Fundraising

The Traditional “Fundraising Funnel” In the past, we’ve discussed how one can easily draw parallels between fundraising and a traditional sales & marketing funnel. Just as a sales & marketing funnel can take different forms, so can your fundraising funnel. Generally, we’ve laid out the “fundraising funnel” in 3 simple steps: Attracting and adding investors (leads) to your top of the funnel on a regular basis. Nurturing and moving those investors through the funnel with the goal of adding them as investors (customers) or engaging them for a future round. Building strong relations with your investors to convert them to promoters, evangelists, or future funders (customer success). Since “Account Based Marketing” has taken over marketing blogs, events, and discussions we’ve laid out how to apply ABM to your fundraising efforts. What is Account Based Marketing Account Based Marketing, according to Marketo, is “An alternative B2B strategy that concentrates sales and marketing resources on a clearly defined set of target accounts within a market and employs personalized campaigns designed to resonate with each account.” In the sales & marketing world, implementing ABM tends to be a costly endeavor, but there are also countless benefits: clear ROI, focus on key accounts, personal and optimized, sales alignment. Terminus, a leader in ABM software and originators of #FlipMyFunnel, use ABM to flip a traditional funnel on its head like so: Terminus defines the 4 stages of the flipped funnel below: Identify – Start with the best-fit. Generally guided by an ICP; Ideal Customer Profile. Expand – Focus on people in the same roles. Find contacts within the companies that you’ll engage during the sales & marketing process. Engage – Right content, right channel. Use the most engaging and targeted form of content to target your contacts and accounts. Advocate – Turn customers into fans. Your marketing team should do everything in its power to ensure customer success by retaining accounts and keeping them happy. How to Apply it for #AccountBasedFundraising We were fortunate enough to pick Sangram Vajre’s, Chief Evangelist at Terminus, mind about using a flipped funnel approach to fundraising. When asked how a founder might apply ABM to fundraising, Sangram said, “The flip my funnel approach can be applied so many more ways than an account-based marketing approach. From a fundraising perspective, lets say your a B2B company in the marketing space. Start by looking at the top 10 companies that have raised money in the last 12 months and who they have raised from and start building your list from here. By starting with a priority list of targeted VCs you won’t have to explain the market and field unqualified inbound interest. As long as you know who your target audience it will really help you solidify where to spend your time.” As a founder himself, Sangram used the flipped funnel approach when fundraising. At Terminus, Sangram and the team had a list of over 100 investors and were flooded with inbound interest from angels and other firms. By limiting the list to ~10 investors they were able to do in-depth research and make sure their visions aligned when they set out to fundraise. Finding the right VC firm can be an integral part of your company’s success and can be started by defining your values and narrowing your list of investors by their visions, experience, and portfolio. In the words of Sangram, “Finding a VC firm is almost like finding a co-founder. Any due diligence that you would do to add a co-founder you should when adding a VC partner.” Identify Start your fundraising process by identifying key “accounts” (read: investors) that are strategic fits for you business. Keep in mind things like location, industry focus, stage focus, other investments, and deal velocity. We suggest developing an “Ideal Investor Profile” to define what investors you’ll want to target during the fundraising process. Expand Find the exact partner or decisionmaker you’ll want to communicate with during your fundraise. Larger firms often have different partners that handle different stages, industries, etc. If there is an advocate and thought leader for your industry within a firm, make sure to add them to your list as well. Unlike the sales & marketing “expand” stage, you’ll likely be able to expand externally from the investment firm as well. Firms decide to pass for a number of reasons, but they also offer a large network. They may be able to make intros to other investors in a similar position, and those investors may be ready to pull the trigger on an investment. Engage Dripping content to your targeted potential investors during the fundraise process is critical. Even if you’re not trying to actively close capital, you should constantly be nurturing and engaging potential investors. We have found it best to send out a short update on the state of the business and industry on a monthly basis. Share a promising metric or two showing strong growth in the business and highlight any significant wins/improvements. Advocate Once you’ve landed an investor, it is vital to form a strong relationship and turn them into your company’s biggest champion. Just as you use customer success to keep your customers happy, you should be intentional about building relationships with your investors and keep them happy, too. Your investors should be your company’s biggest advocate, but that will only be true if you’re top-of-mind for them. Make sure that relationship is strong, and good things will follow. By turning your current investors into advocates you’ll be able to call on them to help fill the top of your funnel with qualified investors from their network. Or better yet, they’re the first people you can go to when you need more capital in your business. There is no definitively correct way to run a fundraising process, so flipping the traditional funnel on its head and using an “account based” approach can be an interesting strategy. If you’re ready to start engaging potential investors and turning them into advocates, sign up for a free trial of Visible here.

In the words of AngelList Founder Naval Ravikant, “It’s never been easier to start a company. It’s never been harder to build one”. The competition for capital and talent is greater than ever. On top of building a great business, obtaining capital to grow your business is tough enough. From countless cold emails, meetings, and rejections fundraising is a long, often daunting, task. While most founders don’t have the fortune to 100% focus on fundraising, creating a simple and efficient process can be the difference between a successful or failed raise. We’ve laid out 3 tips below to help simplify the fundraising process so you can stay focused on your day-to-day: Do Your Homework Before Reaching Out Before you send an email to a perspective investor make sure you’ve done your research. There is no reason to spend time on an email or sitting in a meeting with an investor and find out after the fact that they’re not a good fit. Mark Suster, Managing Partner at Upfront Ventures, suggest building a list of 40 qualified investors before firing off your first email. Use tools like Crunchbase and AngelList to easily put together a list of qualified investors based on their location, industry focus, stage focus, portfolio companies, and deal velocity. Track Your Interactions During the fundraising process theres a good chance you’ll talk to 100+ different investors. Its easy for conversations and notes to get lost in the shuffle. Just as you would jot down notes and the information for a sales process in your CRM the same should be said while fundraising. We suggest creating a simple Google Sheet tracking the investors you’ve spoken with, information shared, and relevant notes/recordings/etc. If necessary, share the sheet with your co-founders to gage the team’s sentiment towards different investors and meetings. This will come in handy when its time to fundraise down the road and need to pull on previous conversations. Go to Existing Funders First If you have already have investors you will want to start here. If you’ve kept your investors in the loop, a request for a meeting should be an easy string to pull. As Jason Calacanis puts it, “There is another really awesome reason to keep investors updated: they didn’t give you all of their money — they have more! They want to give you more! If you keep your investors engaged with honest updates they will reward you by participating in future rounds”. If for whatever reason your investors are not going to fund a future round they will be able to make intros to other, already qualified, investors as well.

