The Other Benefit Of Fundraising

The reason people go out and fundraise is they need capital for their business. I would not recommend doing it for any other reason. It’s hard and time consuming work and can be extremely frustrating.

But there is another benefit of fundraising. You get feedback on your business from people who see a lot of businesses like yours every day.

The feedback you get from any one investor can be horrible and you need to learn to ignore off base feedback from idiot investors. And you will find that on the fundraising trail.

However the aggregate feedback you get from a diverse collection of investors, ideally dozens or more, can be super helpful.

So what I suggest to entrepreneurs is to use some sort of note taking system, paper or electronic, and write down the hard questions you got and the points of feedback you received after each meeting. The sooner you do it after the meetings the better.

Then start to sort them into a list of “issues” that you are hearing about your business. And the ones you hear the most are the one to focus on.

These are not just sales hurdles to overcome in your financing (although they are that too), these are the things that make your business less attractive to investors and they are things you need to address in your business.

These issues could be about your team, your product, your competition, your market, your go to market strategy, your business model, etc, etc.

The point I am making is that fundraising is a bit like the customer development process. You are showing your business to the market and it is critical to listen to what the market is telling you as no business is perfect and investors will take the time to tell you what is wrong with yours, often right in the meeting.

So treat your fundraising process as two things. First and foremost, it is about getting the capital you need to operate and grow your business. But it is also a fact finding mission about the things you need to address to make your business better. Don’t forget to do the second thing because it is a fantastic opportunity to improve your business for the long haul.


Comments (Archived):

  1. JLM

    .The feedback loop from fundraising meetings is a very inexpensive but valuable focus group.It is important to note that while you may approach 200 potential investors, get interest from 20, get a written response from 10 and checks from 5 — the questions from all of them are honest reactions and an entrepreneur should catalog, answer, and husband those questions.I agree more with Fred than Fred agrees with himself.JLMwww.themusingsofthebigredca…

    1. Twain Twain

      Thanks, “husband those questions” is a new term I’m adding to my repertoire of “Things Twain needs to know”!Is this something related to husbandry of animals for the purposes of cultivating best-of-breed?

    2. James Ferguson @kWIQly

      The corollary – that you disagree with Fred less than he disagrees with himself leaves me noting that Fred is never entirely consistent when he agrees with you !

      1. JLM

        .Give me just a second to diagram that sentence as a prelude to figuring out what it means.Sister Thomas Aquinas, that smithy of sentence diagramming, would be very proud of me.JLMwww.themusingsofthebigredca…

  2. awaldstein

    Yup…Hardest, most frustrating and most critical thing we do.Love it cause it forces even the most experienced of us to be humble-yet inspired.Hate it cause it has nothing to do with the job of building the company–except to capitalize it.Challenged by it cause the message to your customers and partners is completely different that the message and language to investors.And–against all common knowledge–I believe in raising more than you think you need. You are always wrong about the number and the process itself is too defocusing to do more often than is absolutely necessary.

    1. JLM

      .The ability to obtain validation of your business concept as evidenced by someone writing you a check is a critical element in developing any company. Not everyone has to write a check, just a few.Fundraising is like game day. You practice all week and then you have to bring your A game to the table. It is a good test of the clarity of your vision.Too many entrepreneurs are practice players and not game day players.As to the amount, there are two big truths:1. Contingency at 15% is a real cost. Real!2. The struggle as to how much to raise is often a struggle as to whether the VC controls your intermediate term future or you do.VCs want you on a short leash and they want to hold it. Runway is everything. Get more rather than less.I also caution that I have a bad feeling the money window is getting ready to slam shut.JLMwww.themusingsofthebigredca…

      1. awaldstein

        We agree.I hate a short leash. It don’t make us smarter it keeps us from being open to opportunity.To those who don’t have the self control to manage their cash flow, I suggest a different occupation.

      2. William Mougayar

        More money raised doesn’t mean you have more freedom from VCs … unless you think you’ll need them just once (which is very very rare). And raising the right amount of money is more prudent. As Fred said a few times, with less money, startups make better decisions. The tendency is to waste money if you have too much of it.I don’t know about the money window being shut down. Look at how much money funds have just raised. That capital needs to be deployed (although some crisis event could put some fear into it, but it typically resumes). Good opportunities always find money (at least in the US, where the investment climate is fertile).Sorry to be disagreeing with you more than you have agreed with yourself. But that’s OK. It forms a better discussion.

        1. JLM

          .Wm –Raising more money means creating more runway. Runway is freedom.VCs — Fred admits it regularly — want to exert control over entrepreneurs by keeping them on a short leash. It is a basic control issue.Pro tip to entrepreneurs: Get a longer leash! Get more money. Do not put your neck into a tight noose.JLMwww.themusingsofthebigredca…

          1. William Mougayar

            1/ IF you raise more money earlier, you have to give up more equity, and that’s not a good thing. An early stage company is typically valued less, so there isn’t much money they can raise beyond a particular threshold of 25% maximum equity give-up.2/ There are terms to raising money, whether it’s a lot or a little. VC money isn’t a bank loan. If you want total freedom, get a bank loan (if you can get one).

