Inc - The 10 Rules of VC Fundraising

A few “rules” in raising venture capital that founders somehow … seem to constantly miss. Or get wrong:

If your existing investors have a strong brand and aren’t positive on you, it can much harder to raise. At a minimum keep them in the loop. Don’t just ignore them after they write a check. The converse is also true. Your existing investors are often your best source of leads for the next round of funding.

It has to be the CEO that pitches the VCs. It just has to be. Don’t send your co-founder or your “COO” or your CFO or whatever. For most investors, that’s almost an immediate No.

The initial VC decision is made within 20 minutes of the first conversation. Make it exciting, speak with data, and get to the point. The initial Yes, Maybe or No decision is made within 20 minutes. So save slides 20–200 for questions and back-up. 

Making stuff up is death, or close to it. If you don’t know the answer, just say that, it’s fine. But make something up that the VC knows the answer is otherwise … that’s almost always a No right there.

You have to know your competition cold. Every great salesperson and CEO does. Learn more here if you don’t.

Cold outreach works. It just has to be very, very good. Everyone reads email. But if you are going via cold outreach instead of a warm intro, make the email amazing. Simple, but metrics-filled and to the point. Hide nothing. Don’t ask for coffee. Get to the point. This is your one shot. At least, there is a decent chance it will be read if the headline is exciting and of interest.

Slow growth is death in fundraising. Just wait to raise then. If you just aren’t growing quickly enough to support a venture investment, it can be better to wait and go out in a few months. At least, you need to have 3–4 good months strung together in a row to show a pattern (and hope).

Your existing investors often save some money for a second check. Treat them that way. Most institutional investors can give you at least a little more money if you are doing OK and need it. So again, keep them in the loop. Otherwise, they won’t reserve this money. 

Be yourself. A top “sin” in fundraising is acting like someone else. Yes, being a CEO involves a little bit of acting. A bit. But overall, be yourself. Be true. 50% of fundraising is the VCs getting to know the CEO. It’s OK to overindex on the topic you are most passionate about (product, sales, marketing, etc.). It’s OK if the presentation doesn’t look exactly like some deck you saw on Business Insider. Make it all great. Rehearse. Take it seriously. But don’t not be yourself. Don’t act like someone you think you should be to fundraise.

Good luck!

So we’re rolling out the final speakers for 2024 SaaStr Annual — and rolling out the first batch of sign-ups for Braindates and mentoring sessions (if you have a ticket, look for that email this week).

The latest speakers at Annual 2024:

• CRO Anthropic
• CRO Notion
• CRO Zensai
• CRO Carta
• CRO Rippling
• CCO Tableau
• CEO Jasper
• CEO EvenUp
• CTO AI Five9
• CCO Mulesoft
• VPCS GitLab
• COO Abridge
• CEO Gainsight
• CPO Buffer
• CPO Onfleet
• Senior Director Product Rubrik
• Head of Global Procurement Talkdesk
• Head of Growth Oneleet

Those are just the latest additions.  Check our ever evolving agenda here!

And see everyone at 2024 SaaStr Annual, Sep 10-12 in SF Bay!

This edition of the SaaStr Daily is sponsored by Prismatic

The question is not if your customers need integrations but what strategy you
will use to build them. Find the right strategy with this guide.

It’s easier to be mediocre at being a sales manager — as you can have everyone else do the work.

It’s harder to be great at being a sales manager, especially as go up to VP level and beyond, as the bar goes up each and every quarter.

I’ve seen this a lot lately. Many sales folks I know are tired of selling themselves and want to get into management … so they don’t actually have to sell. So they can tell other people to sell, and sell more.

You can’t be a great Manager, Director, or VP of Sales just telling others to sell. You have to be in all the tough deals. You have to work through the stuck ones. You have to maybe even be in more deals that as an IC.  If … you want to be great.

But if you find a place you can sort of partially phone it in, it can be a lot easier to manage sales folks … than sell yourself. You just won’t perform all that well if you aren’t selling just as hard as you used it.  Or harder.

So times are tougher these days for many, but in B2B2C … less so. Shopify is seeing growth accelerate. Canva is on fire at $2.4 Billion+ ARR, growing 40%, on the way to an IPO. And Toast is similarly executing at a high level.  No downturn there.

It’s at $1.3 Billion in ARR, growing a stunning 29%. Boom! And importantly, like Shopify, they expect that level of growth to continue.

And for that, they’ve earned a $13.5 Billion valuation. This is what one 10x ARR leader really looks like.

Each story is different, but there is one clear penultimate step: recruiting and managing a small sales team yourself. From scratch.

What 95 times out of 100 is a recipe for failure is jumping straight from successful individual rep to VP of sales:

• If you are the #1 rep at a hot startup, you will get VP of Sales offers from other up-and-coming startups. A CEO or two will want to take that risk, to hire the #1 rep at Hot Startup to be their VP of Sales. My advice is don’t take that job. Wait untl you’ve built a small team first.
• And CEOs, my strong, strong, strong advice is never hire a VP of Sales that hasn’t hired at least 2-3 reps themselves that truly hit quota. Find out. Ask.  Go talk to them.

To be even a stretch VP of Sales, you have to learn to recruit. 50% of the job of a VP of Sales is recruiting a great team. Not just managing one.

A related mistake is a director of sales who inherited a team but didn’t recruit one, jumps straight to VP of Sales. That almost always = failure as well.

Take your time, get promoted at least to manager or director level and recruit 2–3 reps yourself that hit quota. Then you’re ready for a stretch VP of Sales role at an early but fast-growing startup.

If you can find a way to recruit 2–3 that can hit quota … which is hard, and a very different skill than hitting your own quota … you can recruit 20–30, or more.

You then can be a very successful VP of Sales.

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