From working with hundreds of founders we often hear, “what metrics and data should I be sharing with potential investors?” With droves of content laying out what you should and should not share before an investor meeting it can often complicate the process. To some investors, a “data room” and certain metrics are vital but the opposite can be said for others. Despite the difference from investor to investor there are a few traits most will keep their eye on during the fundraising process: Market Data Don’t reinvent the wheel. When you’re pursuing a specific industry or market, there are generally benchmark numbers and stats standardized across the industry. Share these projections, benchmarks, and stats with prospective investors and paint a picture of the potential market and how you will use their capital to penetrate the market. If you’re targeting the right investors they’ll likely have experience in the field and should already have a deep understanding and belief in the market. Growth To get your foot in the door, you’ll need to show some kind of current growth and traction or the potential for growth. This more often than not comes in the plan of a business/financial model and historical data (which often ties into the market info above). At the end of the day, an investors job is to generate returns on their investment. Show them a strong financial model that creates growth for the business and returns for them and their LPs. Some investors and founders make the case that you should be careful in how granular you get with the model you’re sharing as it can often lead to unnecessary questions/confusion. As Tommaso Di Bartolo wrote for Startup Grind, “Using excessive metrics can lead to unnecessary discussions that don’t matter at an early stage”. Related Resource: What Should be in an Investor Data Room? Unit Economics & Margins Margins on your product is a large part of the path to profit and returns for your investors. Margins are easily benchmarked by industry. Investors generally have a % they are looking for in the back of their mind. For example, a SaaS business should have no less than 60 or 70% gross margins. As Tim Anglade of Scale Venture Partners puts it, “If you’re really not able to capture a margin on your current pricing now, it’s unlikely to change in the future, right? And you’ve got to stay within a certain benchmark to have a good business”. Customers Your customers are your business. Clearly showing potential investors that you can attract, convert, retain, and engage your customers is vital. Being able to show proof of repeat and loyal customers will help ease the mind of investors. This can come in the form of customer satisfaction surveys, net promoter score, and retention rates. Related Resource: A Guide to Building Successful OKRs for Startups

Last week, we wrote about the parallels between a traditional sales & marketing process to a fundraising process. This week we’ll take a look at going from prospecting potential investors to attracting potential investors and moving them through your “investor funnel”. In its simplest form, a traditional sales & marketing process can be broken into 3 steps: Attracting and adding qualified leads to your top of the funnel on a regular basis. Nurturing and moving the leads from through the funnel with the goal of closing them as a customer. Servicing customers and creating a great experience until they become evangelist or promoters. You can easily translate the 3 steps into a similar system for fundraising: Filling the Funnel Unfortunately, qualified investors don’t automatically appear at the top of your funnel on a daily basis. On top of building a great business that investors will want to invest in you’ve got to make sure you’re doing everything in your power to pull investors into your funnel. Networking and email campaigns are key when it comes to filling the top of your investor funnel. Don’t be afraid to email or meet with an investor even if you’re not actively fundraising. Share your big-wins, losses, key metrics, etc. with your list of prospective investors to build trust and a long-term relationship. Jason Lemkin of SaaStr suggest making a “new VC quota” a part of your day-to-day job; “Meet that junior VC, that out-of-towner… Take that meeting with the guy that’s ‘a big fan’ if that’s your best investor meeting idea for the week, even if you know he doesn’t really understand what you do. It’s a quota. Take the best prospect you have, and either work that deal … or spend the hour prospecting to get another deal, another VC “. Nurturing & Moving Through the Funnel While you may not be actively trying to close new investors and add capital you should constantly be working the top of your funnel. Business plans change, investor interest wanes, and a slew of “maybes” and “no’s” will land in your inbox at crunch time. Meeting with investors only when you need capital likely won’t do the job. Staying fresh on the mind of potential investors 365 days a year using traditional marketing tactics (email drips, common networks, social media, PR, etc.) will pay dividends when its time to pull the string on a new round of capital. Set up a “drip campaign” to share updates with your potential investors on a monthly basis. We have found it best to send out a short update on the state of the business and industry. Share a promising metric or two showing strong growth in the business and any significant wins/improvements. Current Investors All new fundraising roads will lead to your existing investors and relationships. Customer success is key to maintaining a strong relationship with customers once they reach the bottom the funnel. The same can be said for your investor funnel. As Jason Lemkin puts it, “If your existing investors, even if they are angels, small VCs, whatever … don’t give you a 100.0000% positive reference … you may be dead in the next round. If I call up your existing angel investor, and she pauses when I ask what she thinks of you and the company … as a prospective investor for the next round, I’m probably out. Done”. So how do you make sure your investors are cheering for you? Just how you would service a customer to turn them into a promoter or evangelist: Invest in Investor Updates – Build a cadence and keep updates succinct as well as comparable. Consistent communication builds trust and keeps you on top of mind for your investors. Transparency & Candor – While driving an internal culture of candor results in better decisions, execution and output, the same can be said when communicating with your external stakeholders. At the end of the day, your investors have been in the same situation and are there to help you through “the struggle” or better yet, help you get to the next stage in your business. Respect their Time – Your goal should be to give your investors the ability to make the largest impact on your business with the least amount of exertion. When you are seeking advice or introductions, be specific. Find new investors and manage your fundraising with Visible Connect:

A post by Brock Benefiel. Brock is a Digital Marketing Consultant, Tech Writer, and Author of the upcoming book Flyover Startups. Everyone finds time to talk up culture. You can find literally tens of millions of articles preaching the importance of establishing the right startup culture and enforcing it. If you’d like, you can spend endlessly amounts of time reading up on it and hear over and over again why it matters. But you’ll never have enough time to talk to your investors about culture. Instead, you’ll be forced in board meetings and company reviews to get straight to the point if you want to convey what’s important about your all-important company culture. So speak the language of your investors: use metrics, cite examples and show change. Your passion for your startup’s culture will be visible on your face and 80% of culture is expected to come from the founder. But your strategy for culture and any changes along the way should be put on paper and pushed in front of your investors regularly. Then, no one will be able to question its importance. So, how do you concisely and effectively communicate to your board that you’ve adequately defined your culture and have made it a successful one for your business? Use these strategies: Employee NPS scores If it’s works for customers, if we advocate it for investors, then don’t second guess the power of NPS when it comes to addressing the need for