          2. JLM

            .I am going to have call “off sides” on you. You are knee jerking to the fundraising involving a “rational” VC.The fundraising continuum starts with bootstrapping, friends & family, angels, syndicated angels, [crowdfunding as a placeholder], seed funders, VC A/B/C/D.Halfway through syndicated angels you are dealing with folks who invest based on their emotional (as opposed to rational) reaction to jockey, horse, course.The structure of the deal is also typically a convertible note rather than a priced round.Getting a bit more money — 24 months runway v 12-18 — is also an emotional endeavor.Both of my last semester TechStars mentees raised $1.5MM for 20% and all they did was tailor their ask.At that stage, it is art moreso than science.JLMwww.themusingsofthebigredca…

          3. Jess Bachman

            Indeed, its a continuum. Hardly any one-size-fits-all advice to be found.

          4. William Mougayar

            You seem to have backtracked a bit on your position, back to reality. Good.I have a principle. I don’t invest alongside irrational VCs, nor am I one, and I don’t get involved with irrational entrepreneurs either. That makes level headedness a key feature, as important as the investment thesis itself. Walking away is easy. There’s always another deal around the corner.

          5. JLM

            .I am using the term “rational” in the context of focusing on the numbers rather than being emotional and focusing more on the chemistry of jockey, horse, course.I do not intend the word to mean “imprudent” or “flighty.”I did not mean to backtrack on anything so if you read that that’s a bad read.JLMwww.themusingsofthebigredca…

          6. Richard

            Great points! The issue isn’t the amount of the raise as much as it is the post money valuation.

          7. LE

            Agree.And while of course it all depends on the situation here is an example of when having more money and a longer leash pays off.Having more money allows you to take chances that you can’t take without money. To gamble. You don’t win unless you gamble in one way or another. The amount that you gamble often directly relates to what you can win in the end. You could gamble money or your time or both. Having money also allows you to quickly solve problems that can be solved by using money. If it’s abundant you can then move on to the next thing that needs to be solved.In theory if you can take more chances (spread the risk) there is the chance (once again it yes it all depends) that one of those chances will pay off big.Fred is able to invest in (as only one example) NYC or LA real estate (he mentioned) because he can afford to not make money and in fact can afford to lose money. He doesn’t have to be right with each investment or with any investments. He can buy various buildings or land and if they remain vacant or if he doesn’t get a tenant or if a tenant goes bust he still remains standing and solvent. No big deal I am guessing for the types of deals he is doing (and this is a total guess).Someone with less financial wherewithal can’t take the same chance and putting money into NYC real estate could very well sink them. Because it’s not guaranteed as much as people might think it is.Having money also allows you to paper over mistakes and to not have to perseverate and spend time on things that having money can solve. You can make quicker decision because in the end you have a larger tank of gas. The amount of thinking and time and decisions that you have to make when you have to watch each dollar can be all consuming.

          8. William Mougayar

            “Raising more money” has its limits. The limits are related to the valuation you can command and the amounts of % ownership you’re willing to give-up. If one of them is out of whack with reality or conventional wisdom, the ending may not be a happy one.

          9. JLM

            .Everything has it limits.You are not hearing me.At the low end of the totem pole — bootstrapping, F & F, angels, halfway up syndicated angels — you are dealing with emotional investors and they are using convertible notes specifically because they cannot price a round. They cannot arrive at an agreed valuation.JLMwww.themusingsofthebigredca…

        2. awaldstein

          Well said but completely from an investors point of view William.Investors want control and oversight. Entrepreneurs need a cushion and freedom to be opportunistic.The idea that less money makes you smarter I simply find untrue.If you need to manage entrepreneurs like children, putting the cookie jar out of reach so they don’t glut themselves, they are simply in the wrong job.

          1. Jess Bachman

            I suspect the startups that make dumb decisions would make them regardless of the money amount, the decisions are just bigger with more money.If more money turns entrepreneurs dumb, they were already half way there.

          2. awaldstein

            Raising money is purifying but painful.Sell beyond your plan if you can.Get advisors to help guide you on large financial decisions with the capital if you don’t have the experience yourself.Everyone wins in this scenario if it works out.My way to go about it.

          3. Mac

            I agree. I’ve often heard Fred and other VC’s say the advantage startups have is that they are agile, mobile and hostile. That requires a solid runway….and smart entrepreneurs.

          4. William Mougayar

            Let’s leave it at the disagreement stage, based on my intensive experience in the past year, and investing alongside or working with some of the best in the industry.Everything has a cost. If you raise more money, you need to give-up more of your company earlier, and that’s a detrimental thing to an entrepreneur.You are taking the view that the investor is just a money purse. I’m talking about value-based investors. They typically want oversight and a seat near your decision-making so they can help you.

          5. awaldstein

            You are misreading.I never said that investors are ‘money purses”–your words and polarizing at best.I said as an entrepreneur, give yourself some leeway.Not even close to the same thing. Not at all contradictory to the idea of being partners with your VC.Been doing this for a while, 20 years actually with a lot of raises and three IPOs.Good times and bad, many of my previous funders are amongst my closest friends.

          6. awaldstein

            Hey WilliamI read over this entire thread to both gleam some learning and to understand why we are communicating so poorly.I think we are both correct. You as in it is all about the price of the capital and myself in that–as you well know–entrepreneurs live on cash flow and future belief.We take money when it’s not optimal and when we make mistakes we shutter the dream. I’ve done this and it is painful.I agree some investors, invariably those with huge successes under their belts, can balance common good with winning. But invariably investing is about making money and the clash does happen.My way is simply to understand that we are always wrong about how much cash we need. Always! That is why I started this with raise more to give you that cushion.Regardless, I love bantering but I seriously dislike fighting.No more!(Three weeks in Disqus is still not working and they are simply not responding so I will try and stop by later to gather your response.)

