In this episode, Jorian Hoover, a fundraising consultant, shares insights on the fundraising process for startups. He emphasizes the importance of founders taking charge of their fundraising efforts, preparing thoroughly, and understanding their readiness to raise capital. The conversation covers common mistakes, building a strong investor list, crafting an effective pitch deck, and navigating the fundraising timeline. Jorian also discusses valuation strategies and shares a success story from a client who effectively raised capital. The episode concludes with key advice for founders embarking on their fundraising journey.
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Takeaways
Founders should actively manage their fundraising processes.
Treat fundraising as a structured project with clear timelines.
Preparation of pitch decks and investor lists is crucial.
Understanding your readiness to raise capital is essential.
Common mistakes include rushing the fundraising process.
Building a robust investor list can significantly impact success.
Crafting a compelling pitch deck is vital for attracting investors.
The fundraising timeline typically spans two to four months.
Generating FOMO among investors can enhance fundraising outcomes.
Valuation discussions should be backed by data and market insights.
Chapters
00:00 Introduction to Fundraising Coaching
02:45 The Role of Founders in Fundraising
05:18 Preparing for Fundraising: Key Questions
07:47 Determining Fundraising Amounts and Milestones
10:41 Common Mistakes in Fundraising
13:14 Building a Strong Investor List
15:50 The Importance of Networking in Fundraising
18:22 Creating a Compelling Pitch Deck
28:00 Crafting the Perfect Pitch Deck
38:33 Navigating the Fundraising Timeline
53:53 Fundraising Preparation and Execution
55:49 Recognizing When to Pivot in Fundraising
58:37 A Successful Fundraising Story
01:03:16 Negotiating Term Sheets and Investor Relationships
01:06:30 Understanding Valuation in Fundraising
01:11:36 Final Advice for First-Time Founders
Daniel Faloppa (00:01)
Iorian, thanks for being here today. I’m excited about this episode we’re going to record.
Jorian Hoover (00:06)
Yeah, thanks for having me on. Excited for the conversation.
Daniel Faloppa (00:09)
Yeah, as well, you told me in our previous conversations about like, yeah, your fundraising experience and your job of helping founders through their fundraising process. Can you maybe get us started with like understanding what you do for founders, how long you’ve been doing it for and what you like about it as well?
Jorian Hoover (00:27)
Yeah, for sure. ⁓ So I’m a startup fundraising coach. And so I help founders run high quality fundraisers. And what that means is I support them through the preparation and execution phases of their fundraise. And so I help them prepare really well. I help them with strategy. I help them create a storyline, investor list, kind of all the things that go into preparation.
And also during execution, I become someone that they can call and ask questions as they’re talking with investors as new questions are coming up. And so I’m really the support throughout the fundraisers to help them run a high quality one. ⁓
Daniel Faloppa (01:06)
And that’s different from like, let’s say a brokerage firm or somebody that runs their fundraisers, like early stage founders and CEOs should run their own processes, right?
Jorian Hoover (01:15)
That’s right. Yeah, my belief is that founders should be the ones kind of running a fundraise and so I like to put founders in the driver’s seat I’m not fundraising on behalf of them
Daniel Faloppa (01:24)
Yeah, yeah, but I think it’s also because it increases their chances, Like especially angel rounds, like early stage VC rounds, they want to see the CEO conducting the actual fundraiser.
Jorian Hoover (01:35)
Yeah, not only do they want to see the CEO, but at the earliest stages, would argue an investor is mostly betting on the team ⁓ in many ways. And if the team is unable to present and talk to investors, that can be a red flag.
Daniel Faloppa (01:43)
Yeah.
Yeah, yeah. But indeed, they’ve never maybe done it before. And there is so much to know about the process and so many questions that might pop up that having the support of somebody that has run a number of them is quite valuable.
Jorian Hoover (02:06)
Exactly. Yeah. You know, first time founders, they’re not sure what they don’t know. And so there’s a lot to fundraising. I don’t think it’s rocket science, but there’s some things you want to do well. And then also I have some founders who have are multi-time founders and they fundraised before, but they tell me, Hey, you’re in, I fundraised, I know how to do it, but that wasn’t a lot of fun. I wish I had some help. wish I had a sparring partner. And so I’ve helped in those cases too. Yeah.
Daniel Faloppa (02:32)
Yeah, yeah.
Yeah, and I think like also solo founders or founders where the founding team only has maybe one person that is knowledgeable about these topics, they benefit a lot from somebody to talk to, somebody to talk through the common problems that come up or like specific situations.
Jorian Hoover (02:51)
That’s right. That’s
right. It can be lonely too, because as a CEO, a founder, who do you turn to? Yes, you can turn to your existing investors sometimes, but that can be quite vulnerable. You can ask other founders, but other founders, it’s hard to get on the phone with them multiple times a week and really be there for ongoing support.
Daniel Faloppa (03:08)
Yeah.
Yeah,
yeah, no, can totally see that. I think, that’s super interesting for, I think, every founder to know. So I think the idea today is to try to understand more about the fundraising process, understand your experience with it and how you help founders kind of pick your brain on those topics and hopefully give people some sort of a master class to how to fundraise early stages. I know your focus has been in the US most of your
coaching career so far. But like I think the best practices there apply everywhere. ⁓
Jorian Hoover (03:45)
Yeah.
Yeah, let’s dive in.
Daniel Faloppa (03:48)
Nice. OK,
so let’s say, you know, I’m imagining, like, what’s the first thing that you tell founders when they become your clients? Like, how does your sort of teaching, quote unquote, process happens when a founder is a first time founder or the first time the founder is?
Jorian Hoover (04:06)
Yeah, I would say the way it begins is I really try to emphasize treating fundraising like a project and a work stream you’re working on. ⁓
I think sometimes there’s this temptation just to do fundraising kind of in the background or, you’re putting together some materials, you’re starting to talk with investors, but there’s not really some direction. And so I really encourage founders and I help them with this, think through what are the different elements you want to prepare in order to high quality fundraise? And then how, how do we sequence the actual fundraise process, those investor conversations to try to get some FOMO going to try to
to get the best deal possible. So that’s how those engagements often start is through that strategic lens.
Daniel Faloppa (04:50)
Yeah, so
explaining them that it’s a process, that there is maybe like a timeline to follow, some things to prepare. so if we kind of follow that timeline, I would imagine you start with preparing some documents, Pitch decks, financial projections, maybe.
Jorian Hoover (05:06)
Yeah, maybe
even one step before that is, and this is often before folks will work with me, but it’s something I encourage founders if they’re talking to me and thinking about a fundraise, is answering that question, are you ready to raise? And how much do you want to raise? What is it going to be used for? Are you a good candidate for venture capital?
⁓ I think answering some of those questions before you dive into the materials can be really beneficial because they can help guide kind of what that story needs to look like and also what creating the investor list and so on looks like as well.
Daniel Faloppa (05:41)
Yeah.
And is there like an idea way that founders can figure that out? Because like we speak with a lot of them, right? And when is the first time that they do the process? It’s very hard for them to figure this part out especially.
Jorian Hoover (05:57)
Yeah, it’s really, really tough. I would say the best resource is probably trying to talk to other founders who have gotten different funding sources and trying to understand, you know, which of these buckets do you fall into? I also encourage founders to try to think through, especially if you’re at the early stages, what are your hopes and dreams for this business?
You know, are you trying to build a kind of household name, something that could be a billion dollar or billion euro company, right? Or are you trying to create a really successful $50 million company, which is an amazing, amazing outcome, but is less suited for venture capital? ⁓ And to try and understand, you know, what does that dream look like? Because not every founder even wants to build that, that large company.
Daniel Faloppa (06:38)
Yeah.
Yeah, yeah,
for sure. And they don’t have to, right? Despite the fact that like in the press, a lot of the times you find this like the press is very single sided on these extreme outcomes, but they don’t have to. And sometimes actually with dilution and with everything, like a smaller outcome where you keep more of the equity might end up personally better for some founders.
Jorian Hoover (07:06)
Absolutely. have
a couple founder friends where, you know, kind of in confidence, they’ll tell me, hey, I’ve raised 40, $50 million. I have 30 million in annual revenues. You know, they’re doing quite well, but because of all the investment they’ve taken on.
you know, they really need to keep growing this thing for a good outcome. Now they’re not just doing it for the outcome side. They also want to build a good business, but I don’t think they realized kind of all the restraints it was going to put on. So understanding that before you dive in, is really important.
