Warm intros optional

How to fundraise when warm intros aren't an immediate option

Many founders fundraise successfully without warm intros by:

1. knowing what fundable looks like

2. sequencing their raise

3. making fundraising their FT job for a 1-2 month sprint.

More on that and a list of inclusive VCs below.

1. Know what fundable looks like

Early-stage founders have to decide whether to raise on vision or traction. We’ve all seen AI companies raise multi-million dollar early-stage rounds with pedigreed teams and an idea on a napkin. Often, under-networked founders don’t have the luxury of raising on vision alone.

Before pursuing outside capital:

1. Customer discovery: validate the idea bottoms up by talking to customers about the problem.

   1. How are they solving the problem today?

   2. How painful/frequent/high priority is the problem?

   3. What would need to change about their behavior to adopt a new solution?

   4. Are they willing to pay to solve the problem?

2. Market research: learn more about existing solutions to the problem to see how much whitespace exists and what customer segments are underserved with existing solutions or if there’s already a lot of competition.

3. MVP: develop a lightweight version (could be no-code/low code or even a service) to test with initial customers.

Taking these three steps will help you assemble (and practice!) the key components of your story and pitch deck:

• problem

• solution

• market

• traction

• team

2. Figure out the funding sequence

VC is en vogue, increasing 6x over the last 10 years. As such, more companies learn about and pursue institutional capital early, often before doing customer discovery, market research, and/or developing an MVP.

While some funds invest at napkin stage, many want to see more progress before writing a check regardless of whether or not they got a warm intro to a company.

Founders can make their fundraise more efficient with a well-sequenced process. Some of the most successful breakthrough founders I’ve gotten to know started with angels or an accelerator before pursuing VCs.

1. Angels: it may seem really inefficient to pursue small check writers. How can you ever build momentum if you’re accepting capital $1k at a time? There was a great visualization from Carta last week though that showed how an engaged small check writer can be more impactful than a $100k check from a fund. If that small check writer introduces you to 10 people, only 2 invest, but you ask all of them to connect you with at least 1 other person who might be interested, impact compounds and your network starts to meaningfully grow.

   1. Angel groups: the beauty of platforms like Sydecar and AngelList is democratized access to investing with less overhead for founders and/or syndicate leads. Halcyon, Citron Angels and the Georgetown Angel Investor Group are just a few examples of local angel groups. Many prominent companies and universities have alumni networks of angel groups. More funds are launching angel groups too! My path into VC was through Hustle Fund’s Angel Squad, a 1,500 person global community of founders, operators and emerging fund managers.

   2. Individual/super angels: a search for “angel investor” on LinkedIn that returned 43,000 results. Tools like apollo.io and clay.run can help with building a targeted outreach list. And while a $1k-$5k check may not seem like much, if the investor is engaged and well connected, it could open up a lot more capital.

   3. Non-angels: despite advances in crowd funding platforms, investor communities and blogs, books and podcasts sharing 1,000x returns from making early stage investments in private companies like AirBnB, Uber and others, angel investing is still off the radar of many. In talking to founders who are trying to raise, I like to ask what an ideal advisor or customer would look like and encourage them to reach out to them. While these investors are more top of the funnel, there’s potential to convert with time and education.

2. Accelerators: while accelerators sometimes get a bad rap because of the potential equity dilution, they can be hugely helpful early capital, share playbooks to make company building faster and less opaque, and open networks to improve fundraising outcomes, customer acquisition, and hiring. If you’re far enough along in the company building journey, you’ll know what you need to optimize for, and be able to ask other founders who have gone through the program the extent to which they got what they signed up for.

   1. Brand: YC opens doors. Accelerators like Alchemist, 500 Global, Neo, PearX and Z Fellows can too.

   2. Capital: some founders want to focus on programs that provide non-dilutive capital, like AWS or Google. Others are happy to take any early capital that will enable them to go FT on their company.

   3. Network: sector-specific accelerators can be huge unlocks for expert mentorship and customer connections.

   4. Knowledge: if it’s your first time leading sales or building a product, working with an accelerator with general expertise can save time and runway.

   5. Negotiate: love an accelerator but hate the standard deal on the table? I met a founder last week that went through a well-known accelerator but turned down their investment, getting the benefit of their program without taking an early equity hit. You can often negotiate.

3. VCs: targeting angels and/or accelerators first can open up warm intro paths to VCs. But if not…

   1. find funds that don’t require warm intros AND invest in the sector/at the stage you’re building at: at hustlefund.vc, we don’t require warm intros and invest across b2b SaaS, digital consumer health, fintech and web3. Precursor Ventures is sector agnostic and built there thesis around investing in talented founders building great companies without business school or big tech networks. Rare Breed VC and Overlooked Ventures are similar. More below!

   2. identify funds that invest in your sector/stage: while it’s extra work, spending time building a targeted list of funds means you can be more focused in your outreach and improve your likelihood of conversion to the next step of the meeting.

   3. warm-up relationships: once you have made your list of target funds, get to know investors better online. While social media engagement doesn’t = funds wired, I have seen founders set meetings by responding to 3-4 posts over a couple of weeks, then send a DM to a VC asking to talk about their company. This is easier to do if the investor doesn’t have a huge following yet!

   4. ask for 1 more intro: even a no can be impactful if you ask every person you meet to intro you to someone else who might be interested in investing. Most people will be able to think of at least one person.

Inclusive Venture Funds that don’t require warm intros

See the 👉🏽 full list of inclusive VCs 👈🏽 and/or add VCs to the list!

Fundraise like it’s your job

In some respects, you will always be fundraising as a founder; meeting new investors and keeping existing and prospective investors updated. To be successful in your fundraise, make it your FT job for 4-8 weeks.

1. Run a process: fundraises sometimes fall apart because the founding team is raising opportunistically, jumping on a call when an intro comes in every 1-2 weeks but not proactively engineering success. Capital drips in to keep the company alive but the fundraise never achieves the momentum needed to get enough money in to refocus on company building.

2. Do your homework: spend time learning enough about the fund and/or investor before each reaching out or having a meeting to ask thoughtful questions and build a relationship. Regardless of whether or not it’s a yes now, that work can pay off in future.

3. Send personalized emails: some founders have the luxury of landing 100 conversations by blasting 1,000 emails out saying they’re building in A hot sector with B unicorn experience and Y Ivy League degree. Once you have a target list of investors, figure out a blurb that can be shared with all but include 1-2 sentences on why you want to connect with them specifically to show you did your homework.

4. Send monthly/quarterly investor updates: investor updates help you build relationships and goodwill at scale with investors on your cap table and investors you meet who aren’t ready to commit just yet but want to stay in the loop about your progress. A founder in our angel community has spent the last 6 months sending updates about an idea he’s exploring while still working a FT job. There’s a consistent monthly cadence, even though he hasn’t built a product or taken any outside capital. Another founding team we work with sends an update on the 1st of each month, regardless of day of week or what went wrong in the last month. If either of these teams reached out for help, I’d support in a heartbeat.

While this playbook works, it’s of course easier said than done. Fundraising and company building are rarely linear. If you’re starting to think about fundraising and breaking in without a strong startup network, I’d love to connect and help if I can.

Please get in touch!

haley@hustlefundvc.com | twitter | linkedin