going to show you how to get the Fundraising

00:04:47.920 Like a Pro training to teach you how to go through that filtering

00:04:50.740 process.

00:04:51.540 But make sure that you allocate at least six weeks

00:04:54.560 to the pre-marketing phase of research,

00:04:58.320 connecting with entrepreneurs that have raised money

00:04:59.960 from those investors, and having those conversations

00:05:03.120 way before you ever decide to start raising money officially.

00:05:08.220 Number three, manufacture traction.

00:05:10.940 Now, I'm going to preface this by saying

00:05:14.060 this is not to be deceiving or screw with the numbers

00:05:18.460 or lie about any level of traction you've had.

00:05:21.380 All I'm saying is that there is a way to create a hockey stick.

00:05:25.340 And the way this works, especially if you're not

00:05:27.120 public yet, or if you can time or sequence your partnerships

00:05:30.920 or whatever growth, if you're investing in paid acquisition

00:05:34.280 and you know you have a channel that's performing,

00:05:36.700 you can sequence the growth curve to ramp up.

00:05:39.980 And I think this is what a lot of the accelerators do.

00:05:42.680 I know that I've heard stories at Y Combinator

00:05:44.940 where they pretty much say, look, your goal

00:05:47.040 is to build this growth curve and just make sure

00:05:49.520 that it continues to grow over time.

00:05:51.260 So how do you manufacture traction?

00:05:52.640 Well, if you've got a list of beta users

00:05:55.640 that have subscribed to be notified

00:05:57.000 when you open up the product, well,

00:05:58.980 then it makes a lot of sense.

00:06:00.080 If you know you're going to raise three months from now

00:06:03.560 to slowly ramp up, if you had 1,000 people,

00:06:06.440 start with 200, let them in the product, let them use it,

00:06:08.580 Get some conversions to paid.

00:06:09.960 Then let like 300 or 400 people.

00:06:12.000 Then let 600 people in.

00:06:14.080 And what you do, and look, it's just reality.

00:06:17.020 You're just like slowly phasing people into the product.

00:06:19.120 You'll create that growth ramp.

00:06:21.460 And you can do that with partnerships.

00:06:22.780 So you can sequence the partnerships

00:06:24.540 in a way where it kind of builds that momentum.

00:06:26.720 And this is what a lot of accelerators

00:06:28.220 teach their founders to do because it just

00:06:30.760 looks better as a story, as a fundraising narrative.

00:06:34.400 And it's something that you have control over.

00:06:36.420 So definitely recommend that you do that

00:06:38.580 so that when you go to the market,

00:06:41.160 you've got that built out.

00:06:42.540 Just don't do it in a way that if you don't have enough kind

00:06:46.080 of gas to sustain that, that all of a sudden you

00:06:48.600 have a huge dip, and then you're

00:06:50.040 trying to talk to investors because they're

00:06:51.640 going to ask what happened on that dip.

00:06:54.120 Number four, team story.

00:06:56.460 So here's the deal.

00:06:57.300 Most investors at the early stage

00:06:59.180 will always say, I invest in the person, not the product.

00:07:02.220 And the reason why is at the end of the day,

00:07:03.780 the product more than likely will pivot and shift.

00:07:06.600 I mean, this is true for every one of the companies

00:07:08.160 I've built, and many of the companies.

00:07:09.880 I've invested in over 40 companies, Intercom, Hootsuite,

00:07:13.200 Unbounce, and even though the core problem they were solving

00:07:16.200 may not have shifted, but the product did.

00:07:18.420 What was always true and consistent was the people.

00:07:20.940 So the way I think about the team story

00:07:23.580 is if there's any challenges in your business,

00:07:28.580 maybe you guys don't come from the industry,

00:07:31.060 or you've never started a company before,

00:07:34.560 or you're attacking a market that typically only

00:07:37.720 sells to mid-market or enterprise,

00:07:39.300 and you guys have never done that before.

00:07:40.720 Whatever the objections you think an investor might

00:07:43.900 have around your team and experience,

00:07:47.260 you want to overcome that with advisors, OK?

00:07:50.580 Or make sure that if you know that there's

00:07:52.520 an objection they might have, and you have a great answer

00:07:54.940 from a team point of view.

00:07:55.940 Maybe they're like, well, you've never

00:07:57.400 scaled this company to 100 million users,

00:08:00.680 And you're like, no, but our CTO has used to work at Facebook.

00:08:04.220 That's the kind of thing where you

00:08:05.660 want to make sure that in the narrative and the conversation

00:08:08.240 that you front load into that talking with investors.

00:08:11.140 So the way I think about it is you

00:08:12.300 want to list all the weak points of the business model,

00:08:15.420 your team, the experience, and then find advisors

00:08:18.280 or front load conversations about the specific characteristics

00:08:21.600 of members on your team so that you can overcome that.

00:08:24.320 So it just slowly takes, because I mean, the truth is,

00:08:26.580 is investors want to de-risk the opportunity.

00:08:30.220 They would love to invest in fast traction, high growth,

00:08:33.220 big market, big opportunity, a clear outcome

00:08:37.020 for either public offering or exit.

00:08:39.220 And they want to make sure that there's

00:08:42.100 little to no risk in regards to where you're at in early stages,

00:08:46.000 where you're at today and who's going to fund you

00:08:47.760 in your next round.

00:08:48.960 And that's the way I think about it.

00:08:50.220 The team story needs to be rock solid,

00:08:52.300 and that's the way you overcome that.

00:08:53.980 So quick recap, four steps to creating a rock solid fundraising

00:08:57.700 narrative for your startup.

00:08:59.740 One, make sure you pick the right two peaks

00:09:02.260 before you launch publicly or after you figured it all out.

00:09:05.180 Number two, do the work on pre-marketing phase.

00:09:08.260 Three, manufacture traction in a way that shows a growth curve.

00:09:12.780 And four, ensure that you have an incredibly powerful team

00:09:16.880 story to get investors excited about your business.

00:09:19.960 As I mentioned earlier, I want to share with you

00:09:21.500 an incredible resource called the Fundraising Like a Pro

00:09:24.160 Training.

00:09:25.060 It's something I created a few years ago for my portfolio

00:09:28.220 companies.

00:09:28.720 I've invested in a ton of software businesses.

00:09:30.960 And they're always going through a fundraising process.

00:09:33.580 I want to give them my strategies

00:09:35.500 that I've done to raise my last two companies faster.

00:09:39.220 I mean, Clarity raised $1.6 million in seven days.

00:09:42.380 And I break down that strategy in that training.

00:09:44.720 So you can click below to get access to that.

00:09:47.780 And if you like this video, be sure

00:09:49.120 to smash the like button, subscribe to my channel.

00:09:51.460 And if there's anybody that you care about

00:09:53.080 that you think this video could serve,

00:09:54.480 feel free to share it with them directly.

00:09:56.480 And as per usual, I want to challenge you

00:09:57.820 to live a bigger business and a bigger life,

00:09:59.880 and I'll see you next Monday.

00:10:01.280 How to get the money.

00:10:04.140 The money money.

Dan Martell - April 22, 2019

How To Create a Fundraising Story For Your Startup

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