Dan Martell - How To Raise Venture Capital

00:00:00.500 How to raise venture capital for your start-up,

00:00:02.800 that's something I wanna share with you guys.

00:00:04.840 You know, I get asked that all the time.

00:00:06.240 I've been fortunate enough to do it a couple times

00:00:08.400 for my own start-ups and then I've helped

00:00:10.360 probably 25 other companies raise,

00:00:12.840 close to now, $100 million in venture capital.

00:00:14.960 So, I wanna walk you through a kind of

00:00:16.440 a five-step high-level process to do this.

00:00:19.500 I mean, I still remember when I was starting off working,

00:00:22.640 we were working on Flowtown, me and Ethan, my co-founder,

00:00:25.440 and we really had no clue.

00:00:27.240 I mean, if you feel clueless and you're just starting,

00:00:29.660 Trust me, we've all been there.

00:00:31.640 But we knew we just had to kind of do it

00:00:34.380 and learn as fast as we can.

00:00:35.980 And I still remember this one time,

00:00:37.100 we were, first phone call we ever had with investors,

00:00:39.520 and he asked us what our valuation was.

00:00:41.380 And I don't know about you, but like,

00:00:43.720 at that time, I didn't even know

00:00:45.300 what was a normal valuation,

00:00:47.060 how do you even decide what your company's worth.

00:00:49.040 But, you know, we were a little ambitious,

00:00:50.840 we had a little ego, and somebody told us once

00:00:53.020 that Mint.com did 600,000 on six million pre-money.

00:00:57.040 And we thought we were further along,

00:00:58.760 the product actually had revenue, it was in the market.

00:01:01.360 So we said seven on seven. 0.52

00:01:03.480 Why it sounded cool, now at this point it sounds ridiculous.

00:01:07.520 But anyways, the investor asked and we said seven on seven,

00:01:10.220 you know, raising 700k on seven million pre-money.

00:01:13.260 And he kind of went silent and he goes,

00:01:15.640 how's everybody else responding to that,

00:01:17.280 the other investors that we had talked to?

00:01:18.580 And again, this was our first phone call.

00:01:20.760 But with confidence we said,

00:01:22.800 oh, everybody's been really positive about it

00:01:25.080 and nobody's had any questions.

00:01:27.100 And there was no lying in that statement

00:01:28.920 because it was kind of true,

00:01:29.860 because we hadn't talked to anybody

00:01:30.980 and we were positive about it

00:01:32.440 and there were no other questions.

00:01:33.740 But I tell you guys that story just so you know

00:01:35.840 that this strategy that I'm gonna share with you,

00:01:38.180 these five steps, it's really fluid

00:01:40.100 and there's different ways to do it,

00:01:41.560 but at the end of the day, getting out there

00:01:43.060 and starting the conversations will really help you get going.

00:01:46.320 So number one is research the investors.

00:01:49.400 So many times entrepreneurs go out there

00:01:51.400 and they don't actually have a plan

00:01:52.940 for which kind of investors or which specific investors

00:01:55.940 they want to raise money for.

00:01:57.040 So step one is to really go out there and do the work,

00:01:59.960 spend the time, go on AngelList, go on Crunchbase,

00:02:03.880 ask other entrepreneurs that have raised money

00:02:06.080 who the investors have invested that are in the market

00:02:09.280 or industry that you're in.

00:02:11.160 So if you're raising money for a marketplace startup

00:02:13.580 or an ad network or a game, you really want to talk

00:02:16.640 to investors that understand those industries

00:02:18.500 because they're going to save you so much time

00:02:20.200 from trying to explain something to an investor

00:02:22.540 that doesn't really get it.

00:02:24.320 So that's a huge lesson, do the work up front,

00:02:27.360 do the research.

00:02:29.080 You know, the next thing I'm gonna talk to you guys

00:02:30.540 is there's three phases to raising.

00:02:32.960 There's the fundraising process, there's the close,

00:02:36.100 but then there's a step before called pre-marketing.

00:02:39.320 And nobody really talks about it,

00:02:41.180 but it is the work you do up front

00:02:43.360 before you actually say you're gonna raise money

00:02:46.060 so that when you go to do it,

00:02:47.620 there's a lot of velocity and momentum in that process.

00:02:51.360 And I would say the research, the investors,

00:02:53.760 is part of the pre-marketing phase,

00:02:55.440 and so are a few other steps I'm gonna go over,

00:02:57.100 but that is usually half of the full time

00:03:01.140 that you're gonna commit.

00:03:02.140 When I try to do fundraising activities,

00:03:04.060 it's three to four months, so let's say six weeks

00:03:06.620 will be spent just on pre-marketing phase,

00:03:08.460 which will be building the spreadsheet

00:03:10.280 of all the potential investors, doing the research,

00:03:12.940 finding out which entrepreneurs

00:03:14.160 they recently invested in, et cetera.

00:03:16.120 But that pre-marketing phase is where you don't tell people

00:03:19.380 you're raising until you're fundraising, okay?

00:03:21.880 So that's the phase that you do all the work

00:03:24.420 and when people ask you, are you gonna fundraise?

00:03:25.640 You say, no, no, we're just busy building the product.

00:03:28.120 But we both know that when you go to fundraise,

00:03:30.280 then it's a full on effort

00:03:31.580 and you don't wanna stop doing anything else.

00:03:33.840 The next thing I wanted to share with you guys

00:03:35.380 is when you talk to investors

00:03:36.980 or when you first reach out to them,

00:03:39.080 your product is your pitch.

