Venture Deals, 4th Edition

CHAPTER 3How to Raise Money

Your goal when you are raising a round of financing should be to get several term sheets since competition drives better terms for the entrepreneur. While we have plenty of suggestions on how to do this, there is no single magic trick. Financings come together in lots of different ways and result from an outstanding strategy to plain old good luck. Venture capitalists are not a homogeneous group; what might impress one VC might turn off another. Although we know what works for us, every venture capital firm is different, so make sure you know who you are dealing with, what their approach is, and what kind of material they need during the fundraising process. Following are some fundamental, but by no means complete, rules of the road, along with some things that you shouldn’t do.

“Do. Or Do Not. There Is No Try.”

In addition to being a small, green, hairy puppet with big hairy ears, Yoda was a wise being. We believe every entrepreneur should internalize his advice to young Luke Skywalker before hitting the fundraising trail: “Do. Or do not. There is no try.” You must have the mind-set that you will succeed on your quest.

When we meet founders who say they are “trying to raise money,” “testing the waters,” or “exploring different options,” this turns us off and signals that they haven’t had much success. Instead, you should start with an attitude of presuming success. If you don’t, investors will smell this uncertainty on you if it permeates your ...