Last week, I exceeded my goal of raising $200k for Senseg. It was quite the leap to go from tinkering in the metaphorical basement to having other people deposit their life savings into my company's very real bank account. 

At the beginning of March, I didn't have a company, let alone said bank account.

Fundraising helped me grow, commit, and become accountable. In writing down my hypotheses and talking with lots of smart folks, I formulated a clearer vision of the future and learned significantly more than I thought I would. 

Oh, and I visited a new country...

A couple years ago, I witnessed someone close to me raise nearly $1M from friends and family. I remember being most impressed with the part of their deck which said, "we built this app and got folks using it in one month." So I focused on that in my initial pitch, which turned out to be a serious mistake.
 
The only thing investors really care about, by definition, is the expected value of your company's outcome. This is driven by market size. Traction is secondary to the story, just a checkbox at the early stage. Diving too deep on product stuff is a red flag that indicates you don't know how to speak the language of a CEO.

For example, discussing our app's metrics and $0.94 of revenue maybe raised my execution credibility from 80% (he has an MIT degree and significant work experience) to 95% (he demonstrated a cool app and talked about specific technical things plus people things at the same time, wow). However, investors are multiplying competence x risk x market size. Educating them on how my idea ultimately aims at a $100B total market versus a $1B initial market created literally 600x the impact and excitement.

You have 5 minutes to pitch someone, probably less. Use it wisely.

I should have started the fundraising process by getting more feedback on my pitch deck before approaching investors. I got a couple useful tidbits from friends which took me from v2 to v3, but it was only after botching calls that could have gone differently when I started to pick up on some important themes (e.g. the focus on market size above).

That said, at some point you do have to just go for it. Now I'm on deck v6, it's still not that great, and yet we're done fundraising! I learned as I went, starting the first week with closer friends who doubled as both feedback givers as well as potential investors.

People say that asking for advice gets you further than asking for money directly. I would caveat this slightly. Before you speak with deep-pocket acquaintance-types, it helps to have a firm grasp on your idea. Then you can approach potential investors as thought partners, more along the lines of "How would you think about capitalizing this idea?" as opposed to "What do you think about this idea?"

Had I asked this question in advance of setting a target and signing SAFEs, I might have learned that it's possible to double down on founder trust, especially if you are committed to starting a company. I could have tried raising $2M instead of $200k. Many investors only write checks of $500k-$1M+, and I guess "hey I'm super competent, went to MIT, and have a plausible idea" can suffice.

On the other hand, some folks will advocate for infinite bootstrapping. A latam-focused angel investor advised me to "go get a job at Nubank," learn more about the fintech ecosystem, and build out my company on the side. I guess it's a matter of preference, and especially for a first-time founder, taking baby steps makes sense.

Ultimately, all of our capital came directly from 1st degree connections within my existing network. Our largest check came from a fund managed by two folks whom I know from Interact, one of whom I went on a purely social roadtrip with in 2020. Excluding that, here's the breakdown of where the funds came from:

With a company formed and cash in the bank, I'm now able to send a monthly email to shareholders reporting on our progress. This includes learnings, highs and lows of the previous month, next steps, as well as company health metrics like cash on hand, burn, and runway. I personally find sending this email to be extremely motivating, and it keeps me focused on what's important.

I can also ask for help. All 14 of my investors are accomplished and highly leveraged partners, having collectively worked at Venmo, Stripe, Facebook payments, etc, and having led their own companies through every stage from idea to IPO / acquisition.

I would push back against the necessity of having a cofounder. Generally it's better to have one, I agree, but going alone is also possible and can even make a lot of sense—especially when you hold certain trumps. Having a well-defined problem, access to capital, and sufficient technical expertise myself, I was able to draw in Figma and outsource a lot of the coding to Upwork for the prototype product. Always remember, the only real requirement of a business is to have customers! 