a quick and easy gauge on employee satisfaction. NPS is a hard metric and one that you can track, share with investors and work to improve. You company reviews are loaded with growth stats and NPS fits in nicely among the bunch. At HubSpot, they dig into the raw data from overall NPS and segment scores by department, tenure of employee, office location and gender in order to spot specific problem areas. Then, they can reach out to groups of employees most likely to be unsatisfied and find reasons for their disapproval. Hand the overall and segmented NPS numbers to investors and you’re already have shown your testing your employees on their satisfaction. “The employee Net Promoter Score is by no means a comprehensive way to measure employee engagement,” Jamie Nichol writes in CultureIQ. “Instead, it serves as a useful metric to track at a regular frequency over time.” NPS will never tell you the full story. But it’s a hell of a way to start the conversation. Problems solved “Even if the founders have invested a lot of time instilling culture into their core team, as the company scales and silos naturally form, negative culture can take root and easily get out of control,” Eric Blondeel and Moufeed Kaddoura contend in YCombinator . Your investors aren’t going to expect a flawless office environment. But they will expect a founder to be the one to quickly recognize the inevitable culture problems that arise and fix them just as fast. Your reviews and board meetings are great opportunities to cite specific examples of something that went awry and quickly explain the solution. Attacking it and fixing it shows you have your finger on the pulse of the company’s culture and can handle things as you scale. That’s a qualitative case of both founder and startup growth and investors will always care about that. The culture elevator pitch You are bound to grow a culture that is nuanced, complicated and worthy of long, flowery descriptions. But you need an elevator pitch for culture – have a few succinct examples of what makes your startup great. “You want people to say your startup is different from everyone else. But in what way?” First Round Review notes. “Figure it out early.” These takeaway examples serve as talking points for your investors. They are conversation starters when mentioning your business to potential investors, customers and employees. It’s also proof on your end that you care about culture and possess the ability to make it distinct. In his reflection five years after he sold the company, Eric Tobias can name specific aspects of his former company’s culture that made the business what it was and why it can be easily commerated no much how much time has passed. Culture is best when it’s sticky and easy to explain to anyone. Talk one-on-one meetings Have a meeting and talk about other meetings. How sexy?! How meta?! Okay, it sounds a bit ridiculous. But any good business treasures one-on-one meetings. They make one-on-ones a priority and have the leadership team spend these sessions asking detailed questions to find out what employees like and what’s frustrating them. These frontline efforts are key to getting a sense for your startup’s culture and how to improve it. If you need a helpful set of feedback questions, YCombinator has one here. Let your investors know you have a process in place that allows your managers to monitor the company’s culture and another measure to spot problem areas before they get out of control. Retention rate Finally, a simple but essential one. If you’re sharing your retention rate, your investors will appreciate the transparency because this can be an uncomfortable one. If your retention rate is low, you’ve got a culture problem on your hands. Either you’re not providing a valuable experience for the employees that are heading out the door or you haven’t defined culture well-enough for hiring managers to know how to spot it in potential employee interviews. A drop in employee NPS can be the canary in the coal mine but if retention rate plummets that’s when the emergency alarm goes off. Show your investors you’re monitoring it closely and prepared to act if you’re experiencing unnecessary churn.

What is debt financing? Startups are in a constant competition for 2 resources; capital and talent. When it comes to raising capital for your startup there are quite a few options. Outside of bootstrapping, debt and equity financing are 2 of the most popular options. According to Investopedia, “Debt financing occurs when a firm raises money for working capital or capital expenditures by selling debt instruments to individuals and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise that the principal and interest on the debt will be repaid.” On the other hand, there is equity financing. How does debt financing work? A lender is generally evaluating if and when a business can be repaid. A team of lenders will generally evaluate a few things, this generally starts with past performance and future projections. A few keys to understand when approaching a lender or bank for debt financing: Complete financial statements and documents. Poor or incomplete financial statements can put doubt in the mind of a debt-provider. Most debt-providers will look as far back as 2-3 years. For example, Lighter Capital will occasionally make investments with ~6 months of solid financials. Understand your business. Have a deep understanding of where your customers, how you’re acquiring them, and why they are churning. Revenue Growth. You don’t have to be a profitable company to receive funding from Lighter Capital but should have a clear plan and pathway to profitability. Downside Scenarios. As mentioned above, debt-providers are focused on repayment as opposed to extreme upside. Make sure you lay out downside scenarios to show you can navigate down periods. High Gross Margins. Going hand in hand with “downside scenarios” show debt-providers you have high gross margins and can limit the downside as much as possible. Story matches the numbers. If you’re telling a great narrative and the data/financials are not matching up with the story chances are that will cause doubt in the mind of the providers. Plan for New Capital. Show you have a plan in place for how you will allocate your new capital. Allen of Lighter Capital has seen a clear connection between a company coming to them with a solid plan and their future growth. Pros of debt financing Every financing option will come with its own set of pros and cons. Check out a few of the key pros of debt financing below: Maintain ownership — debt financing does not require founders to give up equity or ownership in their business Efficient growth — taking on debt can allow companies to buy the resources and hire the talent they need to fuel growth Tax benefits — As the team at Lightspeed put it, “A strong advantage of debt financing is the tax deductions. Classified as a business expense, the principal and interest payment on that debt may be deducted from your business income taxes.” Cons of debt financing On the flip side, there are cons to debt financing. Check out a few examples below: Repayment — of course, you’ll need to repay the debt. This requires a predictable business model. Collateral — debt also requires collateral. This can be limited to early-stage companies. Types of debt financing There are different types of debt financing that startups can leverage. Check out a few types of debt financing below: Bank Lending — The most traditional form of debt financing requires taking a loan from a traditional bank or institution. Recurring Revenue — There are specific lenders dedicated to recurring revenue business models (SaaS). Family or Friend Lending — Startup founders can also take on debt or loans from family members or friends. What is equity financing? According to Investopedia, “Equity financing is the process of raising capital through the sale of shares. Companies raise money because they might have a short-term need to pay bills or they might have a long-term goal and require funds to invest in their growth. By selling shares, they sell ownership in their company in return for cash, like stock financing.” When thinking of equity financing in terms of startups we generally think of venture capital and angel investors. When a startup goes out to raise a funding round, they are selling shares (AKA equity in the company) for a set amount of capital. How does equity financing work When raising