Mastering the Art of Fundraising

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0:22And like one of the first rules that I say in my book, fundraising, is don't say your fundraising. because the second you say that you're fundraising and you're on the clock meaning people are going to be like all right well his round should blow up and be over soon because if this is a hot company i'm gonna have a limited window so if in two weeks your round isn't done people are going to be like why aren't others investing and so they're gonna you know they're gonna walk away and if you build up a bunch of no's around your company, people are not investing, then that's, you know, the network becomes aware that all these people didn't invest and you're kind of screwed.

1:07So, you know, one of the first lessons that I learned from a great mentor of mine, his name is Michael Carter. He has this company Playco, a very successful gaming company. He was giving some talks on fundraising and he taught me this concept. Just don't say you're fundraising. Just go build relationships first. Go and meet investors and get them excited about who you are as a person and casually get them excited about your idea instead of going and saying, I'm pitching you, which automatically puts them on a pedestal versus you, right? You're not peers anymore. Now they're on a pedestal. And so it sets the dynamics incorrectly from the beginning.

1:52that you're not building a relationship and you can get this this domino effect of no's which could really screw you before you even begin so i did that in the beginning i learned from those mistakes like i had some great mentors who helped me reshape my fundraising strategy so you said something i heard you say where you said um if you want money ask for advice if you want advice, ask for money. Yep. That's how I said it correctly? Yeah. So can you elaborate on that? Yeah, it's a pretty common adage in Silicon Valley. And so I certainly didn't invent that. But if you go to someone and you say, hey, I want, you know, to pitch you for funding, they're most likely going to give you advice.

2:41It's going to say, hey, you know, I'm not able to fund you right now, but how about I give you some advice? Whereas if you go to them and you show a genuine interest in their advice, uh, but also potentially even more importantly, you really impress the shit out of them with who you are and that person has money or is an investor, they're going to organically want to invest in you. So, so let's say I have a company and I'm trying to raise money. I know a very wealthy guy instead of saying, Hey, do you want to, you know, hear my pitch to give me money to my startup? It would say, you know, I have this idea that I really respect your, your, your opinion.

3:28Um, would you want to just hear about it just to kind of give me some feedback on it? And then you just do a really great job presenting it and then they're like damn i gotta be involved in this situation but you're not you don't look like you're so eager to just only get their money you really genuinely want their advice but then by you not wanting to take their money they want to give you money even more exactly this approach is a win-win makes it more comfortable for them right because they don't like saying no to you it makes it more comfortable for you because if if you're doing a good job they're gonna want invest if you're talking to an investor whose job it is to invest who invests they need you just as much as you need them so if you're sitting in front of them and they're like oh shit this dude is gonna fucking kill it they will proactively say how can i get involved

4:28and they're going to be just as likely if not more likely than if you came to them explicitly trying to pitch how intentional are you about it before you even go to get the advice are you strategically targeting the people that you want to get the advice from like is there a list and it's like if i could meet or get in front of this 10 or 20 people this month that's my target like How did you go about it? Well, in the beginning, you know, beggars can't be choosers, right? And so you kind of will try to get meetings with anyone who has money, right? I mean, now you could be, as you go later, Sage, you could be a little more picky.

5:11And you should be picky. I mean, you should try to avoid putting sharks on your cap table who are at odds with you or who are very short-termistic and they're going to create issues for you. You should avoid those to the maximum extent possible. But what I would do is I would try to build my network in a very strategic way. So I would host happy hours or dinners. I'd do this on a college budget. I mean, I spent minimal money on it. It was like a couple hundred bucks that I'd throw together. after a few this VC would sponsor them so they'd throw down three four hundred bucks on these dinners right and be at my place or you know I didn't spend a lot of money and so I was building network so first step is build network of people who have interconnectivity to investors and play the long game build a relationship with these folks uh casually make sure all these people in your network are impressed by you, right?

6:19Casually. And then at some point you can make the ask or you can say, Hey, I know this person invested in your company. I think they have this relevant experience to what I'm doing. Do you mind making the intro? And so you do that with, you know, all founder friends, people raise money before you're trying to build this network to cultivate and then eventually make the ask for the introductions and uh you know you're just doing this on repeat as much as possible so you said something also where it's like you always want to avoid trying to get a no yes you don't you never want to get a no um this is a little bit of the opposite advice that someone give you oh you want to get to know quickly yeah that's what that's what i've 99 no because i come from sales so that's what i heard all the time was like a no is always is one step quicker to a yes or get to the no early or stuff like but so that's interesting even it feels contradictory it's like it's because you go this is trial right like you're saying this because you've got no's yeah exactly no's uh spread so you know investor community or the community you're raising within is small and so you don't want somebody to go to someone you just pitched and that person say be like i passed right you now if you follow this strategy you may have had a meeting with that person it may not have went well so they may not have invested but you were never pitching them so they don't have the ability to say i passed because you never went to them officially asking them for money.

8:02No, it actually makes a lot of sense psychologically because like you said, it becomes a virus. Once one person says no and then another person asks this person, even if they want to say yes, it's like, well, why'd you say no, right? And then it's like, I don't want to be the person that says yes and be an idiot when my friend, who I have a high level of respect for, said no. so I'm more likely to lean towards the no because that's just where the crowd is going. Exactly. And so what you're trying to create is a crowd momentum behind you. The hardest one to get to fall is the first one. And you have to get this person to fall just through your character and your pitch and this strategy that I'm outlining.

8:48And then that one will hopefully turn to two or three. once you have like three people is the magic number where three people have now casually without you saying your fundraising have told you they want to get behind you. Now you can start a fundraising round with the wind at your back because you could say the way I like to sequence it generally is even when these people say I want to back you. I won't say, okay, how much? Here's docs. You want to then take a step back once again and say, okay, I'm honored. I'd love to work with you. Let's do another meeting. I'd love to get your advice on these other things.

9:30I'd love to learn how you work with founders. I'd love to have this discussion on what working together will look like. I ask for references, say, hey, can I speak a couple other founders you've worked with. So, you know, when someone expresses interest, you don't... Just automatically jump and say, here, I'm ready. Yeah, exactly. Yeah, I think that probably feels like the biggest mistake that most people make because you're in so much desperate, not desperate need, but you're in need of the funds. And so once you feel an inkling of somebody who's interested, it's like, I got to jump. Become desperate.

10:08Yeah. You can't show the desperation, even if you are. I've been desperate many times in my career, even beyond just our seed round. But you can never show it because this is what investors are. Their job is to sniff out desperation. Right? They're experts at this. So they can get the best deal possible. So they can get the best deal possible. Exactly. So no matter what desperate situation you're in, I mean, you've got to come in with confidence. it's as simple as that I mean most people won't give this advice but I mean it's just the truth this is an iHeart Podcast Guaranteed Human