Daniel Faloppa (07:35)
Yeah.
Yeah.
Yeah, super. Yeah. It’s a long topic, right? We could probably do an episode only on that. But indeed, like venture capital and just equity, fundraise comes with some expectations of returns and you need to make sure that those expectations are aligned with your own before jumping onto basically a marriage where the goals are completely different between the founding team and the investors.
Jorian Hoover (08:07)
That’s right. That’s absolutely right.
Daniel Faloppa (08:10)
Nice. how do you go about like, let’s say, okay, they’ve decided that’s the outcome they want. They’ve decided venture capital is the way to finance that strategy. How do you go about determining like what kind of amount they should be looking for and whether like the milestones that they have are reasonable for fundraising that type of run.
Jorian Hoover (08:31)
Yeah, so typically at the earliest stages, you want to look at what milestones you’re trying to hit kind of one in two years out or so. Typically, people are fundraising for two-ish years of runaway, maybe three or so. And you really want to think through what
What kind of funds do you need to actually hit those milestones? Right. And then make sure there’s enough buffer in there as well. And that’s where talking to other founders or looking at other examples can be really helpful. Because sometimes what can happen on that back of the napkin math is you’ll say, OK, well, we need to we need to add these features and we need to add this go to market. And so I need, you know, we’re going to hit two million
revenue. And so I need three developers and I need one salesperson. And if you then talk to someone who has a company at that size, they’ll tell you, you know, making these numbers a little bit up, but no, gosh, you really need double that and those engineers and triple salespeople or something like that. And of course, this is changing a little bit with AI. But my my message is you don’t want to undershoot on how much money you need, because otherwise then you’ll come back and
need money much sooner before you’ve even been able to get milestones. And so when you’re thinking about how much to raise, there’s definitely a part with the milestones. And then there’s also some market reality of how much is the market willing to give you? If you need five, but the market’s only willing to give you two, you might need to make a plan for two. On the opposite end, if money is really kind easy to come by, if we’re in a ZERP area or something like that,
Maybe you don’t want to over raise, but maybe it’s worth grabbing a little bit of extra money while it’s quote unquote cheap.
Daniel Faloppa (10:16)
Yeah, yeah. Yeah, and this idea of milestones meaning like try to raise enough in order to achieve enough milestones so you can raise the next round, right? I feel that’s already something that founders are not really extremely aware the first time that they risk happening.
Jorian Hoover (10:33)
Yeah,
is there a mistake or two you often see kind of when founders are deciding how much to raise?
Daniel Faloppa (10:41)
Yeah, well, one thing we were chatting about is we get a lot of calls from companies that are trying to right before or with the purpose of launching their product, but the launch is like two months, like a month or two, right? And like, that’s the difficult, incredibly difficult process of trying to raise something before a major milestone, right? Every investor…
is going to tell you like, we’re just going to wait and see. And you should also be waiting and seeing. because like, according to how that launch goes, you’re to have so much more information to set the strategy to maybe do fundraising in a different way and so on, and just make a much better personal and company decision on what to do for the future. So I always tell them like, this is not the best way to do it. But then
Normally when they get to me, when they’re doing valuation, like a month before the launch or two months before the launch, it’s already too late because they’re going to run out of capital before the launch or they’re not going to have enough capital to do a proper launch. so yeah, so at that point it’s quite late to change things.
Jorian Hoover (11:45)
Yeah, and I don’t know if this is too much off topic, but one idea that just came to mind there is you wanna, if possible, fundraise with enough runway left. And one of the things you can do in that situation is let’s say you only have four or five months of runway, and so you’re thinking, shoot, we need to fundraise.
You know, it might be worth trying to do a little bit of an angel round and trying to shore up some of the fundraising. You don’t always need to think about fundraising as doing this whole big round or not doing it at all. Because you’re right, if you try to do the big round right before you’re about in a couple of milestones.
Not only are you leaving money off on the table by not seeing the results of those milestones, but also investors are gonna wonder, hey, why are they, this is a little bit of a red flag that they need money right before they’re about to launch something.
Daniel Faloppa (12:37)
Yeah. Yeah,
100%. Yeah, indeed. And that’s actually one of the cases where we normally tell people like a convertible loan at that point is like a fantastic instrument, right? Because you already know that you’re going to need money in six months or so like after the launch, like no matter how it goes. And then at that point, like this type of bridge loans that can convert into equity in the next round are a great instrument.
Jorian Hoover (13:04)
Absolutely, something like that or a safe, yeah, some more lightweight instruments can be really helpful in those scenarios.
Daniel Faloppa (13:06)
Yeah.
Yeah.
Nice, and so you were mentioning like raising, so trying to look for an amount that covers your next two to three years, right? I normally shoot for like 18 months or something like that. So kind of like 12 months plus 50 % because you never know how things are gonna go. I did here during the super high Zurp era.
2022 or something during a workshop, somebody that was absolutely convinced that they should raise for a runway of six months because they should raise every six months. And that sounded to me like, okay, there’s definitely a bubble. So you’re thinking two, three years, right? Like that sort of length of time horizon.
Jorian Hoover (13:42)
Yeah.
think in two or three years, saw some, I don’t have it in front of me, but some data from Peter Walker at Carta earlier this year that the time between rounds has been increasing kind of over last couple of years. If I remember correctly, it’s been from 18 months-ish to two plus years.
Daniel Faloppa (14:02)
Mm-hmm.
Jorian Hoover (14:09)
And so with that, I just want to make sure people know that sometimes that next round doesn’t come as soon as you think. So, and there’s exceptions, of course. I mean, I still know people were raising rounds every six months. And sometimes if you’re growing really fast, if you’re on the cutting edge of AI, that could make sense. But boy, you’re staring off the edge of a cliff every time ⁓ you do that, you know, but if you’re raising huge amounts, sometimes that’s.
Daniel Faloppa (14:16)
Interesting. Yeah. Yeah.
Yeah. Yeah.
Jorian Hoover (14:37)
You’d rather do that than take a much lower valuation earlier on.
Daniel Faloppa (14:43)
Yeah, yeah, yeah, if you’re growing, if you’re going super fast. But but but indeed, like, you know, I’m quite glad that we’re talking about this, because it feels like if you are just exposed to to news, right, you are exposed to the top, like 10 % of companies, right? Maybe even maybe even a smaller percentage. And then you don’t realize that that like the vast, vast majority doesn’t behave like that. And that’s extremely fine.
And maybe those companies didn’t behave like that for 15 years until they did find their own strike, their own gold vein, and then they went after it. But yeah, there is a lot of irrational pressure, I believe, on founders just because of this selection of press cases.
Jorian Hoover (15:29)
Yeah. And I
would take it even one step further. There’s the ones that hit the news. That’s maybe that, that 0.1 % or 1%. And then even founders who just even raise from venture capital in some ways are the exception, right? Cause it is hard to raise from venture capital. And so sometimes what happens is if you just have friends with people who have raised from VC, you know, you can think, start to think that is the normal startup or so.
Daniel Faloppa (15:46)
Yeah.
Yeah.
Jorian Hoover (15:57)
And it’s the normal
VC startup, right? But it can skew your mind also on what is easy versus what is hard, right?
Daniel Faloppa (16:05)
Yeah,
100%. Yeah, yeah. We just did a study, which I believe was one of the first ones looking at the percentage of companies that want to raise angel capital and they actually succeed. Right. And it’s, it’s, it’s quite a difficult thing to do because you like, how do you communicate the intention? Right. So, so we looked at companies that apply for funding to an angel network and like what percentage of those got funded. Right.
And it’s roughly between 3 and 7%. So it’s extremely difficult to raise that first angel capital. And then after that, I believe it’s, I forget the specific, but I think between 10 and 20 % that manages to raise a first VC round. So you look at the companies that did raise the first VC round, you’re already looking at like 0.3 % of all the companies, of all the founders you see.
around, right? So yeah, yeah, super interesting.
Jorian Hoover (17:00)
Yeah, yeah, I don’t want to overly scare folks also because, know, if you have a good background, it could be that you’re a great fit for VC also. And so there’s a fine balance between, you know, putting some fear in people of like, hey, this is quite hard. But also there are some folks where, you know, hey, you could be a great, great candidate for VC funding also.
