How to raise funds for a Series A – TechCrunch

Editor’s Note: Jenny Lefcourt is a guest at TechCrunch Live on August 31, 2022 where, along with Guillaume de Zwirek, CEO and Co-Founder of WELL Health, she is scheduled to discuss the specific steps founders need to take when creating a Series. A. The event records live and is available to view at 12:00 pm PDT. It is free to attend. Register here. Replays will be available and posted here after the event.

Starting with the first company I co-founded 25 years ago and continuing with the second company I co-founded 15 years ago, I raised over $100 million of blue chip venture capital. During that time, less capital was floating around and those numbers were considered huge. The bad news is that I overcapitalized my companies, but the good news is that the process taught me how venture capitalists think and how best to present them. Since 2014, I have been an early investor in Freestyle and had the opportunity to hone this skill by working closely with our portfolio founders to grow Series A rounds. The market is demanding right now – founders, I hope The following guide will help many of you fundraise in this challenging environment.

The key when raising is understanding what venture capitalists are looking for in a founder and a business at each stage, and then you can decide how best to present them in a way that feels right to you.

There is a notable difference between raising Seed and Series A rounds: a seed is often generated solely based on a founder’s great vision, while a Series A generally needs great vision and business traction, especially in today’s market. Below are general best practices for presenting, followed by specific advice on structuring a Series A story arc.

Fundraising wisdom for any stage

• Mindset Matters! Go into a meeting in the spirit of having an intellectual conversation about your business and being in wholehearted “sell” mode. Venture capitalists prefer to work with founders who can thoughtfully discuss their business. Be curious, confident, and ready to debate and, at all costs, avoid getting defensive. I talk more about the mindset here, Learn to love fundraising.
• Trust is what is at stake. If you don’t know the answer to a question, saying so earns respect and trust, while avoiding the question destroys it. One of the easiest ways to lose an investor’s interest in a first meeting is for the venture capitalist to feel that you’re not being forthright. There is no expectation that you know all the answers; there is an expectation to say things clearly.
• Venture capitalists have short attention spans! You need to get them interested in the first 5-10 minutes of the meeting to gain their attention for the rest. See below in “Section 1”.
• The goal of meeting #1 is to get meeting #2. Your goal is not to tell them everything or preemptively answer any questions they might ask. So keep your story high-level and interesting: don’t dump the data and get bogged down in the details too soon.
• Tell a good story vs. “present slides”. That’s why I recommend founders spend time crafting their narrative arc, and then creating the slides to support that story.
  Make your main points very clear and support those points with data or color that helps them believe. Don’t make venture capitalists listen to a lot of conversations and flood them with a lot of data hoping they’ll connect the dots. Subtle does not win here.
• Prepare for the questions. Have a plentiful appendix that covers any questions you may have or delve into the business. Venture capitalists love it when they ask a question and the founder brings up a slide that directly addresses it. Venture capitalists get the information they’re looking for and you show them you’re the type of thoughtful founder they like to work with!
  Manage time. Know how much time you have and make sure you make your main key points. Don’t let it get to minute 30, and you’re still down a rabbit hole in a non-critical part of the business.

Series A Fundraising Wisdom

When your first Series A pitch wraps up, ideally, the VC is excited about the opportunity, impressed with you, knows enough to believe you’re on a promising path, and still thinks of you and your business long after the meeting. Founders typically have 30 minutes (often via Zoom) to make this happen.

I recommend thinking of your launch in three “Sections”.

SECTION 1: The goal is to earn the right to your attention for the rest of the meeting! It may include some or all of the following:

• Equipment
• Vision. The great vision of the company, NOT just what you do today.
• Market. Tell venture capitalists about your market, including market size and macro trends. Venture capitalists need to understand that this is a big market and understand the “why now?” Question.
• Problem/Opportunity. Make it clear who your customer is and what their problem is that you are solving. Sometimes it’s less of a “problem” you’re solving and more of a new opportunity that now exists, given changes in the market.
• Solution for the indicated problem/opportunity (precisely what your company does!)
• First sign of success. Have a picture here where you can imagine that the title of this slide is “And it’s working!” This can be a chart of a key metric like revenue or users moving up to the right, lots of company logos that have already signed up, or other goodies. The goal here is to get them leaning in and excited to learn more.

After launching this section, take a breather and check in with investors. Ask: “Any questions? Does this make sense?

SECTION 2: The goal here is to educate them on how you have de-risked the business thus far and delivered traction on product and growth. This section generally contains some or all of the following:

• Where have you started? Note: all startups have to start somewhere. You told them before what the great vision is. Now he wants to tell you where he started (and maybe why) and how he’s doing. Just be careful not to get bogged down in too much detail.
• Your clients. Who are they and what is your value proposition for them?
• Go to the market. Explain how you target/acquire customers.
• Traction so far. You want to be clear about the main levers/metrics that are driving your business and share information on how they have evolved. You don’t need to cover all the metrics and details; you can cover that in the Appendix. Here’s a long list of potential traction metrics: Total New Customers/Customers, Retention/Dropout, Engagement, Sales Funnel Conversion, Sales Channel, Average Selling Price, Revenue, Gross Margins, CAC Recovery, LTV Ratio: ACC,…
• unitary economy
• Product Love. Ideally, share engagement stats or something that shows that people are not only buying/using your product, but that they love it and find it indispensable. Possibilities here include engagement stats, virality, spending more time or money with your business over time, putting more of your business on their platform, etc. Some testimonials along with data can also help.
• Any other slides that are CRITICAL to the success of your business.
• competitive landscape. This is NOT a feature comparison, but a mapping of the market to educate you about the players. Many use a 2×2 map to show who is in the market based on two attributes where your business stands alone in the top right quadrant. This may seem counter-intuitive, but you want big, important players on this map as you want it to be worth winning your prize for. Landscape example:

SECTION 3: The goal here is to tell a simple story of where you go from here and how the business becomes massive. This section generally contains some or all of the following:

• Product and/or strategic/geographic implementation roadmap. Cover your plans and explain why you think this is the best way to go.
• 3-year financial projections (maybe here, maybe Appendix)
• Milestones you will reach with this round. Note: Most venture capitalists care less about how you will “spend” the capital than what you will achieve with the capital (note: the use of income can be a good Appendix slide). Venture capitalists want their business to be more valuable by the time their next round raises. Potential milestones could include revenue, number of users, product/technology developed, number of markets it will be in and key partnerships,…

APPENDIX: The goal here is to address any question you are asked or to delve into an aspect of your business. As you have more questions, add more appendix slides! I recommend uploading a specific slide when asked for more information on a topic. Some possible appendix slides include:

• sales productivity
• sales flow
• Deeper dive into current customers
• Acquisition and recovery period by channel
• Deeper market breakdown
• Cohort analysis
• Net Promoter Score (NPS) or Sean Ellis test
• product roadmap
• Geographic Deployment Plans
• Organizational structure and team + key hires

To be sure, fundraising can be daunting and exhausting. However, I encourage you to recognize some positive aspects of fundraising…the clarity you gain about your business as you prepare to launch, the wisdom you’ll gain from many of your meetings, and something that isn’t discussed as much, clients you can acquire when interested venture capitalists introduce you to their portfolio companies. Lastly, remember, you only need one VC to say yes!

A couple of additional resources:

If you have yet to increase your seed round, you may find this interesting to watch (especially for female founders). Jess Lee @ Sequoia and I dissected an early office VC pitch from the female founder of Seed for All Raise.

Top-tier presenting agency 4th & King and I did a session on Series A fundraising with the founders of the Freestyle portfolio, which you can watch here.