High Alpha’s Sprint Week is full of learning opportunities, particularly for early-stage entrepreneurs. During our most recent Sprint Week, my team focused on fundraising for High Alpha portfolio companies, led by Managing Partner Scott Dorsey and fellow Partner Mike Fitzgerald. Scott co-founded ExactTarget, and with Mike by his side as EVP of Corporate Development, they led ExactTarget from startup to global marketing software leader. ExactTarget went public on the New York Stock Exchange in March 2012 and sold to Salesforce in July 2013 for $2.7 billion. Throughout their capital raise journey, Scott and Mike gained tremendous fundraising experience, with plenty of lessons learned along the way.
One lesson they shared during Sprint Week is that raising capital is part art, part science — both hugely important. I want to elaborate on three specific points made about the “art” of raising capital, as I believe these lessons will benefit all early-stage entrepreneurs. We keep some fundraising tricks up our sleeves, but below are three of our top lessons for founders when fundraising.
1. Remember That Every Investor Looks for Something Different
Get comfortable with your story because every investor is looking for something different, which will leave you with conflicting direction. Consider building a prospect list of 6–12 lead investors to get a fair sample set, and do your research on those investors before the pitch. As you receive feedback, remember that pitching is a forcing function for clarity on your messaging and improved confidence in your business. This forcing function will help you stay true to your vision and values and lead you to the right fit. Don’t focus on becoming who the investor thinks you should be, because they will all think something different. Be yourself and trust yourself. If you have those two things figured out, it will be easier to decipher which investors are right for your organization.
Pitching is a forcing function for clarity on your messaging and improved confidence in your business.
Talk through the feedback with trusted sources that can help keep you on track, and don’t apologize for the state of your business in front of investors. Be proud and passionate about your current state and make your momentum known so the investor knows they are coming in at the right time.
Scott shared that he believes you can look at anything in one of two ways — a threat or an opportunity. Stay focused on an opportunity mindset if you want to win.
2. Battle Test
Pre-work is everything. The importance of practicing in front of live audiences and running through Q&A can’t be stressed enough. Scott calls this “battle testing.” Be thoughtful when answering investor questions and if you don’t understand, ask for clarification. Before you answer, really think about the WHY behind the question. It’s always a good idea to confirm you answered their question before moving on. If you don’t have an answer, it’s acceptable to say, “I don’t know, but I can try to find out and get back to you.” Investors appreciate thorough answers, but they appreciate honesty more.
When it’s time to pitch, propose an agenda at the beginning, confirm you understand meeting goals, and utilize title slides to help orient your audience. Also remember to include an ample amount of information in your Appendix, as you can expect many questions.
At the end of your pitch, asking for direct feedback and stating your timeline in a humble way is totally fair and will only help you move forward. Remember that your presentation should be easy to update on the fly because with every pitch, you’ll find things that can and should be improved or tailored to your next audience.
3. Culture Alignment & Relationships
I mentioned above the importance of choosing investors that align with your vision and values. You should genuinely like your investors because you will be spending a great deal of time and energy growing your business with them. Once the money is wired, you can’t give it back, and that’s when the relationship truly begins. Keeping your investors in the loop with regular updates — with a tool like Visible.vc, for example — is extremely important. If you do a good job at keeping your investors up-to-date, you are more likely to receive valuable feedback, advice, and future investments.
The most worthwhile investors are expert people-readers, so remember that your mannerisms count. Good investors can sniff out lack of authenticity almost immediately. They are watching your every move, from the way you introduce your teammates, to the side comments made when you think no one is listening, your posture, personal appearance, and the list goes on. It all matters.
As I mentioned earlier, High Alpha provides fantastic opportunities for all members of the portfolio to learn from each other’s years of experience — these lessons on the art of raising capital are just one example. I hope these fundraising lessons are just as helpful to you as they were to all of our early-stage founders involved in Sprint Week.