Daniel Faloppa (17:09)
yeah.
Yeah, yeah,
no, for sure, for sure. It’s possible, but it’s not as easy as it looks like if you’re just following TechCrunch and those type of things. ⁓ Yeah, nice. And this is why we do this podcast, right? To try to even the odds, even the odds between people that do have the knowledge or the means to access that knowledge and people that don’t yet. And we’re distributing this.
Jorian Hoover (17:27)
That’s right. That’s right. That’s right.
Daniel Faloppa (17:44)
everywhere and hopefully a lot of people are gonna listen to it. Nice, okay. So you’ve decided that you have more or less an idea like how much you want to raise. You have an idea of where do you configure yourself in the buyer’s world as well, right? Are you like roughly a pre-seed? Are you like completely out of the schemes and you need to look for some…
Jorian Hoover (17:47)
Absolutely.
Daniel Faloppa (18:09)
different solution or are you configuring yourself as a CDSA or so on? So, what are the documents at that point that you have found this walkthrough?
Jorian Hoover (18:18)
Yeah, absolutely. at the beginning, once they’ve decided how much they want to raise, who they’re getting funding from. So let’s just say for now that’s VCs or angels. I recommend they start preparing their pitch deck and also their investor list. And I recommend they do those things in parallel. The pitch deck I recommend to start with first because
It’s really about, you get your story down? And I think story is so, so, so critical in fundraising. And then the investor list, I’d love to see founders create a robust enough investor list where there’s maybe a hundred plus VCs or angels on there that they’re researching. It can take a lot of tedious work and we can get into that. So there’s a lot to draw from.
Daniel Faloppa (18:59)
Mm-hmm.
Jorian Hoover (19:07)
And then there’s other documents you start making with the data room after the pitch deck, et cetera. But those are the two things that I went starting with.
Daniel Faloppa (19:07)
Yeah.
Yeah.
Yeah, and those are probably the ones that take a lot of time as well, right? And investor list, yeah, trying to have companies or people that you’ve already spoken to, maybe like previously, maybe at events, maybe they noticed you or something. And then also people that you fully don’t know at the moment, maybe.
Jorian Hoover (19:31)
Yeah, exactly. think there’s two ways to think about how to get connected with VCs. Either you take an offensive route and you say, OK, these are the VCs I want to find intros to I want to get connected with. And you still might do that in a natural way. And you might add to it based on who tells you.
VCs that founders recommend you add to the list or You can instead say I’ll just meet with whatever VCs people are recommending, know kind of whatever come my way You know, whoever I meet at events conferences and my worry with that second method is you might miss a lot and You might not realize yet. Who are the best VCs possible for your kind of situation? ⁓
Daniel Faloppa (20:15)
Yeah, yeah,
yeah. Yeah, because it’s just like kind of reflecting who’s on top of mind at the moment or whoever wrote to you in the past two months that you can still remember something rather than trying to follow like a systematic process of hitting everybody. ⁓
Jorian Hoover (20:30)
Exactly. And would
it be helpful if I detail a little bit like how I think about what a really strong investor list would look like? Yeah. So in its most ideal states, you I’d love to see kind of over 100 investors on there. As long as you’re at the earlier stages, if you’re at the later stages, it might be that, you know, only 30 or 40 investors are potentials. Over 100 plus investors. And I’d love to see that kind of
Daniel Faloppa (20:37)
Sure, yeah.
Jorian Hoover (21:00)
tiered in some way where the top tiers are the ones you’re most excited about and that can really lead the round. You know, and then as you go down the tiers, you know, maybe they can still lead the round, but you’re a little bit less excited about that. And then maybe that’s followed by folks who can’t lead, but you’re excited about and, and, and, so on.
Daniel Faloppa (21:10)
Mm-hmm.
Yeah.
And what’s
the percentage of them that should be in that top tier?
Jorian Hoover (21:28)
I would think about like, can you do groupings of 20 to 40 VCs or so? know, so like if you have an investor list of let’s say 120 VCs, you know, maybe there’s roughly that are 30 that are tier one, 30 tier two, 33 tier three, 30 tier four that you have. But the more that you can get in those tier ones and tier twos, the better, of course.
Daniel Faloppa (21:35)
Mm-hmm.
Yeah,
yeah. And is there a heuristic on how many should be sort of warmer already? Should you have done events before in order to meet them? Should you have answered the associate that got into your email? Or is it OK if they are 99 % cold?
Jorian Hoover (22:17)
Is it OK if they’re 99 % cold? Here, it varies so much situation by situation, right? Because some people come in already with this strong VC network. Some people come in with not a strong VC network, but they’ve gone to places like Stanford, or they’ve worked at a Palantir, or they have these kind of natural networks that can connect them.
Daniel Faloppa (22:42)
Mm-hmm.
Jorian Hoover (22:42)
You
know, some people have decent networks and then some people are coming in with no networks at all. And so you have everything kind of on that spectrum. What I would say on whether to choose a VC, if they’re a good fit is if you’re already warmly connected and they’re at all a decent fit, that’s a great one to have pretty high on that list. But I’m totally okay with you having VCs on there that are totally cold.
And we could talk a little bit about strategies of how to turn that cold into a warm intro. I’m not one of these people who will yell and say you can’t do cold outreach. But I would say, you know, if you can work like heck to make that a warm outreach, and there’s a place you can do that all the better.
Daniel Faloppa (23:12)
Mm-hmm.
Yeah, yeah, yeah, yeah.
Yeah, sometimes people don’t even Google the fact that the specific investor is gonna be next to you tomorrow for an event or something. And they miss out on that chance and they would rather send the automated email. Yeah.
Jorian Hoover (23:33)
Yeah
Or a simple LinkedIn search to see who your mutual connections are. I can’t count how many times someone’s told me, hey, you’re in, I don’t have any connections to VCs. And I say, okay, great, let’s pull up linkedin.com. And I have them type in the VC and there’s like 40 mutual connections or so, or maybe not even 40, maybe just five or so. And three are junk connections, but two are really good.
Daniel Faloppa (23:41)
Yeah.
Yeah, one is your previous flatmate and you’re really good friends. And yeah, he had a successful exit already and he’s been seen as a genius by the VC. And yeah, he can run the round on his own. Yeah, no, it’s true. It’s really true. feel like this… Sorry. No, was just thinking about this network fact is maybe a bit less felt in Europe.
Jorian Hoover (24:06)
Yeah, who is very happy to connect to you unless you stole all their snacks out of the fridge.
Yeah. And. go ahead, sir.
Daniel Faloppa (24:31)
Just because the networks are less entrenched and less developed, there are still networks. But because they are so scattered, maybe that’s less important in the process. It’s a bit easier to do cold outreach, let’s say, or to have a lot of leads that are colder and still get good outcomes.
Jorian Hoover (24:49)
Yeah, I don’t know if I’ve seen that or not. Yeah, I’ve worked mostly with US, but also a decent amount with European startups. And I think networks still matter some, but yeah, maybe it’s easier than in the US. I think in the US, the volumes are so much higher that some of these VCs, they’re just getting thousands of reach outs. And so they need some sort of sifting mechanism.
Daniel Faloppa (25:11)
Yeah.
Yeah, that seems to be kind of the case everywhere that like I know, you know, for us for for equity, we do collaborate with VCs that use us for valuations. And I’ve spoken with a bunch of other software companies that are in the same sort of market. And a lot of them had this idea of helping VCs filter through applications. And I’ve talked to with a bunch of VCs and they really
Sorry, not that. They want to send more leads to VCs and most VCs are not interested in receiving even more leads. They already have troubles screening through the ones that they receive. ⁓ Yeah, that’s true for sure.
Jorian Hoover (25:49)
Yeah. Yeah. I
just wanted to return just one other comment on the investor list. One of the reasons it can be so tedious, but I think that tedious work can be really helpful, is you might even want to get to the level of detail where you know which partner at the firm would be the best fit for you. There’s no one place you can go for a magic list. You know, I always recommend,
people, you know, go to a crunch base, but they also go to a pitch book. If someone has access, they also go on these, these sheets that are floating around. They talked to other founders because your VC list is going to be different than my VC list. If I was fundraising and by the way, they change every year or two because funds went out of money. They changed. There’s new GP, all these things. And so all that to say a lot of work, it’s, it’s worth
Daniel Faloppa (26:42)
Yeah.