Fundraising is essentially sales, where you are selling yourself + your idea. Sales comes with a quota and a deadline. You will probably run over your deadline by 50%. I started last month aiming to end March with $200k. I got there, but midway through April. It was helpful to have the deadline not only for my personal accountability, but also to tell people, especially more casual friends and family, "hey we're approaching the deadline" or "hey, for real, we're over deadline."

You want to very clearly define who you're talking with and what you want to achieve. I made a spreadsheet listing all prospective investors, the amount they might put in, summary stats (e.g. percentage signed vs goal), and a status column labeling the pipeline stage:

If folks don't reply, then it isn't a priority for them. I was lucky people eventually nudged me in the right direction when my pitch didn't create enough oomph and urgency, but I didn't change my approach until I started getting some pretty hard nudges. You might not be so lucky to get feedback at all, if people don't respond. You're probably getting ghosted because you aren't speaking the other person's language well enough. Here's the YC deck template I like and a deep dive on storytelling that inspired me (thanks Tiger).

When negotiating, you have to be very patient and know your worth. Keep cool-headed; take a couple days to think about a proposal before responding. Be prepared to make your asks clearly, with parameters in mind as to the dimensions of an ideal vs acceptable vs non-starter deal. Just as founders have a quota, so do investors. If someone says they'd like to invest in you, then especially for an early stage company, that investment is based on you as the founder. Once decided, an investor is unlikely to change their mind that you're worth betting on.

I was offered a large sum of money that would have taken care of the entire fundraise all at once, but the terms were too aggressive. I was super tempted to take the offer, but after a couple days realized that I would be much better off if I had YC or Neo on the table as options. It was extremely helpful to have enough cash, with a few smaller checks closed out first, to comfortably wait a bit longer. So I said no, sorry, "we'd like to wait a couple months, and hopefully we can keep this offer open." 

I really felt this was the best option as their offer was so low that I didn't see the point in negotiating. I didn't fully understand that unlike salary and property negotiations which perhaps fluctuate in the 5-30% range, investors have a much wider tolerance on something as nebulous as an early-stage company idea. This particular investor was understanding of my decision to wait, supportive and congratulatory on having enough cash to comfortably continue executing, and then asked "just out of curiosity" for a bit more color on my reasoning behind wanting to do YC. 

A few days later, we had a call. I framed it as wanting to learn more about their experiences and perspectives on accelerator pro/cons. During the call they basically said, "hey, we might not be in the same position in a couple months, so I'd really prefer to negotiate now, you know, if you don't like our terms then you can propose other ones please!" Since I wanted to have both the funding partnership with this investor, and the accelerator possibility still on the table, I named my price (nearly 2x better terms, but I should have gone even higher!) and they agreed a couple hours later without any further discussion.

When someone chose to pass on my pitch, there were 3 main issues:

The first can be addressed by approaching the conversation from a "capitalization feedback" angle where you don't state a target and are open to a large round. Or you could be strategically talking with folks to get advice or on their radar for future financing, with no real intention of taking money from them now. For instance, I did this with a connection at Founders Fund.

Market uncertainty can be addressed by the same approach as the storytelling section above. You need to gauge the equation your prospective investor is using and educate them appropriately on risk and market dynamics, as well as your competence. Someone gave me great advice on early-stage pitching: to just give plausible answers and don't worry too much unless people really drill into a certain topic. For me, it was much more compelling to say "we have 2 paths to regulatory compliance, 1 - partner with a bank or 2 - certify independently," versus "well, I'm not exactly sure, we need to do more digging." 

Any reason someone passes on investing really boils down to the fact that they aren't prepared to bet your success is going to be worth many billions. That's fine. Some (potentially large) percentage of folks simply won't commit, even if everything points to them being the perfect partner. They may have a higher threshold than you can meet at your current state, or maybe they're just hungry and grumpy and say no because they want to go to lunch! I prefer to do important meetings first thing in the morning when everybody is fresh.

