Fundraising Tips: Power of Story and Context

On Tuesday, the True team spent the afternoon at the World’s Largest Office Hours, part of the National Venture Capital Association’s VentureScape annual conference. The goal of these office hours was to bring hundreds of venture capitalists and entrepreneurs together in one room for an afternoon of networking, mentoring and idea exchange. As a member of the NVCA and supporters of innovation and entrepreneurship in general, we were extremely happy to participate.

Our team had a series of six meetings with Founders of companies who were seeking our feedback and advice on their business and pitch. As we worked through each session, we began to see a pattern emerging. Specifically, within the first minute of sitting down, the Founder would launch directly into describing the product or show a demo of the product.

In each case, we would slow the Founder down and ask a series of questions designed to provide background and context to the broader story.

In general, those questions were:

– Who are you?
– Why did you decide to work on this project?
– How and why is this team working together?
– How much money have you raised?
– How much are you raising now?
– How has the business evolved since the initial inception?

In music, they say that you have been writing your first album your entire life. In startups, it’s the same. As a Founder, you have been with your business from day one. Your product is an extension of you, based on a problem that you identified through your set of unique experiences. Therefore, any time you want to show people your product or talk about your business, they really need the broader context of your background and how you ended up starting this company to truly appreciate what it means. (And long-term, the final product will look very different from where it is today.)

Especially at the seed stage, investors are investing in the people and how they see the world—not the product or business you’ve built today. Knowing that, Founders should spend 80% or more of their time talking about their background, their values and how they see the world, because this information is what gets an investor excited about potentially joining their journey.

For more fundraising tips, check out a presentation Christiaan and I gave last year on more inside tips on raising venture capital financing.

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adam

I work for True Ventures, an early-stage venture capital fund with offices in San Francisco and Palo Alto. We partner with promising entrepreneurs at the earliest stages in the technology market providing hands-on management support to guide our portfolio companies through the challenges of early growth.

  • I think this i just part of the maturation process for entrepreneurs. I used to struggle with this as well. I assumed investors cared about what I cared about, which was product, team, and traction. When in fact they can’t care about that if you don’t set the proper context. One of my advisors always talks about “flying at different levels.” Start with the 10,000 foot view then slowly dive deeper and deeper. For founders this is challenging as we live our life at the 10 foot level, especially at the early stages.

    Great post Adam.

  • I would nuance that a bit. I recently met with the founder of an app in the same category than ours (HeyCrowd) and after sharing our stories we realized that we came from different places, but ended up converging in a pretty similar product with the same kind of challenges.
    If you talk to someone not familiar with your space, giving a lot of context is very important. But if they already know several products in the market, you can generally make the team part shorter and cut to the chase. Happened to me yesterday and it was pretty refreshing to be able to go very deep into the product within 30 minutes and not open a deck at all.

  • markebrandon

    Nice post, Adam. You hit upon a very frustrating aspect of the process for Founders. While your suggestions make uber-sense to me, there is a passel of directly contrary advice about how to start off a pitch. Disciples of Dave McClure, for example, will tell you to start off with traction, period. The reason you saw a pattern of Founders jumping into the product demo is because the Paul Graham-ites have been advised to do this. Some funders prefer to see a full pitch deck complete with everything anybody would ever want to know. Others TL;DR that deck, preferring a short deck. Some don’t care about a deck, preferring to talk it through on the phone. Some will regard you as an idiot if you “don’t summarize your vision in 3 sentences or less” (I’ve heard this). All of those approaches are fine. I’m prepared for all of them. But, funders so often do not make it clear the “preferred way to pitch me”. I wish AngelList, Gust, or somebody else aggregated these preferences because it would make the whole process simpler. Every investor should put your bullet points (or their own bullet points) in their email signature.

  • Solid, Adam. Thank you for taking time to write this out. To be fair, you have a different (better?) view of approaching an investment than a lot of the folks most first-time founders have to wade their way through.

    @markebrandon:disqus – There are so many different approaches, that no set of guidelines are going to be a perfect set of rules. I think the reason the McClures and Grahams pound the drum on leading with traction is that they are coaching 20-30-60 companies how to succeed at closing their next round through a huge demo day. And, I cannot think of a time that great traction doesn’t get *someone’s* attention.

    However, to Adam’s point, once you *do* get a chance to sit down face-to-face with a VC who is interested enough to have the second conversation, it’s probably better to use that time to develop a relationship and in some sense interview *them* as a team member. At least, in my experience.