Jorian Hoover (26:45)
putting in the work.
Daniel Faloppa (26:46)
Indeed. Indeed. Yeah. And yeah, you can easily go to like, who’s the right partner, but even like trying to guess like, what are their interests? Everybody these days has like a few videos on YouTube, right? Like, how do they talk? You know, do you even like them, right? Because like they might end up on your board. You might end up having to deal with them on a monthly basis. And yeah.
Jorian Hoover (27:01)
Yeah.
Daniel Faloppa (27:12)
If they’re not, you know, if they don’t vibe with you, maybe like that’s not the case. Or maybe they vibe a lot and then, and then you can have a much more enthusiastic reach out. and, and, and it helps a lot. Yeah. No, it’s a, it’s a, it’s quite interesting. nice. No. So, okay. So, and that’s a already like a lot of work, right? And I feel like this is, is never advertised, right? Is never advertised that you need to have a very long list.
because everybody wants to make it look like they raised without any effort, right? That they were the best company, that it just took them like two days to raise and so on. So this is super helpful to know. the other thing, is a deck with a story and stuff, right? And I guess sort of going through a good deck is like out of the scope for today, but what do you see…
Jorian Hoover (27:41)
Yeah.
Daniel Faloppa (28:03)
that like, what is the advice that you’re tired of giving whenever you receive a deck?
Jorian Hoover (28:08)
Yeah, luckily I like what I do so I don’t get tired of giving advice, which I feel lucky for. But what I recommend if you’re thinking about making a pitch deck is it really should be one cohesive story. And so I always recommend start making the pitch deck not in slides. Just start it in a Google Doc or start it wherever you can just write down things.
Daniel Faloppa (28:11)
Ha ha.
Jorian Hoover (28:32)
Write down, you know, what are the 10 to 12 to 14 core slides you want. And then write maybe the titles and write just the key takeaways and then scan through that, maybe even show that to someone and ask yourself a couple of questions. One, when you read through kind of every slide, slide by slide, just those couple bullet points, does it read like a story or does it read more like every individual slide is standing on its own and not
Daniel Faloppa (28:56)
Mm-hmm.
Jorian Hoover (29:01)
not coming together like a story. And second, you know, are you really presenting your startup as the hero in this story? Right? At the early stages, you’re trying to get an investor to take a bet on you, you know, yes, that you can execute in the short term.
but also that you have some big dream that you can go achieve, right? And that you’re just a little bit crazy to go after that. And so is that pitch deck sharing that, okay, this startup is really solving this problem and is the hero kind of in this story.
Daniel Faloppa (29:34)
Yeah, yeah, indeed. And like, I always wonder. So you always have some things that maybe are not stellar about the company. And you have to put them in, but you kind of never know where, right? Like, is there a like…
Jorian Hoover (29:48)
What do you mean,
like some things that aren’t stellar, but yeah.
Daniel Faloppa (29:51)
Like
say that a ⁓ startup has, well, very little traction these days is kind of making it very, very hard to raise. Let’s say maybe a team that is not, that you know is subpar for some reason. Maybe they don’t have any big logos on their CVs, right? So like, where do you wave that into the story?
Jorian Hoover (30:07)
Yeah.
Yeah, that’s good point. I would differentiate between, you know, is something just not quite a strength or is it more of a skeleton in the closet? Right. Because it’s one thing if the founding team, you know, Hey, you don’t have the biggest experience ever. Right. But we can, there’s ways to, to, to still share that story on the pitch deck. Or is it that
Daniel Faloppa (30:23)
Mm-hmm.
Jorian Hoover (30:38)
you know, there’s some, some baggage there or something like that, right? In which case that that’s different scenario. Let’s just say it’s kind of, you know, you, you don’t have as strong of an experience. You don’t have quite those logos. you still want to answer why is this the right team, right? And maybe rely more on experiences that show that you’re able to lead.
Daniel Faloppa (30:41)
Yeah, yeah,
Jorian Hoover (31:01)
And that you’re able to do something special, right? So sometimes I’ve seen founders, you know, maybe they haven’t led a company before or had an exciting role, but they, you know, won some national championship at something, or they are super dedicated to this other thing, or, you know, they’ve researched this space kind of in and out and are able to quantitatively show that.
Daniel Faloppa (31:21)
Yeah.
Jorian Hoover (31:27)
If you’re able to just give a little bit of color to who you are and why someone should bet on you, I think that that’s really important. And I would say on the traction example, if you don’t have the best traction, what can you share? What are the leading indicators that you can point to? And how can you tell the story around that?
And then the other thing I would say is like, this comes back to the, you ready to raise? It might be that when you look at all these things and when you look at your traction and the team and all these things, say, shoot, we have to go back and do some, some homework, or maybe we have to get some initial angel funding from people who really care about us and are willing to take that earlier bet. Sorry for the long, answer. There’s a lot there.
Daniel Faloppa (31:46)
Mm-hmm.
Yeah, indeed. Yeah. So at that point, like when it gets too big, no, no,
no. When it gets too big of a negative, then you might have to actually do some work and change it. Like some actual, some actual hard work. Yeah. No, fair enough. Fair enough. No, it’s a good, it’s a great answer. I think in the end, yeah, you’re trying to present the company in the best light, like in a, best realistic light in a, in a very,
Jorian Hoover (32:15)
Yeah.
Daniel Faloppa (32:32)
like to kind of polish it up and show the best self of the company. And then it’s a competitive process, right? So like this deck is gonna be compared with another hundred or so. And then, you know, the top two or three are gonna receive a follow-up call or like the top 10 are gonna receive a follow-up call and then the top two are gonna receive funding, right? So.
Jorian Hoover (32:41)
Yeah.
Yeah, that’s
right. And have you heard of Y Combinator’s fundraising vertebrae before?
Daniel Faloppa (32:58)
Not really.
Jorian Hoover (32:59)
So yeah, it’s this idea that you take a step back and you think through what are your three to five kind of fundraising vertebrae and what they mean by that. And I recommend this to founders I work with is if an investor were to invest in you, what would be the three to five biggest reasons that they would invest? And for some people, the team is in there or the attractions in there and for others, it’s not.
Daniel Faloppa (33:23)
Mm-hmm.
Jorian Hoover (33:23)
But when you
come up with those three to five points, those end up being the things that you hit again and again through the pitch deck, through your Q &A, through storytelling. And that can really help because then you lean more on your strengths, right? And weave that into a story rather than thinking, hey, the story is a collection of 13 points that all need to be incredibly solid.
Daniel Faloppa (33:46)
Yeah, and they all need to, like, it’s a series of check boxes, right? And we get this question a lot of like, okay, you know, like, what milestones do I need to hit in order to raise, like, this amount or in order to raise a series A in this specific industry and so on. And like the reality is that because it’s a competitive process, there isn’t like a checklist and the right way to think about it is not really like a checklist of hitting all the boxes, but stressing your differentiators.
be able to be on top of the selection, let’s say. And those are the ones that get funded. So yeah, this is a great way to shift the focus of founders from trying to check all the boxes to actually stressing their strengths.
Jorian Hoover (34:12)
Yeah.
Yeah.
Yeah, yeah,
that’s the one thing that will get me riled up and I see this a lot online is this kind of checkbox idea that if you just were to hit all these checkboxes, then you would get funding. And that’s just not how it works. ⁓ Well, raised based off story and
Daniel Faloppa (34:35)
Yeah.
Yeah.
Yeah, indeed.
Jorian Hoover (34:48)
Story is not just this magical thing that’s made up and is Willy Wonka. Story is based off hopefully real things. But it’s a story nonetheless and it’s why someone can believe in you.
Daniel Faloppa (35:01)
Yeah. Yeah. Well, the believability of the story depends on like what has been done so far. That’s one of the major differentiators that differentiates one company from another. That’s the whole value of milestones, right? So ⁓ one of the gripes that I have with early stage DAX is that like sometimes you go through the whole thing and like some incredibly important milestones are not mentioned.
Jorian Hoover (35:11)
Absolutely.
Bye.