It's a waste of time talking with someone who is clearly a bad fit a priori, or who will never be convinced no matter what you say. This is why references from your network are so important. Prospective investors have to start in the grey zone where they are already convinced (most likely by someone they trust) that you are interesting enough to maybe invest in. For folks who were on the fence, it was sometimes helpful to provide the social proof of "hey, a bunch of highly experienced tech entrepreneurs have already signed."

I cast a pretty wide net and treated March as a "reconnect with the world" month, where I called up lots of past acquaintances, colleagues, and friends. Embracing serendipity and connecting with one particular old high school acquaintance resulted in a small personal investment but also potentially $800k or more in introductions and pointers to things I had never heard of, such as Soma Capital and their new fellows program.  

I used Clerky's lifetime package to incorporate, get a Brex account, and sign SAFEs. However, I now learned that law firms like Cooley will give you a year of payment deferral if you're likely to raise funding, so it's possible to get a startup lawyer to help you through everything with no initial cost. You should take a second to learn the current definition of accredited investor and limit your outreach to contacting individuals directly to avoid running afoul of public fundraising laws. 

As a final tactical point, remember to keep your momentum and energy alive! Especially if you're getting rejected and told your idea is bad by smart rich investors who say plausible things. Or if friends are a little too candid in "you have a lot of improvement opportunities here!" You never need to respond to feedback. You can and should silently absorb. Just say "thanks for this feedback, I will think on it." 

I went to a founder summit in Cartagena Colombia hosted by a couple VC firms. It was a beautiful trip and a good way to serendipitously meet some folks face-to-face. No investments came out of it, but I did run into one of my pre-existing investors there, and overall I'm very glad I went. Thanks Santiago for inviting me! Even though sleep was scarce, the event was energizing. Visiting a new country is always fun!

There are many different approaches to creating and growing a business. My path with Senseg was to accumulate skills and maturity and relationships, then to cash these in all at once upon encountering a compelling problem to build against. Even though I had always wanted to build a company, I honestly wasn't ready until very recently, and I also hadn't found many problems that pulled me in, aside from Lean On Me, which was difficult to wrap a business model around.

An alternative approach is to be hungry and smart and get financial backing early, probably around some idea but perhaps not. The friends I've seen do this (both successfully and not) tend to be super-powered hackers with a history of executing on projects—the kind of people who are invited to, then win, Greylock hackfest and yet aren't even thinking about winning. Such folks are generative enough that they are bound to find a company-worthy problem or build an interesting technology sooner or later. I am not such a technologically creative Energizer Bunny, so it's a good thing I randomly lucked into finding this cash problem in Ecuador!

Regardless of how you come at it, venture fundraising is a full-time job. Not only is it an infusion of lifeblood for your company, but it's also a milestone to reflect on your story and align your goals and expectations. Even if you only spend 2-4 hours per day actually taking meetings or working concretely, the wheels will be constantly turning in your head, and the responsibility of the raise will weigh on you. I recommend cutting down other responsibilities to a bare minimum while in the thick of fundraising.

For example, I get excited very easily when thinking about the future, and that causes me to want to grow my company and hire more people. I always need to remind myself, as Tiger advised, to hire slow (and fire fast). After there's a bunch of cash in the bank, hiring can occur deliberately, without the need to give away so much equity, and without distracting from the fundraising + goal-setting process.

Other people will inevitably join you, whether they are cofounders, investors, customers, or employees. It's helpful to think of the company as separate from you and having a will greater than yours. You have to do what's best for the company, for all of those shareholders, and not just for yourself. Writing this post as a personal blog focused on the "I" was a weird and deletion-filled endeavor for me. I'm used to thinking in the royal "we". I adopted that posture early on, even though it was technically my solely-owned company. 

Ultimately, as a founder, you know what you need and how you want to achieve it. If trust is the foundation of other folks investing in you, then you need a personal foundation of trust in yourself. If other people don't buy into your story, that's fine. Play to your strengths, and rock on, iterating and updating as you go.