Back in 2005-2013, I was close with Uber founder Travis Kalanick.
Before he started Uber, he was Founder/CEO of RedSwoosh which was an interesting P2P software provider for content companies. RedSwoosh was eventually acquired by Akamai and Travis made a bit of money.
At that time he worked as an advisor helping companies get off the ground and raise money (see CrowdFlower, Honestly, etc.). He then went on to be an epic fundraiser himself with Uber and CloudKitchens. I wanted to share some of his tips as he was an expert at the art of negotiating and raising money. This list is his tips for success that he initially blogged at Swooshing.com (his old blog). At the bottom there’s a great video of him talking about working with seed stage startups and how to grow. It’s a great watch.
Priming the Pump
Go to angel gatherings, industry conferences, any and all networking events. Meet people who are angels or who know angels. Give ‘em the elevator pitch… make sure you’re meeting with somebody new EVERY DAY.
Intro meetings
These are informal discussion where you pitch the company over a lunch/coffee/etc., and expand potential angel network through referrals. Get your pitch down to 5-10 minutes, and prepare a tight FAQ in your head so that you have tight answers to the top 20 questions. Let them pay. Be proud of your scrappiness.
ABC’s – Always Be Closing
At the end of every meeting, get a clear understanding of where they stand on your deal opportunity.
Referrals are key
If you are buttoned up and you have your story down, most angels will immediately offer up a couple folks they can hook you up with… always ask for more folks you can connect with.
Advisors
Turn a couple of these potential angels into advisors. Having a few top-notch people in your corner can make all the difference in turning the tide in an angel round.
Thought Partner:
Pick one advisor, co-founder, or mentor who will be your thought partner in managing the process. Note: ETW is your ticket here
TheList
Keep a list (aka pipeline) of the people you’re meeting with, the referrals that they provide you, and the level of their interest in the seed round. Stay on the ball…Always follow up.
Passion/Charisma
Focus on the positive, have confidence, be amped, bring passion to your game, and share the love with the person across from you.
Credibility
DO NOT FIGHT THE TRUTH… Do not try to spin out of what your weak points are. Do not try to make something certain that is not. Do not pretend to know something that you don’t. Credibility is the name of the game in fundraising.
Momentum and Urgency
Investors are fickle creatures, they are motivated by fear and greed… Time IS NOT YOUR FRIEND! The longer the process drags out, the more it seems that nobody is interested in your deal, and the less likely you are to actually get one.
“Every angel deal is a momentum play”
Getting the Lead
Until you have a lead, you don’t have a deal… The way to get a lead is to spur one of the larger, most interested investors into making an offer.
The Competitive Deal – The Need for Speed
The second you have a single term sheet, you need to move very quickly to get a second one. You don’t have a lot of time, because momentum at this point is crucial to closing… Your second term sheet will be easier to get than your first, and it will make a HUGE impact on your deal. Without a second term sheet, you will be in a position to take whatever crappy terms the original lead provided, and it’s quite possible that the terms could get worse (or even go away!) as the one-term sheet deal drags out.
Herding the cattle
Once you start working the competitive leads, you need to start getting word out to ALL of the interested parties, that this deal is getting hot, and that you could start moving to close in very short order… This makes them anxious about the competitive situation you’ve created b/c now your deal has been validated.
Anti-Collusion
The heavyweights in your deal will have the inclination to collude to make the terms better… Keep it short and sweet with each potential colluder, and draw a very straight firm line that the material terms are not changing.
Sprint through the close
Until the deal is closed, you have at best a 50/50 shot of it happening. Keep working new seed investors, keep the competitive leads warm, get your deal oversubscribed, because until your deal is done, it’s just a nice fantasy in your head.