Daniel Faloppa (35:27)
And maybe they are achieved, maybe they’re not, but they’re not mentioned at all. Right. So you get to the end of the deck and you’re wondering whether the product has already launched. You’re wondering whether, like the team is full time or not, or, whether they started two years ago or five years ago, or, know, these types of things. And, ⁓ I always tell founders like, look, if like the only thing that makes this not like just a story on paper, just a Walt Disney movie is the fact that some of these things actually.
happened, right? So everything that has happened, you need to try to fit it in somehow. Like, you know, maybe in a side note, you know, instead of saying like, we’ll have 10 customers say like, this is our current funnel, and we have zero customers, but we have 10 conversations ongoing, right? So those conversations are actually happening, mention them, right? So yeah, so that’s my biggest thing on Dex.
Jorian Hoover (36:19)
That’s it.
Yeah,
yeah. And I think one useful question when you think about your pitch deck is if an investor were to just scan through it for 30 seconds, which by the way happens a lot, you know, maybe then then once they’ve scanned through it for 30 seconds, if they like it, they’ll go back and read it for five minutes. If they do the 30 second scan, do they understand the core ideas of your startup?
Or do they come out still wondering what in the world is this product? Do they have customers? Is the thing launched? Why is this team special? And that’s why, you know, having the titles be aligned with your key takeaways, having good visualizations, having good design, all those things are important. ⁓ Yeah.
Daniel Faloppa (37:04)
Yeah.
Yeah, I almost think about it as trying to make like a company is an abstract entity. The digital services are extremely abstract and that’s like 80 % of fundraising. Right. So then like when you put it on a deck, like it all feels extremely abstract and extremely not concrete. Right. And what I try to visualize is like the investor is going to try to visualize the company is a concrete thing.
Right. So ideally, if you do have like a factory, like put a picture of it, right. Like, like the more concrete you can make what you what you are making, the better, in my opinion. And like things like, okay, we are a team of 10 people. Maybe you have a picture of the team we, you know, or maybe even the team in the office. Right. Or we have this type of customers you put like their logos or maybe like a picture of a case study rather than just, you know,
Jorian Hoover (37:32)
Yeah.
Daniel Faloppa (38:00)
mentioning it in the text and things like that. It all helps to make something that is just a representation of a company into an actual company, in my opinion. Super nice. Okay. Yeah. There’s a lot of detail in these things. Yeah. think the next natural step, though, which I think is fundamental, and that’s actually…
Jorian Hoover (38:11)
That’s right. That’s right.
yeah, we can go like four hours here, I’m sure.
Daniel Faloppa (38:26)
One of the main things that I wanted to get to today is how do you look at the timeline of a fundraise? So we talked about step one. How long does that take? When do you start contacting investors? How does the scheduling work of the round?
Jorian Hoover (38:41)
Yeah, that’s right. the creating materials, creating the investor list, we didn’t talk about some of the materials, but anyways, all that can take usually minimum two months, kind of up to four months. It can happen quicker if you really have your ducks in a row. And if you’re a hot startup, it’s.
Daniel Faloppa (39:02)
if you
have to. Yeah.
Jorian Hoover (39:03)
or if you have to, right? But
typically it’s two to four months. And that’s all the way from the beginning questions of are you ready to raise, right, et cetera. So that two to four month period, but then you actually want to move into actually having conversations with investors. And I’m a big believer in parallel tracking some of these things.
So while you’re making some of these materials, while you’re making the investor lists, I would love for you to in the later stages of that be having some conversations with investors, whether they be VCs or angels, whoever your target is, to test how is that working and get a lot of those initial questions out of way. Because what you don’t want
to happen is to have everything perfectly wrapped up, feel that you’re ready to fundraise, and then say, and we can talk a little bit about how to run a great process, meet with 45 investors in a two week period, only to find out by the fifth conversation, ⁓ shoot, they’re asking questions I’m not prepared for, I wanna make some changes in the deck and now it’s a little bit too late.
Daniel Faloppa (40:08)
Yeah, my story
is wrong. Like maybe some miles, I still need to achieve some milestones even maybe. Yeah, yeah, yeah. Yeah, that’s super true. But yeah, okay, so you have those conversations towards the end of this, like say two to four months. And maybe one thing to stress here is that two to four months might sound long, but that’s the reality of it, right? You have a day-to-day job, like making a deck that is perfect, thinking through these things, discussing them.
Jorian Hoover (40:13)
Exactly.
Daniel Faloppa (40:36)
making a proper list with the proper connections and stuff takes time on top of your day to day. So the company needs to go on while this happens. And so two to four months is very realistic. It’s not what you find on TechCrunch, but it’s the reality.
Jorian Hoover (40:42)
Yeah. Yeah.
Yeah. Yeah.
And, let’s talk about the two months one, for example, right? Because that might sound like a long time, but that’s actually relatively fast because let’s say you’re, let’s say you were going to start on September 1st or so, right? You might be able to put all the materials and investor lists together all within one month, right?
But now you need to get intros into those investors. And that can take a few weeks as well. And so that’s sometimes what can add to that timeline.
Daniel Faloppa (41:16)
Mm-hmm.
Yeah, for sure. It’s
eight weeks. Two months is eight weeks, right? So you reach out to somebody that you want their feedback on your deck and they are off for a week and they schedule with you the week after or something like that. And yeah, it’s very, easy to get to two to four months. Okay, so you’ve done that. And so towards the end of it, you talk with a few investors that maybe…
Jorian Hoover (41:25)
Right.
Daniel Faloppa (41:43)
like you know already or maybe not, and just to get some initial feedback, just to make sure that there aren’t any major issues with your proposition, let’s say. And is that the point where you start also getting these intros just to… So how does the rest of the timeline look?
Jorian Hoover (41:59)
That’s right. So, yeah, you do these kind of, I call them like sneak peek meetings essentially with VCs to see how those are going, right? And as a quick aside, you know, if you have the luxury of lots of time, you know, and you’re thinking, hey, I might want to fundraise a year from now.
you might actually start doing some these coffee chats, getting no VCs earlier. I don’t want that to take over your job by any means, right? Cause job number one is to build the product itself, right? But you might start some of that networking earlier. But anyways, back to your question, right? How do you get intro to all these VCs? How do you kind of kick off this process? So if we return to that investor list, let’s say that had 120 names on it.
What I would love a founder to do is what I would call intro mapping, right? Where they’re going fund by fund through almost that entire list of 120 or at least the top half of it and trying to figure out what their intros are. And the number one way I would do that is just through LinkedIn. If you just search the fund in the search bar and then click people and then you can click kind of second degree connections.
you can find a lot of folks that way. And again, ideally it’s that partner that you actually want to get connected to. So if you make that big list of all the potential intro-ers, you can then reach out to those people and say, hey, get them a little bit jazzed about your startup and your fundraise. Maybe bring them into the fold and say, hey, I see you’re connected with this person. Might you be able to make an intro? And if they say yes,
What I actually recommend is a little bit counterintuitive where you say, thank you so much. Can I take you up on that in a couple of weeks or can I, you know, let me kick things off in a few weeks. Just because someone offers an intro doesn’t mean you need to take it right then and there. And if you hold off, what that allows you to do is really make sure you have a lot of intros happening all at once rather than sporadically. So I’ll pause right there.
That’s kind of strategy number one, if you can actually get those intros. I can also talk about like, what if you’re looking through that VC list and you’re not able to find intros? I can talk through some strategies on that side as well.
Daniel Faloppa (44:15)
Yeah, no, and that’s interesting. But I think like, until we finalize the process, then it’s difficult to visualize like, what is this all for? Because I think what you’re leading to is like, you need to get to a point where you you’re running the fundraising campaign for a short time, but very, very intense.
Jorian Hoover (44:24)
Yeah.
That’s right. That’s right. So yeah, let me touch on that. So ideally you’ve had this link meeting. So you have a good sense of like our, our VCs or investors biting or not. Right. And you’ll, you’ll know if they’re, they’re biting, I would then love for you to kick things off. And in a ideally two week period, you are doing dozens of meetings, right? Yeah. And
Daniel Faloppa (44:54)
Yeah, as many as you can. Yeah, with all the lists, like hit everybody. Yeah.
