Raising Venture Financing Is A Sales Process

Some recent posts have generated a lot of interest around the process of raising money.  This post is really around running the fund raising process.  For those of you that have sales as a competency or profession, you’ll understand that this spreadsheet is a poor man’s sales funnel.  Raising money is a sales process.  Understanding each firm, your pitch, and the details around the process are critical to closing a round of financing.  Don’t’ act like a first time startup CEO (even if you are one).  I cringe when I meet a new startup CEO that is running around like a sailor on leave. 

A good tool to have as an entrepreneur to have after you have mapped out your financing strategy, is to map out a plan.  A very specific, project-like tactical plan that you follow religiously is a sure fire way to keep your financing process moving.  It also ensures that you don’t forget critical follow-ups.  Here is a simple spreadsheet format that is really helpful (click here: Download sample_venture_tracking.pdf)
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The first column has a list of status codes:

• Hot – good news; you have a VC on the hook.  They are getting back to you quickly and asking for more information in the way of financials, supplementary business plan information, etc.
• New – Very early in the process;  you have either talked to an associate or very early discussions with a partner.
• Lukewarm – the venture firm is still interested but they are not giving you a strong sense of momentum or interest;  lukewarm is the entrepreneurs purgatory.
• Waiting – your business is being presented at the partner meeting;  this happens on Mondays.
• Stale – they are not getting back to your email or vmail after 3-4 days.  This is basically a ‘no’ but the firm doesn’t have enough respect for the entrepreneur to get back to you.
• Passed – remember this is nothing personal;  they passed so move on.  The best firms will actually explain why to you in email and even better a phone conversation.  Please listen to their feedback.  Its usually really darn good.

The firm, contact, and sponsor information is very self explanatory.  However, an important note is that make sure that you key contact in the partnership is someone senior enough to sell through your business.  If not, the Monday partner meeting process will just roll over your idea.  The partner in question can’t get enough of the partnership excited about the idea nor pulls enough political weight to get the firm behind the idea.  There is more emotion behind these decisions than you might think and having the right person behind your business is crucial.

Latency and Last Contact Date are important tools for you.  I am very religious about tracking this and flags go up for me personally if I haven’t heard from my contact in 4 days.  Venture capitalists hate the idea of losing a deal so if you’ve run your process correctly there is a healthy bit of tension around how hot your investment is.  so, if you are getting 4 days out email responses then you need to start to pull in (aka expanding your target list) more firms and analyze what you are doing (or not doing correctly).  At this point, if you have several lukewarms right out of the gate then make use of Board members, advisers, and your team.  Ask hard questions about how you are pitching, your presentation, and even deeper ones (say around your business). 

Full history is fun for you anal retentive types.  Its almost at the point where you would want to use a light CRM system.  But, I basically jot down little milestones along the way.  What I look for in this section are things like what information have I sent, people that I have met with in the firm, and any feedback from those encounters.  I also have a column that indicates whether I sent financials.  Its good to know who has them. 

Good luck.  Raising money is tough. Ben Elowitz did a great post on the Startup Whisperer that is helpful and Bill Burnham’s post last year was really good to.