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Bursts of Color - Raising VC in 2021

Bursts of Color - Raising VC in 2021
By Geoff Donaker • Issue #54 • View online
Contrary to some of the headlines, raising venture capital in 2021 still requires a lot of work and luck. Since I have the benefit of many data points, today I’m sharing some rough stats and guidelines around what seems to be working. Of course there are exceptions to every rule, so please take this all with a dose of salt.

Get out your Patagonia vest...
Get out your Patagonia vest...
What Should My Round Be Called?
Here is the typical nomenclature I’m seeing:
  • Seed: $2-5m raise
  • Series A: $8-15m
  • Series B: $20-30m
  • Series C: >$50m
  • Raises of less than $2m are often SAFEs. They don’t need a name, but are often called pre-seed or angel rounds.
  • If you are far off this range (e.g., $4m Series A), consider changing the target or name
Building Your VC Pipeline and Getting Intros
For those who are not already hyper-connected with VCs, here are some rules of thumb:
  • 1 term sheet requires 5-10 VC meetings
  • 1 VC meeting requires 3-5 warm intros
  • Therefore, most processes require 30-50 warm intros
  • You can increase your intro hit rate by sending custom, forward-able emails for each prospect
  • Do your homework and try not to waste intros on VCs at the wrong stage (e.g., if you’re raising $3m, don’t target Tiger)
The Pitch Deck
The deck is your primary marketing material. Here are the current defaults I’m seeing:
  • Most companies still use a PPT-style deck (not Notion, etc)
  • Most intro emails include the deck attached as PDF
  • A prospective investor will read the deck for 3 minutes total
  • Good decks are mostly charts and graphics, with very little text (see the 10/20/30 rule of Powerpoint)
  • Most decks have had professional design help
During the Meeting
To make the most of a 30-45 minute VC meeting:
  • After introductions, pull up your deck and give a 5 minute “quick flip” pitch, only stopping on 4-5 key slides
  • Don’t assume the VC remembers your deck (they only looked at it for 3 minutes, and that was last week)
  • Also don’t charge into a 20+ minute talk unless asked
  • Before parting, do ask about their process and what the appropriate timing and next steps would be
How Long Will This Take?
Of course it ranges widely. In general, I’m seeing successful fundraises that are:
  • 3-10 weeks from first pitch to first term sheet
  • 5-8 weeks from signed term sheet to wired funds
  • If you can manufacture urgency by getting a first term sheet from a friendly or insider VC, that speeds things up
  • For most of this time period, the CEO (or other point person) is in full-time fundraising mode
When To Pause a Process
If you’ve met with ten VCs and nobody seems to be digging in after a couple weeks, it may be that, for whatever reason, your timing is off. In these cases, sometimes discretion is the better part of valor: you may wish to pause the raise and try again later rather than burning through the rest of your leads. If a little cash cushion is needed in the meantime, founders often turn to insiders and angels for a SAFE, convertible note or other extension.
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Geoff Donaker

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