Oversubscribed Weekly #5

December 11, 2018 by Mike

Hope you’re enjoying the holiday season! This week, we dove into some insights about asking for introductions and did an exclusive Q&A with a founder who just raised a $3M seed round. Read on for more! 

Tweets worth reading

If you don’t follow Hunter Walk yet, you should. He’s a partner at Homebrew, a seed stage VC. He blogs frequently and his takes are refreshingly honest, and dive deep into insightful nuances. When trying to meet an investor, it’s always best to get an introduction. As Hunter points out, if someone who the investor trusts vouches for you, that can go a long way. At the same time, it’s valuable to be honest about whether or not you think someone would vouch for you. If you want someone to make an introduction but don’t think that they know you well enough to vouch for you, that’s ok! By telling them that you’re simply asking them to make an introduction, not vouch for you, then they’ll be much more comfortable doing you the favor quickly.

Justin Kan (Twitch and Atrium founder) helps us see the broader context of what it means to ask for help (whether it be for introductions or advice). His advice about writing in concise, simple language is key. In Y Combinator’s application, one of the biggest things they look for is if you can talk about your business without marketing speak or buzzwords. In 140 characters (probably less), you should be able to articulate your business in a way that someone else will understand it and know how to talk about it to someone else. 

Q&A with a founder who just raised a seed round

We asked our friend Brandon Gell, the founder of Clyde, about his experience raising his $3M seed round, which was announced two weeks ago. If there are three things to get out of the Q&A, it’s: 

  1. React to investor feedback constructively, not defensively
  2. Fundraising is easiest if you’ve installed simple mechanisms (e.g. monthly supporter updates) that make it easy for you to build investor relationships for months prior to your fundraise
  3. Fundraising effectively is a full-time job

How long did it take you to complete your fundraise?
It took us about 6-weeks once we kicked it off – but that came after about 8 months of relationship building and updating. It’s hard to put a timeline on the raise because it’s hard for me to tell when it really started.

How was your time allocated between running the business and fundraising?
Luckily I have an awesome team that was able to shoulder the business during those 6-weeks. Otherwise, literally nothing would have gotten done. The whole “fundraising is a full time job” thing is 100% true. It takes an incredibly amount of time and energy.

How would you describe your fundraising process at a high level?
I like to keep investors in the loop through my monthly update, so the fundraising process sort of felt like a continuation of that. Our syndicate ended up consisting of a number of investors that we’d been talking to for many months. If there is one thing I learned about fundraising it’s that VCs talk to each other. A lot. We got massively oversubscribed after a few key players in the round committed.

How were you able to solve the chicken-and-egg problem of getting your first investor?
We solved this by getting buy in from two investors, Red Sea and RRE, at the same time. They are very close and spoke closely about the investment in Clyde for a few weeks before ultimately co-leading. The danger there, of course, is if one decides to drop out.

What was something you did during your fundraise that you think was really helpful but that most founders don’t do very well (or at all)?
My version of this answer started the first day I went full time on Clyde. I have a monthly update that I send out that tracks our progress that I send to mentors, investors, and advisors. By doing this, investors feel a sense of ownership and investment in our success and are able to see growth over time. I think this is the most important thing that it did because it builds a relationship and trust between you and the reader.

Did you receive much negative feedback during your raise? How did you react to that feedback?
Constantly. I think even if a VC doesn’t have a piece of negative feedback, they’re obligated to say something to see what your reaction is. If I was a VC – I’d roll the same way. I think a good judge of character for a person or a business is to see how they react to feedback. I imagine if I acted defensively, rather than constructively, to negative feedback, we wouldn’t have the investors we have today.

What did your VC fundraising funnel look like?
I spoke to over 100 VCs and ended up personally meeting with ~25. 

Any advice you want to give to founders currently gearing up to fundraise?
Go in with a plan A and a plan B and be really diligent about focusing on the fundraise. The goal is to get the company to a point where it can raise, not try to use the raise as a crutch to get yourself there. To split your time between both running the company and doing a fundraise will lead to worse outcomes for both!

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