          7. William Mougayar

            agreed. I like fighting for ideas, but not against any one person.but sometimes one can mis-interpret an idea disagreement for a fight against the person who originated the ideas.i always try to dissociate the person from the topics. topics come and go. people and friendships stay.

          8. LE

            The idea that less money makes you smarter I simply find untrue.Agree. It’s simply a short leash where a short leash could possibly be needed. Or maybe not.In any case, and to this point, Fred does invest in many children (and I am serious..).What I mean is that many of them have never been around and have had access to such large sums of money and freedom.My guess is that the statement that William is referring to is not anywhere near ubiquitous among all VC’s and portfolios.

        3. Rick

          “And raising the right amount of money is more prudent.”.+1.Uh oh… Fred’s giving me the evil eye. Gotta’ go.

  3. Seenator

    Evan Williams Raised VC funding for Medium even though it was not for the two reasons you mentioned (he had the money to finance it on his own AND Medium was already working with input from the larger community). He however, did outline three other reasons he took capital. Curious to get your thoughts if these factors (attracting employees, raising the number of stakeholders invested in your success etc…) play a big role in a company’s success?=====…Which raises the question: Why is Williams taking outside capital at all?Williams, in an interview earlier this week, cited a few reasons: As Medium scales, taking money from multiple investors is a signal of long-term thinking and diversification to the company’s employees; and the more parties that have a stake in Medium outside of Williams, the more they have a stake in the company’s success.Williams also specifically picked Sze and Elman for board seats for different reasons. Sze has a good investment track record, having sat as an observer on Facebook’s board of directors, and he is a current director on LinkedIn’s board. Elman and Williams go back to their days working together at Twitter, where Elman was a product manager on the company’s growth team.And lastly, Williams can tap into the networks that outside investors bring with them — often something he doesn’t have time for while working on product and running his company full time.

    1. Mario Cantin

      Ev Williams is an outlier in terms of what Fred’s point is about — it falls outside the norm. So would be Wence Casares, et al.

  4. Jon Michael Miles

    There is a great book called “Good in a Room” by Stephanie Palmer. She talks alot about integrating pitching into the creative process, using feedback in this case for screenwriting, to refine and understand what the market wants, learning to pivot and listening to smart people around you. Recommended reading and really in tune with what you’re saying here.

  5. LIAD

    I think there’s a third facet too. Inherent in drafting and redrafting the deck and telling your story time and again.You yourself gain a deeper insight into the business. How to distill key aspects to bullet point form. How to create a compelling story arc. Discovering what resonates and what falls flat. What is core. What is chaff. How to pace the pitch. How to narrate the vision etc.This all happens irregardless of the actual feedback itself. Purely iterating the deck and giving the pitch clarifies and optimises things in your own mind. Retelling the story makes it better.Things take time to marinate. You need a lot of polish to bring out a compelling deck and pitch.If the deck doesn’t get you amped it definitely isn’t gonna do it for anyone else.I find the whole process cathartic too.

    1. William Mougayar

      Saying something in simple and clear ways is not always easy.

      1. awaldstein

        it is never easy William.

    2. awaldstein

      Agree, just iterating on a deck for the nth time.

    3. fredwilson


    4. Jess Bachman

      Can confirm, redrafting the deck has brought out lots of clarity, and nuances. And not just redrafting around the edges, like… tearing it down and building back up again.

      1. LIAD

        creative destruction. ftw.

    5. PhilipSugar

      Great comment as usual. There is another important point of clarifying and polishing your story: It helps you explain it to employees and potential employees.That in the long run might be more important than investors.

      1. JLM

        .I have never finished a pitch deck in fewer than 20 revisions. The revisions create a better understanding for everyone involved. This power of alignment is critical to a startup.JLMwww.themusingsofthebigredca…

        1. Rick

          I finish a deck the first time through. Then I get in front of one person with the pitch. I then revise it and get in front of another person. This is a really good approach because many times your first instincts are the best. I only make changes after I *prove* it needs changed..Remember: It’s about the right audience not the right idea.

          1. awaldstein

            It’s about both.

          2. Rick

            Well gee… I was just reading another VC blog the other day that said it’s about the audience not the idea. Would you guys make up your mind. 🙂

        2. Matt A. Myers

          Is the final deck for when you’re trying to go to the pay window? Assuming that’s the only reason you stopped revisions..

          1. JLM

            .Not really. There is a distinct deck that is used ONLY for raising money. That deck is “chapter headings”, is less not more and the pitch itself fills in the blanks.Selling a company — or going to the pay window — is more of a Letter of Intent type negotiation. You are already engaged, you are just negotiating the price, terms, conditions.JLMwww.themusingsofthebigredca…

          2. PhilipSugar

            It is my contention that small companies are bought not sold. You always have to look around and be open but I have never seen one sold (I’m not counting fire sales) as a result of a marketing effort

      2. Donna Brewington White

        Yes!This ties into a thought I had as I read Fred’s post. Recruiting is another great source of feedback on your company. And it’s fun. 😉

    6. LE

      Inherent in drafting and redrafting the deck and telling your story time and again.And as with any interview or sales situation (job, college, investor) [1] best to start off with one that you can afford to lose and/or don’t care about. Perhaps with a 4th tier school not the Ivy League.I am always surprised at how many people make this key and obvious mistake.[1] Or even dating.