equity financing or venture capital it often follows a process. This involves the founder focusing on the fundraise. Finding the Right Investors To start a fundraise, you first need to understand what investors you should be talking to. A venture fundraise is time intensive so it is important to make sure you’re spending your time with the right people. Check out our investor database to find the right investors for your business here. Related Resource: An Essential Guide on Capital Raising Software Pitching Your Company Once you land a meeting with a potential investor you will need to pitch your business and make it a point for them to invest. As we wrote in our Fundraising Guide, “If you’ve done your research and asked the right questions, you’ll be armed with the information you need to effectively pitch your company. At the end of the day, pitching is storytelling and it is your job to figure out how each potential investor fits into the narrative. If done correctly, you’ll be able to control the conversation and better your chances of setting future meetings.” Due Diligence If you are fortunate enough to gain interest from a venture capitalist they will perform due diligence to confirm what you’ve been pitching is true. This means they will be calling on customers, other investors, and combing through historical data to confirm they’d like to make the investment. Pros of equity financing Like debt financing, equity financing comes with its own set of pros and cons. Check out a few of the pros of equity financing below: No Loan Repayment — With equity financing, the burden of repayment does not fall on the shoulders of a founder. In turn for giving up ownership, they are giving up the burden of repaying debt. Resources — Many equity financers, like venture capitalists, come with resources to help startups grow and scale their operations. Cons of equity financing On the flip side, there are also cons that come with equity financing. Check out a couple of examples of the cons of raising equity financing below: Loss of ownership — Giving up equity means that founders are giving up ownership and potentially decision-making powers. Expectations — When adding on new shareholders, chances are they will have requirements and expectations that may not align with your own. Types of equity financing Equity financing, and the individuals/firms that support it, come in different shapes and sizes. Check out a few examples of equity financing below: Venture Capital — dedicated firms built to invest in high-growth startups Angel Investors — high net worth individuals that use startup investing as a way to diversify their investment portfolio Private Equity — Professional investment firms dedicated to helping operate and scale large startups. Related Resources: How to Find Investors How to Effectively Find + Secure Angel Investors for Your Startup Private Equity vs Venture Capital: Critical Differences Debt vs equity financing for startups When evaluating debt and equity financing there are a few key major differences that a startup and founder have to evaluate. The Cost The major difference when evaluating debt and equity financing is the cost to your business. On one hand, you can take debt financing and will need to pay back the interest rate and principle at a later date. This generally assumes that your business is bringing in some type of predictable revenue. There is a clear cost associated with paying this back. On the flip side, is the cost of equity financing. While there is not a set amount of capital you will need to pay back you will eventually need to pay the cost of the shares at a later date. This can be expensive if the business turns out to be worth a large amount. The Business Model When understanding debt vs. equity financing you need to understand the impact your business model will have on each as well. When raising debt financing, the lender will want your business to have predictable revenue and clear projections so they know that they will be repaid. On the other hand, equity financing allows small businesses to pursue a new market where they may have little to no data. This is because someone buying equity, especially a venture capitalists, are investing in the future value of the company and the ability for the team to execute on the vision. When to seek out debt vs equity financing As we’ve discussed earlier in this post you need to understand the costs associated with both equity and debt financing. Securing Debt Financing For those who aren’t growing at 300% but rather 150% or 200% a good option would be to look into debt financing. While there are countless types of debt financing, Lighter Capital focuses on “revenue-based financing”. There are several factors that Lighter Capital looks into when evaluating a potential investment but as Allen Johnson of Lighter Capital puts it, “At the end of the day they’re assessing the risk to get repaid”. Securing Equity Financing To kick off the webinar, Mike discussed experiences from Visible’s own fundraising efforts and what we’ve seen from our partners and countless companies using Visible for investor relations. The biggest takeaway from raising equity financing? It is very much a process and can be very time consuming. Raising equity financing is essentially a full time job for the CEO or founding team. It is not something that can be done lightly and viewed as a “side project”. You need to build relationships and a pipeline of investors, show momentum, generate inbound interests, etc. Equity financing allows pre-revenue companies with a strong vision and adjustable market an opportunity to secure capital and pursue their vision. Investors are expecting a return and are often in pursuit of an “extreme upside”. As you can see below, Christoph Janz of Point Nine Capital breaks down what it takes to raise a Series A in SaaS below: Basic Info and Docs You’ll Need While Raising Venture Capital: As part of the process of raising venture capital, VCs will need to understand your past business performance. Venture capitalists are generally investing in a highly experienced team, intriguing and emerging market, and/or a world class product. Related Reading: Building A Startup Financial Model That Works With that being said, they will generally need a few of the info and docs below to evaluate their investment decision: Legal Docs, Cap Table, Financials, etc. A venture capitalist will want to see who owns the business and how it is structured. They will want to see the cap table to understand this. They will also want to get a look into historical financials to understand how the business is burning cash and handling their finances. In the wake of recent VC failures, it is especially important to have cash burn and financing under control. Trends over time VCs are largely investing in the founder and the team if there is little to no revenue or historical data. It is important that the founder and team takes the relationship and transparency seriously. A regular cadence and rapport leading up to the investment. Investors won’t make an investment in a single point of time. Customer Acquisition Model VCs will also want to understand your customer acquisition model and the sustainability of it moving forward. If it costs more to acquire a customer than they are paying, it is likely not a feasible business. To learn more about customer acquisition models, check out this post. Total Addressable Market and Sensitivity analysis If a business has little to no historical data, a VC may want to better understand the market they are investing. If a market has the opportunity to be large and the investment has the opportunity to penetrate a large percentage of the market, it may be an interesting investment. You can learn more about modeling this and sharing TAM with investors here. Both debt financing and equity financing are solid options depending on your stage, metrics, and financials. Each has its pros and cons for each company. It is ultimately up to the founder to have a deep understanding of their business to make sure they are making the right decision for their business. The Visible newsletter brings you weekly, curated fundraising news, articles, and events Every Thursday we deliver curated insights to help founders raise capital, update investors, and track their key metrics in our newsletter, the Visible Weekly. Subscribe to the Visible Weekly and stay in the loop with fundraising data and insights here.