Jorian Hoover (45:00)
At that period is when fundraising does turn into a full-time job and I would not recommend running your business in parallel. I mean, maybe you have to do it a little bit for sure, right? You have to keep serving customers, but that’s where you really want to rely on a co-founder, your team, et cetera, to help you out. ⁓ So now you’re fully kicking off with investors doing as many meetings as possible.
Daniel Faloppa (45:16)
Yeah. Yeah.
Jorian Hoover (45:24)
That allows a few things. It allows you to generate hopefully some FOMO, fear of missing out, right? Among these investors, because just naturally your schedule is going to be more busy. There’s going to be more people trying to get after the deal. And also you’re going to be fully in fundraising mode and it’s going to give you confidence. If you’re talking with 45 investors in a two week period,
you will be you will feel more confident in your messaging, but you will also feel more okay if investors say no, because it’ll feel like a pipeline to you. You know, whereas if you’re doing things sporadically, if you’re talking about a couple investors per week, every no hits you so hard.
Daniel Faloppa (46:09)
Yeah, yeah. And it happens a lot that nos are from completely, like extremely strange reasons, right? So it’s extremely unpredictable to understand whether somebody is gonna say no or yes in this type of things. I feel like normal traditional sales, can expect things, you can qualify, you can do a lot. Unlike fundraising and &A,
It’s like, there’s a company, there’s an investor or a buyer that I never heard of in like Austin. And, you know, we never spoke before, but it turned out that they’re extremely excited about this and they just happened to sell their own company like a month ago. So they have the cash right now. And, you know, it’s kind of all aligns. And in the same way, it could be that an investor just saw a similar deck the week before and they
didn’t like it for some reason, and then they say no to your deck as well. So having that perspective of like, I still have 10 potential yeses on the list, like not all is lost, really helps handling the 90%, 95 % rejection rate that you’re gonna get. Now.
Jorian Hoover (47:15)
100%, you can’t
know exactly why they might turn a nose. And as you also said, you’d be surprised sometimes which firms end up stepping up to the plate and wanna take a swing at that.
Daniel Faloppa (47:27)
Yeah, also simply because you cannot know every firm, right? Or every partner or… Awesome. Yeah, so you try to concentrate everybody in like two weeks, something like that, so that you can really minimize the impact on the business of this process,
Jorian Hoover (47:43)
Yeah, an initial meeting within two weeks. And then
hopefully you’re then running the process kind of over the course of I would say, six to 12 weeks or so, right? So the two week period is the initial meetings. And then there’s going to be follow up meetings as well, hopefully leading to a term sheet kind of between.
Daniel Faloppa (47:54)
Yeah.
Jorian Hoover (48:04)
six to 12 weeks, maybe sooner if you’re a very exciting deal for sure. and then there’s, there’s time for closing, et cetera. Once you move to closing, that’s where you can also get back to kind of running the business or so closing can be a pain, but you’re able to, know, at least you’re only talking with one party at that point. What if, yeah, and yeah, for sure. And, one of the reasons the big investor list comes into play cause
Daniel Faloppa (48:06)
Yeah.
Yeah, that’s an episode on its own. ⁓
Jorian Hoover (48:31)
You might have heard me say the numbers kind of 120 and then maybe you’re having kind of 40 50 meetings, right? And you might think hey what’s happening with those other VCs? One strategy you can do is kind of top up the investors you’re having initial conversations with if many are starting to drop from the pipeline So that you’re continuing to kind of hit quote-unquote that top of funnel in weeks two three four
of fundraising if not enough people are kind of moving through your process, you know.
Daniel Faloppa (49:01)
Okay.
Yeah. Yeah. And that’s actually my question was, what’s like, what’s the latest that you allow somebody new to come into the, into the process.
Jorian Hoover (49:15)
What do you mean by that question?
Daniel Faloppa (49:17)
Like, I imagine like you start a process, word gets out, right? But somebody is like on holiday or something. And then they realize that somebody tells them like, let’s say three weeks into that process that you’re fundraising and they reach out and they’re like, hey, we just heard you’re running a fundraising process right now. We’d like to be part of it. Like, what’s the latest time that you allow them to come in or you just always allow them?
Jorian Hoover (49:43)
Yeah.
So I would distinguish here if they’re a lead versus like a follow on investor. If they’re a follow on investor, then you can be more chill with when they come on because they could throw in some additional capital later on. If they’re a lead investor, I wouldn’t want to bring them in too late because they’re, I’ve heard
Daniel Faloppa (50:03)
Yeah.
Jorian Hoover (50:06)
multiple time term VC where they said, hey, an exciting founder came to us where we maybe wanted to get into the deal. Maybe they didn’t think it was the next stripe, but they were still excited nonetheless. But they already had a term sheet or they’re moving towards a term sheet and the VC just said, hey, this is moving a little bit too quickly for us. We don’t have time. So VCs can move very quickly usually, but you don’t want to wait. I would say,
Daniel Faloppa (50:24)
Yeah, indeed.
Jorian Hoover (50:32)
you want to at least bring them in a week or two before you’re getting a term sheet at the latest. ⁓
Daniel Faloppa (50:39)
Yeah. Yeah. So, so like
you, are, let’s say fairly deep in conversations with like other two potential lead investors and like you’re kind of discussing the later terms. That’s when the term sheet is like two weeks out, let’s say that’s the latest that you bring in like a new part in the same role.
Jorian Hoover (50:57)
Yeah, at the early stages, right? And here’s where it matters so much. Are you raising a pre-seed seed series A versus are you raising a series B CD, right? Because series B CD is generally going to be harder to bring someone in very late in the process because they need to go through the data room. They need to get comfortable. They need to meet the management team. There’s a lot more things they really want to do. At the early stages, I’ve seen some seed deals go, you know, in a day or two. ⁓
Daniel Faloppa (51:03)
Hmm.
Yeah. Yeah.
Yeah.
Hmm.
Jorian Hoover (51:25)
because
essentially the VCs just need to talk to the founders, do a couple of reference calls and they can move. Yes, they might be on vacation in Majorca, but there’s still internet service down there. So, yeah.
Daniel Faloppa (51:33)
Yeah.
Yeah, fair enough. Yeah, and then
it’s just a standard, like safe and yeah. Awesome, awesome. Okay, yeah, that’s really overlapping with the, yeah, the processes that we normally encounter, well, not that we normally encounter, that we normally suggest, right? This is kind of the state of the art and…
Jorian Hoover (51:43)
Yeah.
Daniel Faloppa (51:57)
And this is really what maximizes your chances of fundraising. And I think a lot of the 93 to 95 % that we were saying before that doesn’t manage to precede. Like there’s a large percentage of them that doesn’t know about this process, that doesn’t follow it, or that for some reason think it doesn’t apply to them, because it’s a ton of work, right? It’s a ton of work, but it’s also one of the largest transactions that you’re gonna do. So…
Jorian Hoover (52:16)
Yep.
Daniel Faloppa (52:22)
Like it has to be a ton of work. It’s a very competitive process and so on. So you need to give yourself the best odds and this is how.
Jorian Hoover (52:25)
Yeah.
Yeah. And make sure,
by the way, on that ton of work, don’t let things slip through the cracks. You want to make sure you have, and it can be a simple Google Sheet, honestly, or you could use a lightweight CRM. But have a Google Sheet where you’re keeping track of all the conversations, all the to-dos, because I promise you, unless you have perfect memory, if you’re talking with 45 investors,
There’s gonna be lots of follow ups. There’s gonna be a lot of, wait, when did they last respond to this email? There’s a lot of things you need to keep track of that are easy to forget about if you don’t have them written down somewhere.
Daniel Faloppa (53:07)
Yeah,
and there isn’t an easy way to do that. Or at least for me, that’s incredibly hard to keep track of and to be consistent with. But I think that’s also why you’re trying to manage this in a short period of time. Because it feels like, OK, you add everything up and it’s like six months, let’s say, or maybe more. ⁓ That’s not.
Jorian Hoover (53:30)
Yeah, four
to six months like that, yeah.
Daniel Faloppa (53:34)
Yeah,
from the thought of like, I need capital to the actual capital hit in the bank, like, right, six months or more. And it feels like, okay, this is a lot of time. This is the shortest. Like, this is, you know, I think the practice that has been made by practitioners that have been doing this multiple times. And they’ve seen that this is the quickest time, the one with the better odds and the one that doesn’t affect the business negatively.