    7. ShanaC


      1. Rick

        Things that make you go “hmm…”.

    8. sigmaalgebra

      Nicely written. Yes, it is possible to polish a presentation just as you have described.And you are correct that the work can need a lot of iterations, shortening, etc. I’ve done some of that: I have a pitch deck with just eight foils and 335 words.But I have about three objections:(1) Compelling.Your description places a lot of emphasis on the desirability of a presentation being “compelling.”My concern is that compelling is frequently used to describe cases of fictional story telling, say, in novels or movies, and there means an emotional reaction.Gee, I can like emotional reactions and compelling art that produces such reactions, e.g., as in my posts yesterday about the Bach Chaconne…But I have to believe that serious people in finance with thick checkbooks want to proceed rationally and very much not emotionally.Gee, now I understand: My pitch decks should have been done with some version of PowerPoint that would let me use as background music, say,Bach/Stokowski “Toccata & Fugue D minor”…Also Sprach Zarathustra, Richard Strauss…”The Great Gate of Kiev”,…”Entrance of the Gods into Valhalla”…”Stars and Stripes Forever” — John Philip Sousa…From Lohengrin on organ:…Did someone say bombastic?Are we feeling “compelling” yet?Gee, and I didn’t even include the finale of the 1812 Overture!(2) Content.Our civilization has a long history of very serious presentations of important content of wide variety.In a pitch deck, isn’t what’s really important the content?(3) Presentation Standards.We all know of examples of serious, presentations in science, engineering, medicine, finance, and from those presentations there are some common standards, followed by Andrew Wiles as he settled Fermat’s last theorem, Nobel prize winners in science, e.g., for the transistor, some of the best people in engineering, say, Kelly Johnson proposinghttp://iliketowastemytime.c…Eric Lander’s lectures on genetics, e.g.,…So, suddenly we have to have some new, very different standards, maybe something out of The Music Man about the desperate need for River City, Iowa to have a boy’s band?There is an implied issue here: Somehow for pitch decks, we have to struggle to get the interest of someone who really doesn’t care, doesn’t want to think, and would prefer to play with his e-mail on his smart phone. So, the attempt is an opening negotiation ploy to insult, demean, denigrate, and intimidate the startup entrepreneur — “I’ll give you at most 15 seconds and 25 words to tell me everything important about your startup.”.Then there’s another suspicion: Nothing about polished presentations really matters at all; that whole claim is just a case of misdirection to draw attention away from direct recognition of the one, main issue: Does the entrepreneur’s project have significant traction, hopefully in the form of number of monthly unique users, better still, monthly revenue, that is growing rapidly but, somehow, still needs the money. In that case, the founder can crack bad jokes, pick his nose, scratch his belly, sneeze on his shirt sleeve, refuse to make eye contact, smell of old beer, irritate any women in the office, and still get a check?

  6. Phil Hayes-St Clair

    Great post, Fred. Not sure if you’ve extended on this topic before, but do you find yourself consistently asking the same two or three questions of each new venture you encounter?

  7. William Mougayar

    There is another reason- it’s an opportunity to be helped by investors even if they don’t invest:1/ Some will refer you to other investors where the match potential may be higher.2/ Others will offer something useful to you (non-feedback related), eg an intro to a customer, or to a partner or they will commit to use your product and support you that way.

    1. Twain Twain

      You are especially good at this.

  8. Chimpwithcans

    I’d love to have heard the meetings for companies such as Napster, Soundcloud and Spotify if they ever went in for fundraising meetings with the big music cos. I would argue that the music business pre-internet was close to perfect – However – they (the big boys) confused themselves with the market and are suffering the consequences of not listening.

  9. Nidhi Mevada

    Good strategy could be, find investors who is facing the problem that you are solving, and make him mentor! When he is your customer, you will have many brainstorming sessions with him and it will develop mutual understanding between both. Gradually he will like your co-founder.

  10. Joe Neiman

    Another thing to be aware of is tact. We just closed our $1mm seed round so my successes and failures of pitching are still fresh in my mind. When pitching a business that disrupts an industry, many investors and potential customers will try to crumple up your idea and throw it in the waste basket because it questions the way an industry has always handled an issue. Many people aren’t ready to hear an alternative. Walking that tight rope of exposing/educating without insulting/offending is a delicate balancing act. If perfomed with sufficient tact, you can win over the naysayers and convert them into believers. Keep smiling and think before you speak to avoid falling off he tight rope.

    1. JLM

      .Great point.Said another way — it is amateurish to knee jerk that someone who is “skeptical” is an opponent. I see this all the time. Skepticism, when done correctly, is a call to educate, to convert.In dealing with any pitch, there is a fine line between being a skeptic, a zealot, and proselytizing.Tact is just part of the skill set to conversion, persuasion, education.Well played.JLMwww.themusingsofthebigredca…

  11. Steven Kuyan

    There was an article I read recently about the lack of note taking during demo days and there’s something to say about a point you made here about a similar problem. Too few entrepreneurs take notes during their pitches, especially when they are pitching to investors. If there was one skill all startups need to improve while pitching, it’s the taking in of feedback and making it actionable.While everyone will have their own opinions, an entrepreneurs job isn’t to act on opinions but rather on trends in feedback.