Raise capital, update investors and engage your team from a single platform. Try Visible free for 14 days. Fundraising is difficult. On top of building a fundable business, founders need to find the right investors, build relationships, successfully pitch their companies, and more to close a round. In order to better help founders find the right investors, we’ve built a totally free, community-sourced investor database, Visible Connect. SaaS startups and SaaS companies are commonly funded by different VC funds and angel investors. The list below is an active list of 60+ SaaS investors that are investing in seed rounds (some invest in later stages as well). The list uses our data from Visible Connect – we focus on key information like check size, investment location, fund size, and more. The link to “View their profile” will display firm information like their thesis, check sizes, focus, recent fund size, etc. In order to better help you track your raise, you can also add investors directly from Visible Connect to your dedicated fundraising pipeline in Visible (Learn more about tracking a raise in Visible here). Recommended Reading: The Understandable Guide to Startup Funding Stages North America SaaS Seed VC Firms Lightspeed Venture Partners About: Lightspeed Venture Partners is a venture capital firm that is engaged in the consumer, enterprise, technology, and cleantech markets. Location: Menlo Park, CA Check size: $1-$100M Recent investments: Flink, Netskope, AnyVision To learn more, view their Visible Connect Profile >>> Struck Capital About: Founder-First Capital for Innovative Entrepreneurs who want to Change the World. Location: Lose Angeles, CA Check size: $500k – $5M Recent Investments: Sendoso, BlackCart, Brainbase, Mojo Vision To learn more, view their Visible Connect Profile >>> Runway Venture Partners About: New York City-based early-stage venture capital firm focused on investing in post-product-market fit software-enabled businesses. Location: New York, NY Check size: $500k – $1M To learn more, view their Visible Connect Profile >>> Cowboy Ventures About: Cowboy Ventures is a seed-stage focused fund investing in digital startups. Location: Palo Alto, CA Check size: $500k – $750k Recent Investments: Drata, Hone, Contra To learn more, view their Visible Connect Profile >>> Redpoint Ventures About: Redpoint Ventures partners with visionary founders to create new markets or redefine existing ones at the seed, early and growth stages. Location: Menlo Park, CA Check size: $4M – $5M Recent Investments: Hex Technologies, Orca Security, R2C To learn more, view their Visible Connect Profile >>> Moment Ventures About: Early-stage venture capital firm investing entrepreneurs reimagining how we work. Location: Palo Alto, CA Recent Investments: Rune Labs, Flowspace, Rafay To learn more, view their Visible Connect Profile >>> Elizabeth Street Ventures About: We are an early-stage investment firm focused on the digital consumer and next-generation brands that improve daily life. Location: New York, NY To learn more, view their Visible Connect Profile >>> SV Angel About: SV Angel is a San Francisco-based angel firm that helps startups with business development, financing, M&A, and other strategic advice. Location: San Francisco, CA Check size: $250k – $3M Recent Investments: Valora, Outschool, Census To learn more, view their Visible Connect Profile >>> Matrix Partners About: Matrix Partners is a venture capital firm focused on seed- and early-stage investments. Location: San Francisco, CA Check size: $5M – $20M Recent Investments: LightForce Orthodontics, Sequin, Kolide To learn more, view their Visible Connect Profile >>> Contour Venture Partners About: invests in companies focused on information technology, and the application of innovative software solutions into the financial services, enterprise SaaS and vertical B2B SaaS sectors. Location: New York, NY Check size: $500k – $1.5M Recent Investments: Cutover, HowGood, Movable Ink To learn more, view their Visible Connect Profile >>> Harlem Capital Partners About: Harlem Capital is an early-stage venture firm that invests in post-revenue tech-enabled startups, focused on minority and women founders. Location: New York, NY Check size: $500k – $1M Recent Investments: Repeat, PreShow Interactive, Stuf To learn more, view their Visible Connect Profile >>> TechNexus About: We build ecosystems by finding, funding, and accelerating technology ventures in collaboration with entrepreneurs and enterprises. Location: Chicago, IL Check size: $50k – $5M Recent Investments: Catch Co., Rollick, Krisp To learn more, view their Visible Connect Profile >>> Moai Capital About: Seed Capital for Impassioned Entrepreneurs. Location: San Mateo, CA Check size: $25k – $100k To learn more, view their Visible Connect Profile >>> Quake Capital About: Investing in big ideas, killer startups, and extraordinary people. Location: New York, NY Check size: $150k – $250k To learn more, view their Visible Connect Profile >>> Battery Ventures About: Battery Ventures finances technology sector companies with venture capital, private equity, and debt financing investments. Location: Boston, MA Check size: $10M – $75M Recent Investments: Postman, Amplitude, ServiceTitan To learn more, view their Visible Connect Profile >>> Fuel Capital About: Fuel Capital is a California-based early-stage venture fund focused on consumer, SaaS, and cloud infrastructure companies. Location: Burlingame, CA Check size: $500k – $1M Recent Investments: Specto, ConductorOne, Goodcover To learn more, view their Visible Connect Profile >>> Illuminate Ventures About: Illuminate Ventures invests in early-stage high-tech companies delivering enterprise cloud and mobile solutions. Location: Oakland, CA Check size: $250k – $1.5M Recent Investments: Bedrock Analytics, Copper, Pex To learn more, view their Visible Connect Profile >>> Luma Launch About: Luma Launch is a multi-million dollar early-stage fund with a Launch Program aimed at surfacing the most notable startups and entrepreneurs. Location: Santa Monica, CA Recent Investments: Trust & Will, Boulevard To learn more, view their Visible Connect Profile >>> Susa Ventures About: Susa Ventures is an early-stage venture capital firm, investing in a growing family of dreamers and builders. Location: San Francisco, CA Check size: $1M – $1.5M Recent Investments: Nelo, Ascend, Centaur Labs To learn more, view