Jorian Hoover (53:38)
Right.
Daniel Faloppa (54:01)
or at least minimizes the negative impact on the business of a fundraising process. Because you’re going to be distracted for so long. It’s a tough process.
Jorian Hoover (54:06)
Yeah.
Absolutely. And time is money, right? So if we break fundraising into two parts, preparation and execution, the preparation part is the part you can kind of fully control, right? Like it’s making the pitch deck, the investor list, trying to get connections. Like you can do that work. The execution piece, you can just give yourself the best chance of running the best process.
the market will decide how quickly it kind of ends up moving. But you really want to make sure you’re giving yourself that best chance so that the process can move quickly as opposed to slowly because otherwise you’re prolonging the amount of time before you get money in the bank and before you can start getting back to what matters, which is building and selling. ⁓
Daniel Faloppa (54:33)
Yeah.
Yeah,
indeed. Then maybe like, if it doesn’t go well, when do you call it quits? How do you call it quits in the best way possible? Because that happens as well.
Jorian Hoover (55:11)
It does and there’s some internet lore out there of, you’ve just got to talk to 200, 300 investors out there and then you’ll find the right one. And I’m not going to debunk that because there’s some truth to, know, fundraising is a long game and many founders have that experience of talking to hundred or 200 plus investors. So last thing I want to say is, you know, don’t do that.
However, if you are getting repeated feedback where in your heart of hearts, you’re like, that is that is true. And it’s something you need to go fix in the business. Then if you hear that 30 times, 20 times, something like that, that might be a good time to pause because that might be something you need to go fix. And you might need to find a different way to get funding. Right. And
Daniel Faloppa (56:04)
Yeah.
Jorian Hoover (56:05)
Also, another reason you might kind of quote unquote call it quits is the time side of things, right? You might be going after a larger round via VCs or angel groups or whatever.
And, but if it’s dragging on, that’s all time that you can’t be building. And so at some point you might need to think, can we raise a smaller amount? Can we bootstrap? Can we do something different to try to get some of those milestones going and, and get back and then maybe raise in the future? I don’t know. What do you think there? ⁓
Daniel Faloppa (56:36)
Nice, yeah. Yeah,
I think that’s a great idea. The way that I think about it through the valuation lens is if you can standardize the feedback under the lens of risk and return, normally you can receive different feedback, but then it all communicates the same thing. So if it’s about, for example, the vision is not big enough, the market is not big enough, the…
a number of customers not big enough, feedback like that, it’s about the return. So you need to find a way to shape the story and the company because the story, again, is based on the company. So you need to find a way to shape the story and the company to actually be able to have that bigger vision if you want to raise venture, if you want to raise angel type of rounds. If the whole…
feedback is like you need more traction or like we need to see more certainty or we don’t believe you’re gonna be able to achieve this growth, like these type of things, then it’s all about the risk part. And again, you might have to, but I really like your model. Like, okay, you find that consistent feedback. You see that it’s not something that’s about how you communicate the story, because sometimes it’s just about how you communicate it and you need to learn about that and always adapt, but.
Jorian Hoover (57:49)
Yeah.
Daniel Faloppa (57:52)
But if it’s not about that, then yeah, that’s a great sort of heuristic to think like, okay, I might need to take a step back, reconsider the whole thing. And probably if you sort of maturely communicate it to the people that are currently in the funnel, you might have a really good outcome when you go six months after to the fundraiser again. like, know, this process taught us a lot. It taught us that our traction is not there yet. I’m sorry, but for now we’ll…
regroup and we’ll go after that and we’ll reach out again when we’re ready. Like that’s a fantastic way to do it. Always easier said than done, right? Because when you’re in it, like you feel it, right? You feel it on your skin. But yeah, that’s a great way.
Jorian Hoover (58:21)
Yeah. Yeah.
Yeah.
Yeah, and you know, you’ll often hear the next best thing after a yes is a quick no, right? And if you can get a lot of no’s quickly, that’s helpful to get that feedback sooner. And if for me, I’d prefer for you to get that even during those sneak peek meetings, you know, that that’s part of why I recommend those.
Daniel Faloppa (58:42)
Yeah.
Yeah, nice. Maybe to…
Yeah, maybe to get us back on a positive note, is there like an interesting fundraising story that you have where maybe the process will run very well or just maybe like a real story of what happened?
Jorian Hoover (59:13)
Yeah, absolutely. So.
Yeah, I can bring that in so many different directions. What kind of story do you think would be interesting? Because there’s a lot that come to mind.
Daniel Faloppa (59:22)
I think like a real story of somebody that ran this process, how did they do it, what did they find difficult, and how did it go in the end. ⁓
Jorian Hoover (59:32)
Yeah,
yeah, perfect. So a friend, I’ll keep this anonymous, but they’re kind of in legal space, was recently fundraising and they did a good job of for about six or eight weeks building up all the materials and kind of shopping those around with friends. They worked with me. They worked.
you know, they had some current investors and they got good feedback on that and really got a good understanding of are these materials are going to land or not. And they got confidence on that. They also worked their butt off to really create a curated investor list. And one of the things they did well was they were quite
Open with how they put that together. So I think they drew from 10 plus sources or so and they had a investor list that was nearly 200 VCs deep right
Daniel Faloppa (1:00:28)
and like
serious and targeted and like open to invest in their space. Yeah.
Jorian Hoover (1:00:30)
Serious and target. Exactly.
And they had a lot of notes written for each one. they, I think they actually use perplexity, which I love for getting some additional details on focus areas and so on. What they were then able to do was for their top couple tiers, they went into their network.
not only their existing network, but they started dialing up founders because founders generally love to help other founders and asking for help, asking for intros, et cetera. And they were able to get some of these intros very warmly into these VCs where people were messaging these VCs saying, hey, you’ve got to talk to so-and-so, you know,
It’s really cool what they’re building. And this founder, did a great job of getting people in between them and the investors really excited. So then when they went to fundraise, and by the way, they also had a buttoned up kind of data room. had a financial model ready to go. They had the other documents ready to go, the due diligence stuff, all that.
Daniel Faloppa (1:01:25)
Mm-hmm. Yeah.
Jorian Hoover (1:01:37)
When they went to fundraise, they were able to then have a lot of conversations with VCs all at once because the people making the introductions, they kind of told them to go all at once. So they had about 65 meetings in a two week period, right?
Daniel Faloppa (1:01:55)
Was it in a specific location or were they present to these meetings or was it a lot of calls? ⁓
Jorian Hoover (1:02:00)
They were in San Francisco. The first meetings
were all on Google meets or so. But then some of the second and third meetings were then in person in San Francisco. And they also flew over to New York for a few of these meetings as well.
Daniel Faloppa (1:02:06)
Yeah.
Aha,
that’s a busy couple of weeks, 65 comes.
Jorian Hoover (1:02:20)
It’s a busy couple of weeks. Yeah, so the 65 were all online and then it trickled down. And what happened to them was kind what you were mentioning where it was kind of a complete surprise of who went through the funnel. And so of the firms that they thought were kind of sure bets, like half of those moved through and then half were no’s and those were really surprising. And then there were a few dark horse firms that also kind of came through.
Daniel Faloppa (1:02:24)
Mm-hmm.
Yeah.
Yeah. Yeah.
Nice.
Jorian Hoover (1:02:49)
And then just to kind of finish that story, that culminated in three term sheets and the power, you know, and if we talk about the goal, the goal is to get multiple term sheets because then you can play them off of each other, not only to get better terms, but also for you to figure out who is the best VC you want to work with. ⁓ Right. And so through that, they were able to negotiate some of the term sheet terms.
Daniel Faloppa (1:03:10)
Yeah.
Jorian Hoover (1:03:15)
⁓ and also find a partner that they really liked. And they did most of the negotiations, if not all, prior to signing the term sheet so that when they closed, it was a relatively clean kind of process from the money. ⁓
Daniel Faloppa (1:03:30)
Yeah, nice. Yeah. And this is,
I mean, I imagine their legal background helped in that case.
Jorian Hoover (1:03:37)
It did. It did. Yeah. So they were familiar with it and they were in good conversations with their startup lawyer beforehand of, you know, what is all the due diligence you need to do. So that was an example I saw recently of a friend who did it very well, the whole fundraise process.