    1. JLM

      .If I go to a meeting and see that someone is not taking notes, I dismiss them as a “not serious” person.When I was a CEO for 33 years, I would never attend a meeting if everybody did not have their Moleskines out.It is amateurish to do otherwise.JLMwww.themusingsofthebigredca…

      1. Guillaume Lerouge

        Now the thing is, even when you’re used to it, delivering a pitch and being fully engaged with your audience while at the same time taking relevant, actionable notes can be tough. This compounds if you’re alone and there are 3+ people in front of you whom you have to keep interested / on track.

        1. JLM

          .Life is tough. Notetaking is easy.Your pitch (elevator/taxicab/boardroom) should be so finely honed that your Labrador should know it by heart.The entire call to action of any pitch is to get the audience to ask questions.Take notes.JLMwww.themusingsofthebigredca…

          1. Steven Kuyan

            This should be on the first page of every entrepreneurs’ notebook of choice.

      2. PhilipSugar

        I don’t agree with this. I have one person take notes and I really, really concentrate on the meeting.Looking at your phone, etc, I agree.Not doing a quick sum up after the meeting, , I agree.

        1. JLM

          .I disagree more with you than I do with Hillary Clinton. [Bit of Presidential drama, no?]A bit of disagreement is a good thing.I rarely speak at meetings. I am usually there to listen or to make a decision.I would make the meeting commit to time and an outcome.”This is a decision meeting. We’ve got 30 minutes and we will make a decision on . . .”I am talking about meetings in general, not just pitches.JLMwww.themusingsofthebigredca…

          1. PhilipSugar

            Ha!!! I really like that…but we can’t go political or it will get ugly around here.I really try and eliminate internal meetings. In my experience at least 90% and that is being generous are worthless.If you are making decision which is the only reason you should have a meeting: no notes are needed. Decide on the decision, write up the decision, agree to the decision, and then most importantly: Get it done!We have one formally scheduled meeting: When a new release has been finished coding, we decide what goes into the next release.Also that is when developers get their “google time” to work on pet projects. If your code is tight you have free time during testing, if not….well not so much.

          2. Pointsandfigures

            I don’t always take notes. I always turn off my tech. Try to be present in

      3. LE

        If I go to a meeting and see that someone is not taking notes, I dismiss them as a “not serious” person.An even higher level of dismissal in my book would go to anyone who attends a meeting and has material in advance which they can review but fails to review the material and then decides to do so during the meeting (or asks questions).I always find it a big waste of time to not have material in advance.

        1. JLM

          .I agree more with you than you do with yourself.Well played.I used to put an obvious typo in all my board books to ensure that I could tell who had and who had not read the materials. Board members, who knew I did this, would look for that typo and actually read the materials.Great fun.JLMwww.themusingsofthebigredca…

          1. LE

            When I was in college I was assigned to put together a group of other students to read a book and be on one of those Sunday morning TV shows. (Shows that local stations did to fulfill some broadcast license requirement I am guessing).Oddly enough it was a book by a oddball libertarian and titled (this is from memory) “The Sharing Society”. I guess they thought it would be cute to have Wharton students “discuss” the book.So we all had a copy of the book in advance. I read every single page because I thought how could I be on TV and not have read the book? Not only did the other students not read the book, but at the end of the taping they tossed the book in the trash as some kind of juvenile sign of disrespect. Really bothered me.

      4. Rick

        I love my leather bound hand written journals with my thoughts in them. What a pleasure it is to write on hand made paper with a fine writing instrument!

  12. Val Tsanev

    Apparently Mark Zuckerberg had the amazing ability on doing exactly that, disregarding the useless feedback and taking in and acting upon the constructive criticism from investors re: Facebook

  13. Twain Twain

    Recently, I was at a pitch event. Two startups had been through a mentoring program by an organization that supports startups that have female founders. Both had previously raised angel and seed.As soon as the first founder introduced her company’s name and their tagline I physically felt a disconnect and switched out. At the end of the pitch, she shared her team composition. She’d sourced 8 or so people and not a single one of them was technical and actually coding the site (rather than just scoping architecture) — and she’s trying to build a platform to connect retail professionals with others in the supply manufacturing chain.I wondered how in 3+ years of operations and all those feedback loops, no investor seemed to have pointed out the two most obvious problems they have:(1.) Brand name + tagline = communicate values and what the tech does.(2.) Hire CTO / technical founder before all other hires if you’re building a Web / mobile platform.[Or maybe someone had raised those issues and she’d decided to put them lower on her list of priorities.]When she sent me an email, I gave her that honest feedback and sent her a link to a competitor’s proposition that would provide some useful learning from.She found my feedback to be so helpful she cc’d the two advisors (one branding, one technical) she’d bought into her team.

  14. Kyle Van Pelt

    I think it is important to focus on reframing the meeting for yourself. It is so easy to be defensive about your baby when people provide feedback.That being said sometimes when you are caught up in the moment it is easy to forget to take some notes you wanted.I am curious about everyone’s thoughts on recording your meeting? Is it inappropriate?I think it would not only capture every question but also, and perhaps more importantly, your responses which is always valuable regardless of how uncomfortable it makes us.