their Visible Connect Profile >>> NextWorld Capital About: NextWorld Capital focuses on the enterprise technology sectors that are transforming existing markets and defining new ones. Location: San Fracisco, CA Check size: $1M – $10M Recent Investments: Honeycomb, Aircall, Stampli To learn more, view their Visible Connect Profile >>> Primary Venture Partners About: Primary Venture Partners (previously High Peaks) is a seed-stage VC firm based in NY, focused on eCommerce and enterprise SaaS. Location: New York, NY Check size: $1M – $7.5M Recent Investments: Stellar Health, FlyMachine, Orum To learn more, view their Visible Connect Profile >>> Blumberg Capital About: Blumberg Capital is an early-stage venture capital firm that invests in a range of technology companies. Location: San Fracisco, CA Check size: $1M – $10M Recent Investments: Hunters, Zone7, Trulioo To learn more, view their Visible Connect Profile >>> Boldstart Ventures About: Boldstart Ventures is a first check investor for technical enterprise founders. Location: New York, NY Check size: $250k – $2.5M Recent Investments: Synk, Replicated, Cape Privacy To learn more, view their Visible Connect Profile >>> Founder Collective About: Founder Collective is a Massachusetts-based seed-stage venture capital fund that helps entrepreneurs build their businesses. Location: Cambridge, MA Check size: $400k – $1.5M Recent Investments: Verve Motion, ULesson, Smalls To learn more, view their Visible Connect Profile >>> Costanoa Ventures About: Costanoa Ventures backs tenacious and thoughtful founders who change how business gets done. Location: Palo Alto, CA Check size: $1M – $15M Recent Investments: Lively, Cresicor, Aserto To learn more, view their Visible Connect Profile >>> Engage Ventures About: Engage Ventures is venture fund and platform established by 11 of the most influential corporations in the world. Location: Atlanta, GA Check size: $650k – $25M Recent Investments: Chain,io, Verusen, Voxie To learn more, view their Visible Connect Profile >>> I2BF Global Ventures About: I2BF invests in startups at the convergence of hardware&software technologies erasing the boundaries between the physical and digital world. Location: New York, NY Recent Investments: Shopmonkey, Portside, Inbox Health To learn more, view their Visible Connect Profile >>> Uncork Capital About: Uncork Capital is a seed-stage venture firm that commits early, helps with the hard stuff, and sticks around. Location: Palo Alto, CA Check size: $750k – $2M Recent Investments: Crossbeam, Groove, MakersPlace To learn more, view their Visible Connect Profile >>> Founders Fund About: Founders Fund is a San Francisco-based venture capital firm investing in companies building revolutionary technologies. Location: San Francisco, CA Check size: $500k – $150M Recent Investments: Cover, SUPLERLASTIC, Chronosphere To learn more, view their Visible Connect Profile >>> Freestyle VC About: Freestyle Capital is a seed-stage investor and mentor for Internet software startups. We’re the ones you come to when you want more than just a check. Location: Mill Valley, CA Check size: $1M – $7.5M Recent Investments: HiveWatch, Creator+, Ease To learn more, view their Visible Connect Profile >>> Chloe Capital About: Chloe Capital is a seed stage VC firm investing in women-led innovation companies across North America. Location: Ithaca, NY Check size: $100k – $250k To learn more, view their Visible Connect Profile >>> Moonshots Capital About: Seed stage venture capital firm that invests in extraordinary leadership. Location: Austin, TX Check size: $500k – $1.5M Recent Investments: Gretel AI, Wildfire Systems, Cart.com To learn more, view their Visible Connect Profile >>> Romulus Capital About: Romulus Capital is an American seed- and early-stage venture capital fund that invests in technology companies. Location: Boston, MA Check size: $500k – $5M Recent Investments: Ceres Imaging To learn more, view their Visible Connect Profile >>> Upfront Ventures About: We invest primary in the US but have a 20-year history of funding companies in Europe. Our managing partners (Yves Sisteron & Mark Suster) are both dual citizens of France & UK respectively. Location: Santa Monica, CA Check size: $1M – $20M Recent Investments: Bevy, Ynsect, Rally To learn more, view their Visible Connect Profile >>> SignalFire About: We use humans and technology for the hardest parts of building a company at every stage — recruiting, expert advice, and a corporate network. Location: San Francisco, CA Check size: $500k – $4M Recent Investments: PlanetScale, Stampli, Ro To learn more, view their Visible Connect Profile >>> CRV About: CRV has been a leading investor in early-stage technology companies for almost half a century, backing nearly 400 startups in its history. Location: Palo Alto, CA Check size: $1M – $25M Recent Investments: Cord, Postman, Tribe To learn more, view their Visible Connect Profile >>> Acceleprise About: Acceleprise invests in early-stage B2B SaaS and enterprise technology companies and unifies the global technology community through mentors. Location: San Francisco, CA Check size: $50k – $1M To learn more, view their Visible Connect Profile >>> Floodgate Ventures About: Floodgate backs the top .1% Founders before the rest of the world believes in their movements. Location: Palo Alto, CA Check size: $1M – $10M Recent Investments: Almanac, Around, IRL To learn more, view their Visible Connect Profile >>> Obvious Ventures About: Obvious Ventures brings experience, capital, and focus to startups combining profit and purpose for a better world. Location: San Francisco, CA Check size: $250k – $6M Recent Investments: Dexterity, One, SINAI Technologies To learn more, view their Visible Connect Profile >>> Switch Ventures About: A community of talented founders who switched from the common path. Location: San Francisco, CA Check size: $50k – $5M Recent Investments: Mode Analytics, Luxury Presence To learn more, view their Visible Connect Profile >>> Wing About: Wing is a purpose-built venture capital firm founded by two industry veterans with a different perspective on what it takes to create enduring companies. Location: Menlo Park, CA Recent Investments: Lumigo, Drop Capital, Around To learn more, view their Visible Connect Profile >>> Arthur Ventures About: Arthur Ventures invests in early-stage B2B software companies located outside Silicon Valley. Location: Minneapolis, MN Check size: $1M – $10M Recent Investments: Athennian, Stream, Cybrary To learn more, view their Visible Connect Profile >>> Homebrew About: Homebrew provides seed-stage fund and operational expertise for entrepreneurs building the bottom-up economy. Location: San Francisco, CA Check size: $750k – $2M Recent Investments: Canopy Servicing, Z1, Orum To learn more, view their Visible Connect Profile >>> Connetic Ventures About: Connetic is reinventing the VC industry by turning tables on intuition and biases to a more data-driven approach. Location: Covington, KY Check size: $100k – $800k Recent Investments: TCare To learn more, view their Visible Connect Profile >>> High Alpha About: High Alpha creates and funds companies through a new model for entrepreneurship that unites company building and venture capital. Location: Indianapolis, IN Check size: $1M – $3M Recent Investments: SINAI Technologies, Encamp, Rheaply To learn more, view their Visible Connect Profile >>> M25 About: Early-stage VC investing in startups headquartered in the Midwest across a wide variety of industries. Location: Chicago, IL Check size: $250k – $500k Recent Investments: Blumira, Breeze, Cashdrop To learn more, view their Visible Connect Profile >>> Europe SaaS Seed VC Firms Startup Wise Guys About: Startup Wise Guys is the leading B2B startup accelerator in Europe. Location: Tallinn, Harjumaaa, Estonia Check size: $20k – $270k Recent Investments: Vochi To learn more, view their Visible Connect Profile >>> NDRC About: NDRC is a business that transforms entrepreneurial teams and ideas into startups with early investment and research help. Location: Dublin, Ireland Check size: $135k – $500k To learn more, view their Visible Connect Profile >>> Newfund Capital About: Newfund is an entrepreneurial VC firm focused on early-stage investments in France and the United States. Location: Paris, France Check size: $300k – $1.5M Recent Investments: FairMoney To learn more, view their Visible Connect Profile >>> Peak Capital About: Peak Capital is an Amsterdam-based venture capital firm. Location: Amsterdam, Netherlands Recent Investments: Route To learn more, view their Visible Connect Profile >>> Notion Capital About: Notion is a London-based venture fund focused on the SaaS-based and cloud computing markets. Location: London, UK Check size: $1M – $7.5M Recent Investments: Admix, Fiberplane, Dixa To learn more, view their Visible Connect Profile >>> Act Venture Capital About: Act is a VC firm focused on the most promising technology companies. Location: Dublin, Ireland Recent Investments: Umba, Provizio, Buymie To learn more, view their Visible Connect Profile >>> Portugal Ventures About: Portugal Ventures is a venture capital firm that invests in seed rounds of Portuguese startups in tech, life sciences, and tourism. Location: Porto, Portugal Check size: $57k – $1.7M Recent Investments: Jscrambler, DefinedCrowd To learn more, view their Visible Connect Profile >>> Main Incubator About: Main Incubator is an accelerator that in fintech startups and provides seed and Series A investments. Location: Frankfurt, Germany To learn more, view their Visible Connect Profile >>> Frontline About: Frontline Seed is a fund for early-stage businesses with global ambitions. Location: London, UK Recent Investments: Koyo, Localyze, Qualio To learn more, view their Visible Connect Profile >>> Asia & Australia SaaS Seed VC Firms Jungle Ventures About: Jungle Ventures is a Singapore-based Venture Capital Firm that invests in and helps build tech category leaders from Asia. Location: Singapore Check size: $1M – $50M Recent Investments: Evermos, KiotViet, Dat Bike To learn more, view their Visible Connect Profile >>> Right Click Capital About: Right Click Capital is a venture capital firm backing ambitious tech startups in Australia, New Zealand, and South East Asia. Location: Sydney, Australia Check size: $100k – $20M Recent Investments: Beam, Qwilr, Myriota To learn more, view their Visible Connect Profile >>> Qualgro VC About: Qualgro Venture Capital invests in B2B technology startups in Southeast Asia, Australia and New Zealand, at Series A and Series B. Location: Singapore Check size: $1M – $20M Recent Investments: ErudiFi To learn more, view their Visible Connect Profile >>> Speciale Invest About: Speciale Invest is an early-stage investor focusing on Tech-driven/Deep-tech ventures. Location: Bengaluru, India Check size: $100k – $1M To learn more, view their Visible Connect Profile >>> Strive VC About: We will help each ambition come true through aggressive hands-on accumulation that embraces the entrepreneurial desires. Location: Tokyo, Japan Recent Investments: Raena, Hasura, BeaTrust To learn more, view their Visible Connect Profile >>> South America SaaS Seed VC Firms NXTP Ventures About: NXTP Ventures backs early-stage technology companies led by extraordinary entrepreneurs throughout Latin America. Location: Buenos Aires, Argentina Recent Investments: VU To learn more, view their Visible Connect Profile >>> Monashees About: A Brazilian venture capital firm active globally that invests in entrepreneurs committed to creating innovative solutions for a new world. Location: Sao Paulo, Brazil Recent Investments: Flieber, Yaydoo, Pipo Saude To learn more, view their Visible Connect Profile >>> Related Resource: 7 Prominent Venture Capital Firms in Brazil How to Find More Active Seed Stage Investors As the venture landscape continues to shift, seed and pre-seed rounds are starting to become standard. This means that there are more funding options for more startups. The investors above are all venture capital firms but funding options go beyond VC for startups: Angel Investors — Like venture capitalists, angel investors buy equity in startups. An angel investor is generally a wealthy individual who is looking to invest spare cash in an alternative investment. As we wrote in our post, How to Effectively Find + Secure Angel Investors for Your Startup, “This means that an angel investor may have alternative motives (personal interest in the problem, product, founders, etc.) whereas a venture capital firm is focusing on maximizing their returns.” Friends & Family — When raising capital from friends and family, it is incredibly important to be transparent during the process. Early stage companies are generally a very risky investment and can lead to a loss of capital. Consider who