00:03:41.380 You know, a lot of people ask me about

00:03:43.020 building a pitch deck and what are the right slides

00:03:45.380 and what information should they disclose

00:03:46.840 and at the seed level, where most of the people

00:03:48.520 watching this, their first round of funding,

00:03:50.820 it is all about the product, you know?

00:03:52.940 It's really your pitch deck's the URL.

00:03:55.280 So don't think too much about all these other things.

00:03:58.620 You wanna do the research and make sure you understand

00:04:00.500 the market and the competitive set,

00:04:02.060 but that URL, that website is gonna be what 99%

00:04:06.140 of investors go look at first and decide

00:04:08.380 if they're even gonna take a meeting with you.

00:04:10.060 Or if you go through entrepreneurs

00:04:12.000 and the way I suggest you do it,

00:04:13.680 and I'll give you guys this tip,

00:04:15.760 always ask entrepreneurs that recently raised money

00:04:18.520 from an investor to make the introduction.

00:04:20.840 And trust me, it may sound crazy,

00:04:22.800 but most entrepreneurs that have just raised money,

00:04:25.940 especially if it's their first time,

00:04:27.060 if you email them, and their email is

00:04:28.660 firstnameatcompany.com, they may give you that 15 minutes.

00:04:32.140 And if you present to them in that 15 minute conversation,

00:04:35.480 the excitement, enthusiasm, and the product,

00:04:38.260 you show them that you actually built something,

00:04:40.420 they'll probably offer to help, and when they do that,

00:04:42.500 that's when you ask for an introduction to their investor.

00:04:44.960 That's the way I've always done it.

00:04:46.260 I don't go direct, I don't cold email investors,

00:04:48.280 I always go for an introduction.

00:04:50.660 And just to help you remember this,

00:04:52.620 investors don't want to meet with you,

00:04:54.440 they want to be introduced to you.

00:04:56.920 They don't want to meet with you,

00:04:57.940 they want to be introduced to you.

00:05:00.280 That's the right way to get investors.

00:05:02.900 Now, and because it's product.

00:05:05.440 So there's this process, the pre-marketing,

00:05:07.640 the fundraising, and then the close.

00:05:09.280 What I'm gonna suggest is when you're doing this,

00:05:11.480 as an entrepreneur, you run the process.

00:05:13.360 You do nothing else but actually fundraise.

00:05:15.800 If you're the founder, CEO, designer, programmer,

00:05:18.520 you're gonna have to understand

00:05:19.640 that while you're going through this process,

00:05:21.300 if you truly wanna be successful,

00:05:23.740 and most people that start don't actually get it done,

00:05:26.500 you wanna make sure that you schedule

00:05:28.760 that nothing else happens,

00:05:30.140 that every morning you wake up,

00:05:31.380 you work on the research, the pre-marketing phase,

00:05:33.420 you get the introductions, you have the phone calls,

00:05:35.500 you do all the work, and you really,

00:05:37.400 once you start fundraising

00:05:38.700 and you're starting to meet with investors

00:05:39.920 and you see if they're interested

00:05:40.920 and at what level they're gonna be involved in your round,

00:05:43.500 that's when you really just wanna keep that process running.

00:05:47.580 You wanna go all in.

00:05:48.660 You don't wanna be distracted by anything else.

00:05:50.600 If you have a team, you wanna let the team know

00:05:52.360 that over the next few weeks you're all in

00:05:54.980 and you won't be able to meet for the morning meetings

00:05:57.180 or whatever it is.

00:05:58.400 I can't tell you and I can't stress enough

00:06:00.100 how important that is.

00:06:02.400 And then the last part that I've seen founders

00:06:05.100 just totally screw up.

00:06:07.200 They, I don't know what it is.

00:06:09.160 Maybe they just feel like they get confident

00:06:11.140 that they have like six or seven investors interested,

00:06:14.080 like 70% of the round done,

00:06:16.540 but they don't sprint across the close.

00:06:19.020 Like if you're closing your round,

00:06:21.260 the first thing I do when I work with entrepreneurs

00:06:23.100 is I ask them what day, the specific date,

00:06:25.820 are you gonna close the round?

00:06:27.060 And that date guides all other actions.

00:06:29.240 It guides the amount of time you're gonna spend

00:06:31.120 in the fundraising process, the pre-marketing,

00:06:33.120 it is everything.

00:06:34.460 So when you know that date and you're getting

00:06:37.100 and you have momentum and people are coming together,

00:06:39.680 You want to sprint across the close.

00:06:42.920 So those are the five steps and strategies

00:06:45.920 to get your round done, to raise a great round of investors.

00:06:49.360 You want to have a great lead investor

00:06:50.920 that puts in about 25%, and then some great angels,

00:06:54.300 and maybe even throw in some advisors into your round.

00:06:57.200 That's gonna get you going on the right foundation

00:06:59.300 to build an amazing start-up.

00:07:00.860 Hopefully you found that useful.

00:07:02.060 I would love to hear from you below.

00:07:03.540 In the comments, if you have questions,

00:07:05.280 I didn't go over a lot, like there's real detailed stuff.

00:07:08.180 If you have questions, leave a comment below.

00:07:10.280 I'm also gonna link up a special fundraising webinar

00:07:14.020 that I hosted a few months ago to help you

00:07:16.460 kind of go in detail into this process.

00:07:18.360 The link is below in the comments.

00:07:19.960 I would love to hear from you guys.

00:07:21.260 I wanna challenge you to live both a bigger life

00:07:24.740 and a bigger business and I'll see you guys next Monday.

Dan Martell - August 31, 2015

How To Raise Venture Capital

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