    1. Guillaume Lerouge

      I’m not 100% sure, but I guess most VCs would feel very uncomfortable about this. Even if you promise never to leak the audio/video of the meeting outside of your organization, they might not want to provide fully honest feedback for fear of staying on the record. And no, I don’t think that recording the meeting without letting them know would work either 🙂

  15. JimHirshfield

    “You are showing your business to the market and it is critical to listen to what the market is telling you…”This isn’t exactly true. You’re showing it to VCs who _may_ have experience in that sector, or (as you point out) have seen other startups in the sector. But let’s not kid ourselves that every investor is an oracle, has a crystal ball, or is in touch with the market.I also think too many VCs are still giving simple “it’s not for us” answers, as opposed to truthful and valuable advice.

    1. iggyfanlo

      That’s accurate and unfortunately in many cases VCs provide no feedback at all

      1. JLM

        .Every pitch should end with the entrepreneur asking:What worked? What interested you?What did not work? What did not attract you?What can I do to improve the pitch?Who do you know who might be interested in this business proposition?Can you call me an Uber on your account to take me to my next meeting?Pay attention.JLMwww.themusingsofthebigredca…

        1. JimHirshfield

          Call me an Uber and pimp my ride.

        2. LE

          Every pitch should end with the entrepreneur asking:What can I do to improve the pitch?Who do you know who might be interested in this business proposition?I’m curious do you really mean “every pitch should end” or do you mean “every pitch where you are flatly rejected on the spot”?Seems that asking for a brain dump at the end of a sales pitch shows a lack of knowledge about what you are doing and a bit of newbiesq wet behind the ears behavior at least if I am taking your comment literally.

          1. Guillaume Lerouge

            I think the main point made by JLM is that you should have a good idea of what’s going to happen next at the end of the meeting. Either they’re interested and you can leave things at that, or they’re not, in which case now is the time to gather as much information as you can – you probably won’t have another chance to be in front of those guys soon.Pushing things further, you can try to follow Jean-Louis Gassée’s advice and stop after 3 slides: “After that, shut up. The silence will be unbearable. […] If you don’t get questions, you have your answer: We’re not interested.” [1] => if done well, this should elicit all the feedback you need, right away :-)[1]

          2. JLM

            .Not an unfair point. I would say something like: What gained traction with you? Where did I lose you?I have no fear of obtaining good intel and am willing to seem a little direct to get it. I always find the biggest shortcoming of folks to be not asking for help or not being inquisitive enough?One of the biggest errors American business people make is answering too many questions, so I ask a lot of questions and get a lot of answers.JLMwww.themusingsofthebigredca…

          3. LE

            Agree and agree.Another thing in flip (and I am sure you have done this as well over the years) is to ask someone that you are buying a product or service from why they are better than their competitors with the goal of finding out other sources of supply that you might not know about. Most people when asked this question are not aware of why (from what I have heard) that IBM never acknowledged the competition. I can’t tell you how many times that I have had a competitor blessed by the competition.Nothing in my mind could be more stupid then to tell someone positive comments about a competitor which makes that competitor my next stop for a sales pitch and/or elevates them in the process. (This does not imply that you should trash competitors either..) Just don’t pretty them up.When I was a kid my Dad went shopping and was either going to buy a Camaro or a Firebird. He asked the salesman of the Firebird why it was better than the Camaro and why it cost more. I remember to this day that the answer salesman gave was “the glovebox in the Firebird is metal and in the Camaro it’s plastic”. My dad bought the Camaro. [1][1] Getting my very practical Dad to buy my Mom a totally impractical red camaro was a major accomplishment of mine in high school. To this day I still can’t figure out how I got him to agree to do that. [2] I would have asked him but he would definitely have spotted the technique and gamed me in some way. I know that because that’s what I would do.[2] And to your point about asking questions it’s important to know after you get the sale (investment) also what worked and didn’t work. After the check ink is dry of course since you don’t want to oversell and you need to get your ass out of dodge lest someone changes their mind.

        3. Rick

          All great points. Ones that I use when pimping the pitch.

    2. LE

      But let’s not kid ourselves that every investor is an oracle, has a crystal ball, or is in touch with the market.And actually Fred called some of them “idiots”. Which raises an interesting question. If there are in fact “idiot investors” then how are they able to last investing other people’s money over a period of time? Ditto for the sleazy VC’s that you typically hear about.

      1. Guillaume Lerouge

        Probably because it’s a hit-driven business, where one successful bet can hide a lot of mistakes… As usual, PG says it best: “Our ancestors must rarely have encountered cases of exponential growth, because our intutitions are no guide here. What happens to fast growing startups tends to surprise even the founders.” [1] => one unicorn in your portfolio will generate outsized returns.Assuming you’re an “idiot” VC, if you’re somehow lucky enough to have that one significant hit, you’ll probably be able to keep inviting for quite a while. I have no idea how frequently this has taken place in practice, but I guess it must happen from time to time – at least to a sufficient extent for the “sleazy VC” meme to keep going around.[1]

        1. Matt Zagaja

          A stopped clock is still right twice a day :).

      2. Richard

        This is a great point. Sometimes you have to go off message based on the investors biases. No different than other first time encounters.

