8 tips to finish your 2023 fundraise strong

Founders, prepare to get squeezed.

This is a gnarly time to try and build a company on the backs of angel or venture capital. A unique recipe of challenges awaits you:

• Interest rates are high

• Funding is down

• Competition for funding is fierce

• The dreaded holiday lull looms

And there will be blood.

Today’s newsletter is for the first-time founders who are raising pre-revenue in a pre-seed or seed round. I’ll share some fundraising advice that helped me in the past in hopes of helping you ring in the new year with a bang.

The climate

Before we talk about surviving and thriving, we need to talk about the current climate.

I wrote about some of this last winter, predicting layoffs for certain roles, budget cuts, and turnover. I (and many others) had hoped we’d be through these challenges by summer, but we’re still in a dogfight.

It’s about to get worse.

We are exactly two years out from the peak of deal madness in 2021. This was back when capital was cheap and valuations were high—and it was much easier to land a check. Many of the companies funded in Q4 2021 are now coming due on another round, and it’s creating a squeeze.

The pinch is happening across the board—even those darling AI companies are about to feel it. I’ve personally even seen a shift in how founders are even working together. Everyone is playing their cards close to the vest when it comes to investor intros. Phrases like this are common: “Let me see what happens with this one (unnamed) investor. If they don’t invest in us, I will introduce you.”

And that’s totally fair in this market.

Deal flow and deals closed are in a seesaw effect right now, with deal flow being lifted to the sky and deals closed resting on the ground. Investors have their pick of great companies. If you’re pitching investors right now, you’re likely getting ghosted more than in the past. Much of this, I think, is from investors just being overwhelmed with opportunities.

Unfortunately, we just got out of the summer lull for investors, and we’re about to hit another with the holidays. It’s a very brief window in between “back from the Hamptons” to “sorry, in New Mexico to visit family.” Realistically, we have about a month before those distractions pile up and the dreaded “let’s circle up in the new year” replies start.

The playbook for the rest of 2023

Hope is not lost. There is always a chance of a spark for anyone willing to swing an ax long enough to build up some meaningful fuel. While we’re coming into a holiday lull, it’s also peak networking time. The following tips will absolutely drum up investment leads for your Q4.

1) Attend the networking events
Halloween kicks off the beginning of annual networking events. Keep an eye out for opportunities in your network, even if it means founder friends throwing parties. When companies host these events, there are always high networth individuals in attendance. I’ve been invited to four parties over the last few weeks and in a single event I secured four possible investors in a two hour stretch. Show up ready to work the room.

When working the room, it’s key to quickly figure out if someone invests to maximize your time. This one often feels awkward for first-time founders who are learning to raise. So, how do you tactfully get to the core question? Just ask them. It’s really not complicated and it feels more awkward than it is. I usually ask if the person does much investing, and then follow up with what kind of investments they make. By engaging with them around what they like to invest in, I can usually figure out if there is a possible path forward.

2) Lean into your current investors
If you’ve raised at all, you have entire networks on your cap table waiting to be tapped. Communicate early and often with your current investors, as they likely have friends or associates who they’ve co-invested with in the past. These warm intros can move much faster, given the new investor has a trusted friend already invested in the company. Don’t be afraid to ask for help.

3) Maintain a list of possible investors
Many first time founders are not organized in their early raises. Create a spreadsheet with two tabs—Scheduled Meetings and Outreach. Outreach is your master list of possible investors, including at a minimum their name, emails, notes on when you last spoke, criteria alignment (such as if they invest in your sector, similar investments, etc.) and the outcome of that conversation.

When you land a meeting, move them to the Scheduled tab, and add a possible check size. The Scheduled tab becomes your pipeline, helping you visualize your path to a completed round. In this climate, I would try to have at least 2X your funding goal in your pipeline at a minimum.

I could write an entire newsletter on this process, and maybe I will. If you’re not doing this though, I promise you that you’re forgetting about investors who might have converted with a more organized effort.

4) Dig into tax credits
This is a bit of a Hail Mary, but it’s an option worth evaluating if you’re in a rut. Many states have tax credits for investors who invest in their state’s startups. This is public information, and you can see who has already applied for credits. These investors are active, and it’s worth reaching out if you see someone you know on the list. This is also a great way to get previous investors back in. Kentucky gives 40% of the investment back to investors as a tax credit, which is no small sum. Keep in mind you may have time to get approval for a new or current investor. Check with your state’s guidelines.

5) Work databases for leads
Signal is a database of investors of all check sizes, managed by NFX. You can dial into what type of investor, sector focus, region and more (“angels who focus on SaaS who invest in Atlanta,” for example). The tool is free and fundraising founders should be spending some serious time curating a list of potentials with this tool. Pitchbook is another option that has better fine tuning but it does require a pricey subscription. If you have any institutional investors on your cap table, check with them to see if they have a login to score this export for free.

6) Create warm intros
Once you have a hit list from Pitchbook or Signal, start looking at their LinkedIn pages to see what team members you have overlapping connections with. Hit them up and see if they can send a forwardable email to the person of interest. This process also works beyond your investor exports. As you dig up potential investors, keep trying to find that golden intro.

7) Talk to other founders
Yes, I said it’s competitive and founders are tight lipped right now, but that doesn’t mean your founder friends won’t help. I’ve had several calls with founders in similar stages to my company, GoWild, and all of these calls have drummed up potential leads.

Founders have entire networks of angels and institutional investors they can open up for you with forwardable emails, and if an investor has already invested in that founder, they’re far more likely to trust their recommendation when they send over your pitch deck. Taking the time to connect with other founders will have 3-4X more results than anything else on this list.

8) Start raising sooner
Over the last few years, founders started raising a new round with six months of runway left. Let me be clear—This is a possible death sentence right now. If you are at less than a year of runway, you should probably be raising now. If you’re at eight months of runway or less, you should definitely be raising. Do not base your current raise on previous timelines.

Bonus resource: Jason Yeh has a great blog on fundraising advice. If you’re new to fundraising, I would subscribe and also go through his old newsletters.

Yes, it’s tough out there. It’s likely going to get worse for the next few months at least. You should use data like in the chart above to motivate you, not debilitate you. The companies and news organizations are reporting on the trends, not predicting your future. You are not yet among the statistical norms.

This is a time to be a War Time CEO, as Ben Horrowitz says in one of my favorite startup books of all time, “The Hard Thing About Hard Things.” Visualize what success looks like, and work your way back through the path to victory. If you’re raising your first round of $500K, you need five investors. How are you going to do that?

I believe in you. Good luck out there.

“Well now, Lord, if you can hear me
Won't you throw a damn dog a bone?
'Cause if the Devil shows up with a better deal
This old soul's a-goin' down.”

— Sturgill Simpson

If you found this newsletter helpful, please share with other founders. If you post to LinkedIn, please tag me so I can personally thank you.

Who I’m listening to: Nicholas Jamerson

What I’m reading: “Lark Ascending” by Silas House

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