Recently, I chatted with Ari Mir, an entrepreneur who has raised more than $10 million in venture capital. As the co-founder and CEO of Pocket Change, a universal loyalty currency, he's raised money from some of the top venture capitalists in the world, including First Round Capital and Google Ventures.
So I thought he'd be a good person to ask about how to nail the fundraising process--the first time. Here are his tips:
1. Get your timing right before you pitch.
Here's a tip most entrepreneurs don't think about: look at your calendar before you decide to start pitching VCs. Why? If your investors have family, they're likely to take vacations around certain times of year when their children are out of school. So, if you want to raise money, the best time to pitch is when their kids are in school. Avoid spring break, summer, Thanksgiving through mid-January, and make sure to leave 30 days to go from term sheet to financing.
2. Keep your momentum going during the fundraising process.
Your fundraising process should be set up like a moving train. There needs to be enough momentum so that VCs feel like they need to jump on or else they're going to miss out. If you execute correctly you should go from first meeting to term sheet--consider this your letter of intent--in four weeks:
Week #1: Schedule all of your initial VC meetings to be in a single week. (Do this a month in advance.) If your first meeting goes well, the partner you initially met with will ask several follow-up questions, which may mean he or she is preparing to pitch your deal to more partners.
Week #2: If the previous step went well, you will be invited to pitch two to three more partners, who are probably friends of the VC.
Week #3: This will be the week where you pitch the entire partnership.
Week #4: By now you will hopefully have some term sheets--use this week to negotiate and execute an agreement.
As a note: Never be afraid to tell the VC that he or she is falling behind in the process.
3. Make sure you have an amazing pitch deck.
Keep your presentation light on copy, heavy on pictures. You don't want anyone reading while you're talking, but you do need enough copy so that a VC can forward it to one of his or her partners. Every great presentation has these slides:
Team: Paint a picture of your company. Who are the founders, investors, advisors, and employees? For employees, keep it high-level, e.g., three in the sales group.
Problem: Describe the problem you're trying to solve.
Solution: Explain why your solution is best.
Demo: Show the product you've built or want to build.
Traction: If you're live, get the VC excited about your growth metrics.
Competition: List your competitors to show your VCs you understand your industry. Saying you have no competitors is BS.
Market Size: Quantify the size of the opportunity and stay with a bottoms-up approach--i.e., for every widget, we make a dollar, and we think we can sell one billion widgets per year.
Ask: Tell the VC how much money you're interested in raising and how you plan to spend the funds.
4. Pay attention to terms.
Don't spend all of your energy negotiating valuation when you could be talking about the options pool. VCs may force you to create an options pool to reward future hires with equity.
Sounds great, right? But VCs expect the options pool to come out of your pocket. This is a problem because if the company sells before the options pool gets used, it gets redistributed back to all shareholders, unfairly upping the VCs' ownership stake. VCs will want a 20 percent options pool, but you should try to push for 10 percent. You can always increase the size of the options pool, but you can't decrease it.
Did you use any unconventional methods to raise venture capital? Please share in the comments below!