  16. James Ferguson @kWIQly

    Obviously sage adviceHowever last week in the UK with CEO of a UK PLC (partnership of ours) – He said: (not verbatim but close)”The trouble for you is while I just about understand why what you do makes sense, My investors struggle to understand why what we do (and its a pretty significant market) – I have no idea how they can understand disruptive ideas because they have no context in which to put them.”This is a recurring problem – especially in B2B – a few trade partners may understand but the VC market has no clue how to evaluate.It makes me wonder whether Edison, Faraday, Marconi and their ilk would get any support from todays VC markets. – Call me a cynic but the specialist domain knowledge in non B2C is just way beyond many money markets.

  17. PhilipSugar

    The biggest thing you can get from investors is the fact that they can pattern match on your business plan. They don’t know your business but they can pattern match your plan among all of the others that they have seen.I can pattern match on operational issues, because that is what I do every day.I cannot pattern match on overall business ideas because I am stuck working on only a few at a time.

  18. Elia Freedman

    I always envisioned that having good investors involved does the same thing on a day to day, month to month basis. I’ve missed that over the years, I think.

  19. Pointsandfigures

    On the flip side it helps if investors are transparent when they pass. Not every NO is sign of an idiot investor. I also think it helps with investor reputation and credibility to be clear. You don’t have to be mean, just clear. In my case on seed deals I will just tell people I am th wrong target investor. If I am the right target and pass, I am clear why (valuation, team, business model etc). I am also clear that it might not be the right time for me given other constraints. The old ” it’s not you its me” break up line. ( how many times have I been on the receiving end of that one!)

  20. Vasu Prathipati

    very true for us. some people raise their seed round in the a couple meetings. we did not – it took many meetings and obviously, that brings stress but at the end, we met w/ many investors and it really impacted how we evolved our product.for us, it was often about the market being competitive (aka your product being un-differentiated). it forced me to really think through our product and where to focus our efforts to make sure we could stick out in the the end of the day, the grind was an invaluable process and i think we avoided some serious mistakes if we had received money right off the bat. as is often the case, the grind is tough to swallow while you’re in it but in hindsight, it’s critical and you’re thankful for it.

  21. Andrew Hubbs

    This one feels a little off base to me. Almost the only good feedback I’ve seen given during fundraising, is on how to fundraise more effectively. I think one of the biggest mistakes entrepreneurs (especially young ones) make is to take too much advise from investors they meet with no skin in the game. Furthermore, I think the caveat of ignoring the one “idiot investor” isn’t what you have to worry about. Instead, it is the bad advice you get from the 10 smart investors you talk to that still don’t get it/aren’t a fit. While I fully expect that most of investors could give deep and valuable advice, I think in reality they almost never do to companies they aren’t invested in. Instead, I see little outside of cookie cutter feedback, and you can’t really blame them for it given the volume of meetings they take.I was surprised to see this post on AVC after last weeks post about eShares (…. Fundraising really is a filtering exercise and if Henry had been paying a lot of attention to the aggregate feedback from the 20 investors he spoke with, I doubt he would have had the success story with fundraising.

    1. JLM

      .One thing there is no shortage of in the startup business is BAD ADVICE.I was a CEO for 33 years and advise a few startup CEOs these days. I will hear some gem of advice they have received from somewhere and ask — Who told you that?Invariably it will be some guy who has never been a CEO but is an acc’t, lawyer, VC and has no clue.On occasion, true north is 180 degrees off the advice they have received.It happens all the time.JLMwww.themusingsofthebigredca…

  22. Rick

    “You get feedback on your business from people who see a lot of businesses like yours every day.”.Bingo!

  23. Nick Lashinsky

    Great advice Fred. However, I would also advise entrepreneurs, **especially first time founders**, to take this advice very, very, very carefully.While first time founders undoubtedly look to get help from VC’s – more than mentorship – more of a guiding light, if you will – it’s important to remember that you’re building your product for your customer. They are the buyers, and therefore, they are the most important source of feedback to incorporate into your product.I say this because: Too often founders get into a trap where they start doing things they think VC’s will want, instead of what their customers want. I’ve seen this happen way too many times.See PG:

  24. Steven Nargizian

    Investors are not the market… The market is right 100% of the time, investors are happy to be right 20% of the time.