Daniel Faloppa (1:03:48)
That’s also great.
Yeah.
And just the three term sheets, they would be with three potential leads, right? And then the investors that identify themselves as followers, they would just come in whichever lead VC would be the chosen one.
Jorian Hoover (1:04:11)
That’s right. So the lead VC was the most important, the most important piece. The good news is at the earlier stages, if you get a lead VC and they’re writing a pretty big check, it’s relatively easy to get follow on VCs that want to come through. And so then they were able to get those in on the process as well. And I think they were very strategic about which
VCs they wanted at that point because once you have your lead You know, you don’t need to take more money from other people and so you want to be very selective on why am I bringing this person on? Not just they bring money to the table
Daniel Faloppa (1:04:47)
For sure. Yeah. Yeah. especially
if the lead can cover the whole amount then. Interesting. Interesting. And yeah.
Jorian Hoover (1:04:53)
Yeah, and there’s some
negotiations that happen there because if you actually have too many people interested, it can become a little bit of a like school fight amongst the VCs of how much allocation they get. And you do want to be a little bit careful there as a founder, because if you get your round over allocated, you could be giving up more dilution than you initially hoped for.
Daniel Faloppa (1:05:18)
Yeah.
Jorian Hoover (1:05:20)
So obviously it’s a good problem to have, but it is actually a problem a lot of high quality founders run into where they start saying yes to too many people and give away too much delusion. I don’t know if you see that also, but yeah.
Daniel Faloppa (1:05:34)
yeah, yeah, for sure. And we haven’t touched on valuation today because there are too many things. But yeah, the way that we think about it is always trying to balance the dilution based on the idea that you’re going to have to retain enough equity to have incentives to be with the company through thick and thin. So if you end up giving away too much of the company in the early stages,
And like you increase the risk of like founders splitting up and so on, lowering ultimately the probability of success with the company. So you see it with like specific companies that are really hyped, right? And it happened in the past already, especially through the Zerp years and now with like AI companies that people don’t think too much about, okay, what kind of dilution and also what kind of pressure this type of hype is going to bring to the company.
And is it actually beneficial? it’s flattering, it’s nice. It’s like, you know, there is this idea that like more capital, more good, right? And it’s so hard to stop oneself there when you have the honey jar in front of you, right? But it can be very detrimental. And there’s actually a ton of research over the fact that more capital is not more good. Like more capital is actually very detrimental to the success rate of the companies.
Jorian Hoover (1:06:50)
Yeah.
Daniel Faloppa (1:06:51)
So yeah, it’s definitely something to think about. Again, easier said than done. Yeah, when you’re in the situation.
Jorian Hoover (1:06:56)
Absolutely.
And you mentioned we haven’t talked about valuation. I just wanted to ask you about that. Like, obviously you have a lot of different types of founders that are using Equidem. ⁓ But when you come across a founder who’s running kind of a high quality kind of fundraise process and they’re using you guys, like how do they usually leverage?
kind of the products they get from you to really help them in that high quality kind of process.
Daniel Faloppa (1:07:25)
Yeah, so the goal, like the top, the best way, the best tips, right, are in that preparation phase, right? You’re thinking about how much to raise. You’re thinking about your story. At that point, you can, you should be thinking also about your valuation, right? And what using Equidem in that stage allows you to do is it allows you to figure out that risk and return balance and like whether with this type of growth, like this type of valuation is justified and the other way around.
what kind of growth would justify a certain valuation, right? So that’s kind of super helpful to give you feedback on whether the strategy is realistic and whether like a certain amount of capital would make sense for a certain type of company, right? And this is surprisingly useful even at very early stages where like, course, projections at that stage are, yeah, more strategy than like anything.
Jorian Hoover (1:08:06)
Yeah.
Yeah.
Daniel Faloppa (1:08:19)
but
it still allows you to understand that stuff. And it allows you to communicate how ambitious the company is, right? Because everybody has a different definition of it. And if you say like, we are an extremely ambitious company, that doesn’t mean anything. Well, it means different things to different people, right? So that’s kind of ideal. And then you of know that valuation, and you can think about it when you have those initial conversations of like setting up your proposition.
Jorian Hoover (1:08:35)
Yeah.
Daniel Faloppa (1:08:46)
You call them spot meetings? No, quick meetings. ⁓ Yeah, sneak peek meetings, right? So that’s perfect. We should establish that term. It’s a great term for those meetings. Yeah, and then you get into your two weeks of intensity. If you talk with experienced VCs and people that are from the industry, you might not have to bring up valuation too much.
Jorian Hoover (1:08:49)
⁓ speak meetings.
Yeah, yeah, I think I got it from somewhere else, but yeah, it’s a great term nonetheless. Yeah.
Daniel Faloppa (1:09:13)
But if you are raising an early round and you’re talking to investors that maybe haven’t done a ton of investments in your sector, they might be used to different practices, different assumptions on growth and other stuff. You might like, you have a much more confident idea of where you stand on valuation and where you stand on parameters at that stage. And then after that, when you are negotiating with your lead, you might get to a point where you’re knocking heads on valuation and then…
the report there can help in kind of unlocking that conversation and saying like, look, nobody knows much about valuation, but we’ve done our homework. This is like a number that we calculated, like, you know, what’s wrong with it, right? And like, you know, it might allow to unlock that conversation. ⁓
Jorian Hoover (1:09:58)
Yeah. Data is
power and having that background research. Even when you’re right for VCs or good VCs, you kind of want to let the market a little bit tell you what that valuation is. But if it’s in a back and forth, it’s great as a founder to be armed with data in different ways, right? So that you can actually negotiate. Because if you don’t have that kind of information,
⁓ it becomes a lot harder to really have a point of view ⁓ on valuation. ⁓
Daniel Faloppa (1:10:28)
Yeah.
Yeah,
exactly. And I think that confidence shows, right? When somebody asks, like, if you haven’t done your homework, when somebody asks, like, why are you raising this much? Do you think it’s appropriate for your stage? Like, you think, you know, like those type of questions, it’s helpful to think them through beforehand. And if you have investors that are not…
expert in that industry. Again, this is mostly like when we’re talking about angel stages and so on. But like, we got a lot of questions of companies that want to communicate what could be the return, right? To investors that have no idea because they’ve been only investing in real estate so far, or they’ve been only investing in like factories or traditional businesses so far, right? So…
Yeah, so having that information comes helpful in those maybe edgier situations. But even for repeated founders, we have a bit of the same situation. Repeated founders know that valuation is up to negotiation, it’s up to the market and so on. But they want to have a support document, they just want to be done with it in a quick way. And we become that quick way.
Jorian Hoover (1:11:36)
Yeah, very, very cool.
Daniel Faloppa (1:11:38)
Yeah. Awesome. So we were running out of time for today. There’s still so many things that it would have been awesome to talk about. Common mistakes, common misconceptions, the whole like how’s the US fundraising environment versus the European one? How is AI changing everything? So I think this is a massive teaser for a potential episode in the future.
Jorian Hoover (1:11:58)
I thought so too. Yeah, is there any
I have a little bit more time, but is there any like last question or two that you wanted to wanted to ask?
Daniel Faloppa (1:12:07)
I think maybe
like, you we can just leave it with like, what would be your, your, sort of top advice that you want to get out there, for, ⁓ for founders that are trying to fundraise for the first time.
Jorian Hoover (1:12:17)
Yeah, my top piece of advice is make sure you have a robust story of why should someone should invest in you, right? And maybe the second thing I would say is really treat fundraising like a project and try to pick this several month to six month window where you’re doing the preparation and execution.
And hopefully from some of the topics we’ve talked about today, other resources, you can really design it in a way so that you put your best foot forward and give the best chances at running a great fundraise and getting an outcome you’re really happy with.
Daniel Faloppa (1:12:56)
Awesome, Appreciate it, Joran. Yeah, fantastic information. I think fantastic for founders and yeah, so much more to discuss.
Jorian Hoover (1:13:05)
Yeah, thank you so much for having me on. It’s really been a pleasure and always love nerding out about fundraising.
Daniel Faloppa (1:13:12)
Sounds good. Have a great day.
Jorian Hoover (1:13:14)
Alright, thanks, you as well.