Founder Toolkit 🧰 : How to raise your seed round from top VCs & Angels
This is is the 4th part of the Founder Toolkit series, after the Non-Dilutive Funding, Investor Databases and Cold Outreach Playbook posts. Thank you to everyone who has provided me feedback on this post and previous posts. Feel free to reach out to me on Twitter to connect.
I posted this advice on Twitter today and it seems to be popular already. I’ve added some bonus content and links at the bottom for my substack fam.
Your seed round is likely the most important round you will raise in terms of dilution and investor composition.
It’s also easy to get wrong.
The advice below is based on my own experience as a founder, but also as a serial investor in pre-seed and seed stage companies. Feel free to dm me on Twitter or respond to this post if you’d like some advice on fundraising.
Here’s some advice on how to raise your seed round from top tier VCs and Angels.
This advice will help you raise:
Maximising for valuation
Setting you up well for the next round
A best-in-class Seed round can go from deck sent to cash in bank in 4-6 weeks.
However there are several months of work that go into preparing the round. Start by creating a target list of investors & building relationships.
Create your target list carefully. Optimise your time by selecting VCs and Angels that invest in your space and at your stage.
@OpenVC_has a database of 4,400 VCs filterable by stage and criteria.
As an additional filter, check the reputation of the investors you're targeting using @Landscape_vc.
You don't want investors with bad vibes or who waste your time 🚩. Here’s a link to their VC reputation engine.
Next: Create a sheet with your target investors in. Ask existing investors / advisors for introduction - ideally 3-6 months pre raise. Here's a thread and template from @dunkhippo33 on how to do this. This will become your CRM for the fundraise later.
For any investors you do not have a warm intro to, you're going to need to craft effective cold outreach. Here's your playbook.
3 Months Pre-Raise
Do introductory calls with investors 3 months before your round starts. Explain your business, ask for advice and build a relationship. Add them to your investor updates to demonstrate how you execute.
1 Month Pre-Raise
Craft your deck carefully and get feedback from your existing investors on it (or DM me). It will take several iterations to get it right. Great thread from @myfriendjanine on how to make your deck stand out:
2 Weeks Pre-Raise
Build a data room. This will shrink your time to close significantly. It can be as simple as a google drive folder. Ideally use @docsend or a vdr which captures visit data - this will help focus your time once the fundraise is open on serious investors.
The data room should include:
- Product demos
- Sales materials
- Historical financials & forecast
- Corporate docs (articles of incorporation etc)
- Founder employment agreements
- Trademark / IP documents
- Overview of tech stack
- Cap table
- Org chart & hiring plan
1 Week Pre-Raise
Confirm target raise amount, consult with existing investors to sense-check this. Decide on structure for round (Equity v SAFE v Convertible) SAFEs are the most popular these days due to flexibility and tranched closing.
First some wellbeing tips for the raise:
- Try not to drink or smoke in the evenings (despite the stress)
- Take exercise every day & drink plenty of water
- Have some positive tunes to pump you up:
Send to your, now warm, VC & Angel contacts your pitch deck and a loom recording of your pitch.
Define the timeline of the raise: 'we're expecting term sheets in 2-3 weeks and to close within a month of the term sheet.'
Give a range of how much you're raising (but no valuation).
Explain why you would like them as an investor.
Suggest specific times for a call and use a scheduling link to make it easy for them to select an alternative time.
Follow-up in 48 hours if you receive no response.
Keep a living FAQ document with questions from investors and model answers. You can share the full doc in the data room with all investors who come in later in the process.
If a VC suggests you do a call with a portfolio company: do not accept it. This is a lose-lose situation.
Respond: 'They're a little close to our space for us to be comfortable sharing our full plans. Is there another industry expert we could speak to?'
If it's a priced round and an investor asks what the valuation is for the round, do not give them a valuation.
Respond: 'We don't know, the market will set the price. Here's the valuation of our last round and the progress we have made since.'
As a general rule of thumb you do not want to be diluting by more than ~20% in your seed.
If you do it may be hard to raise a Series A from a top VC (as they want founders to have a meaningful stake).
Your target amount to raise for the round will be an indication to the VC of the round valuation (based on 15-20% dilution).
Equally you need to raise enough money to reach the next valuation milestone. Do not be too greedy, if you're val equates to <15% dilution: raise more.
Due Diligence, Rejection Handling, Term Sheets & Closing
Respond promptly to any questions during the raise.
Everyone likes speed (investors, clients, employees). This not only demonstrates you can run the raise well, but that you can operate at high velocity.
Every raise email should be answered <24 hours and ideally <2 hours.
If a VC sends a term sheet early with a tight acceptance window: Politely respond reminding them of the timeline you communicated at the start of the raise, and that you'd hate for them to miss out on being considered because of the term sheet deadline.
If investors say they're waiting for a lead respond: 'We'd love to have you in the round, so I hope there's still some allocation left. As an update we have $XXXk of the round committed without a lead. Is there anything else we can share to get you to commit now?
If an investor passes on the round: Don't give up - ask for feedback as to why. Respond with well thought-out counters. If they still decline, ask if they know other investors who are interested in your space and for an introduction.
If you have multiple term sheets, you need to compare them. Term sheets are open to negotiation. Here's a great thread from @paigefinnn on how to interpret them:
Once you have a term sheet signed, there is usually a confirmatory due diligence process which is quite limited at Seed. You can speed this up by having professional references ready and all your company documents in order.
If you find this helpful, please share it for other founders.
How to Raise a Seed Round - Guide from Elizabeth Yin.
47 Investor Databases - from Steph Nass at OpenVC - updated with new investor lists.
Previous meta thread on fundraising:
How to Cold Outreach Top 1% of VCs - from Steph Nass at Open VC.