  25. sigmaalgebra

    Hmm:Feedback from venture partners to startup entrepreneurs: Interesting remarks. But:For my startup, I just used my favorite software, my text editor, to count how many e-mail messages I’ve sent venture capital firms, and the number is something over 1500. I sent long, short, overviews, text, decks, stories, details, founder qualifications, software and server farm architecture, some interesting source code, etc.Early on, a small fraction of venture firms would call back, and we would talk. Later they quit calling back, but a small fraction responded via e-mail. Now the responses are still more rare and are never more than a few words of boilerplate independent of my work.I’ve never had a substantive — pro or con — remark about my startup from a venture firm.I’ve never had or been invited to a meeting. As far as I know, I’ve never been within 20 feet of a venture partner.I’m beginning to draw the same conclusion I did back in high school about girls my own age — they weren’t interested, at all. And for likely much the same reason: They didn’t see me as a fast path to significant money. And the solution is likely much the same: Once I have a lot of revenue and earnings, with both growing quickly, a lot of both VCs and females (VCs or not) will be interested. I have to suspect that given the earnings, all other supposedly important attributes will be essentially irrelevant.It’s an old story, back to Mother Goose and “The Little Red Hen.”But, again, all across the US, villages to big cities, entrepreneurs do startups without equity funding. That my startup is based in part on Moore’s law, some original applied math, software, the Internet, and mobile should be an advantage.E.g., my back of the envelope arithmetic indicates that if Internet users like my Web site well enough to keep a $2000 server half busy, then in a few months I will be past willing to accept an equity check. Old story: By the time I can get a check, I won’t need or want it.Besides I would not be thrilled, instead would be terrified, to report to a BoD of people who don’t have well informed, insightful, serious, constructive comments about and particular to my startup.Since millions of guys are successful with grass mowing, pizza, auto repair, auto body repair, red sauce Italian restaurants, used cars, asphalt paving, big truck/little truck businesses, etc., then I should be successful if users simply like my Web site.Ah, since my software is now ready for at least first production (only one known bug), I should be getting alpha tests soon.Should be able to go live fairly soon.Today went by my local branch office of Chase and got started on what I need to do for a business account, receiving revenue, handling payroll for myself, pleasing my county government, etc. The representative I talked with was not clear on how I could download machine readable copies of my account activity — there has to a way to do that.Called my ISP and confirmed what their business offerings are, static IP address, IP ports unblocked, up/download data rates, charges, what IP routers they can supply, etc.Some of the remarks here at AVC look like good advice, information, etc. for my startup, but I’m not holding my breath waiting for a venture partner to tell me anything really good or even just substantive and particular to my work.We will see if Internet users like my work, i.e., if some “100” users “love” my work, at least if the 100 are a good sample of a reasonably large, initial audience.For a fantastic opportunity to improve your business for the long haul. from the response I got from my 1500+ e-mail messages, that quote sounds like “a fantastic opportunity to” buy an important bridge over the East River.Those 1500+ e-mail messages, essentially individually written, not form letters, were a lot of work.Those high school girls my age didn’t like me. Got it. VCs don’t like me. Got it.At some point in business, need to cut losses, drop what doesn’t work, don’t fight not very important problems, and instead pursue opportunities.

    1. JLM

      .Good luck and Godspeed. Don’t let the bastards get you down. Keep on plugging away!JLMwww.themusingsofthebigredca…

  26. ShanaC

    This works better if the VCs are interrelated to your target market.I could imagine this working badly if they are not. Like if Max Levchin wasn’t the one behind glow, I could see a lot of people going WTF because !fertilefemale or !couplestrugglingwithinfertility(but yeah, we knew all of that already…patternmatching can be a bit blind making)

  27. Monce C. Abraham

    Thanks for sharing, Fred.In agreement with you, where you share that ventures should be thinking of VCs only when thinking on the lines of serious fundraising – I see a lot of young first-time entrepreneurs in India getting sucked into consecutive Fundraising competitions as a validation for their business acumen and model, instead of getting their hands dirty and spending more time actually working on their ventures.Have touched on this lightly here :…Cheers, Monce

  28. Gregg Freishtat

    All positive impacts of raising capital. In addition to the deck and messaging – most young companies underestimate how important it is to button up some fundamental items that are required for any investor. Employment letters with confidentiality, non-compete, signed option agreement with proper strike price, documented process for code review and back up, a unanimously agreed upon cap table, projections that make sense, accurate historical books and records and other boring stuff like that. Having sold a few start ups along the way, I like to live in a perpetual state of Due Diligence. Raising capital (and selling) taught me that and many folks (even if they don’t raise capital) would be well served to get their house in order as if being reviewed by a VC.Gregg FreishtatCEO, SalesWise

  29. Pankaj Garg

    VCs should be connected to only if you want to raise money. It takes lot of time showing each other who needs who. In general its important to keep discussing with everyone. Your batchmates, ex-colleagues, family, friends, everyone. With every discussion, the thought process is better channelized and the problem definition keeps becoming more crisp with every discussion.

  30. JoeSixPack

    The Gotham Gal is really clever.

  31. marko calvo-cruz

    I don’t know what the shelf life of these blog posts are so I hope people still look at this.I’ve read in essays from Paul Graham that a founder, especially a first time founder, really should accept money from whoever offers it to them because so few investors usually do. But then I’ve heard that WHO you raise money from largely sets the stage for future fundraising funds and if you take from an investor without a tract record, it could hurt you in later stage funding.How should a founder reconcile these two pieces of advice? (Open to anyone with experience fundraising)

  32. Guillaume Lerouge

    The issue I’ve faced with this strategy is that if the second person stays silent throughout the meeting, people on the other side are likely to ask themselves “why did that second person bother coming in in the first place?”.I’ve had this happen to me in sales meetings even though I had mentioned upfront that the second person would be here only to take notes. I was lucky to receive the feedback informally after the fact, I wouldn’t have known otherwise.

  33. Twain Twain

    Best of luck!

  34. PhilipSugar

    See my comment below about taking notes….we totally agree.

  35. LE

    and the other to take notesAnd also important to study the reactions and hot buttons of the people that you are presenting to. Not to miss the tell tale signs which are quite obvious to anyone who knows how to read faces. Often the person selling can miss clear signals of agreement or disagreement.

  36. JLM

    .How did it go, Sage of Lancaster?JLMwww.themusingsofthebigredca…

  37. JimHirshfield

    Hard to know in advance whether a meeting like that is going to be meaningful.