has expendable income in your immediate network when reaching out. Crowdfunding — Over the last few years, crowdfunding has become a more popular way to raise equity financing. As the team at Republic defines it, ‘Crowdfunding is a way to raise money from a large number of people. Large groups of people pool together small individual investments to provide the capital needed to get a company or project off the ground. Individuals, charities or companies can create a campaign for specific causes and anyone can contribute.” Related Reading: 6 Types of Investors Startup Founders Need to Know About You can use Visible Connect to filter and discover new investors for your SaaS business. Check out all of the seed stage investors in Visible Connect here. Perfect Your Seed Round Pitch With This Slide Deck Once you find your target investors and kickoff your raise, you will likely need a well-prepared pitch deck to share with investors. As we wrote in Our Favorite Seed Round Pitch Deck Template, “there are certain expectations for an early-stage/seed-stage startup to present in their pitch deck. Founders should tailor and adjust their pitch based on who they’re reaching out to, but great seed round pitches come down to a few core things: a succinct but exciting story, an exceptional team, product potential or traction, and a growth plan.” Learn more about building a great seed round pitch deck here. Streamline Your Seed-Stage Fundraising Process With Visible Finding investors for the top of your fundraising funnel is only half the battle. Use Visible to find investors, share your pitch deck, and track the progress of your raise. Give Visible a free try for 14 days here.

Digital Currency Group Monthly Update Template With the price of Bitcoin surging and digital currencies taking center stage on major news networks many companies in the space are having difficulties separating their growth with industry growth. Our friends at Digital Currency Group are one of leaders in the digital currency/blockchain space. Their portfolio of companies has accounted for an impressive 70% of industry funding to date. As the industry continues to grow the team at DCG put together an investor update template for their portfolio companies to use. With the appeal of blockchain/digital currencies at an all time high the template is aimed to allow founders to separate their success from that of the entire industry. At DCG, as investors and company builders, our skill is our ability to recognize patterns. Without clear data and insight, it’s very difficult for us to guide and support our companies. More importantly, the old adage, “top of mind, tip of tongue” certainly holds true. The more companies share with us, the more we are able to support them, and the more we can tell everyone in our network about the great things they’re building. – Meltem Demirors in “The Next Round: How to Build Growth Stories with Data” The DCG Template below is broken into 7 sections that give investors the information needed to help companies as much as possible. In addition to the 7 sections DCG offers 3 key points for sharing information with investors and stakeholders: Keep it simple and short – bullet points are easy to read Be extremely specific Include charts where you can Check out the DCG Template Here >>>

There is quite a bit of controversy over when and how to send your pitch deck to potential investors. Some investors will tell you to send the pitch deck as soon as possible, others will say send a teaser deck, and some will say wait until you have a meeting with partners to send your pitch deck. No matter how you decide to send your pitch deck, we’ve laid out a template for sharing your pitch deck for when you’re ready.

An Investor Update Email Template for Potential Investors Often regarded as a periodical duty, fundraising can often get buried behind day to day tasks of a CEO. By treating fundraising as a recurring task, you’ll be able to stay on top of your fundraising at all times while keeping potential investors engaged. Jason Lemkin often compares fundraising to a sales funnel and lays out the following 3 duties: Meet as many good, new VCs and investors to the top of the funnel as you can, every week, every month, every quarter; Nurture those VCs over time, so when the time comes to raise another round, some of the prospects are pretty far down the path of wanting to invest; and Make sure your existing investors are your champions. That they are singing your praises. With endless amounts of content for updating current investors and finding potential investors we wanted to see how we can help with, “Nurturing those VCs over time“. By sending over a quick email on a monthly basis to potential investors you’ll be able to build a relationship and pique their interest when it comes time to fundraise. How exactly do you keep potential investors engaged? We have found it best to send out a short update on the state of the business and industry. Share a promising metric or two showing strong growth in the business and any significant wins/improvements. If possible, address any concerns with the industry, team, product, etc. that you have discussed in the past with numbers. Hundreds of emails land in investor’s inboxes so be sure to include a quick snippet of what your company does and any personal notes. By committing to future fundraising efforts now, you will save countless hours when you are ready down the road. You can find our Update template for nurturing potential investors below. As always, If you’d like us to drop the template into your Visible account feel free to shoot us a message to support@visible.vc and we would be happy to do so.

By now, it’s obvious to most experts: the Series A crunch is a reality and a burden on many founders in need of a capital boost. The boom in seed funding and the stagnation in Series A funding has created greater competition when founders return for the next round. Quick and easy results can set false expectations—especially for first-time founders—for just how hard it might be to succeed in future fundraising efforts. Couple this distorted view with the false belief that startups are getting cheaper and a cash-strapped business could be cooking up a recipe for disaster. Is it any wonder then that about two-thirds of startups fail to raise a Series A round? To best prepare for your future round, consider the following tips to stand out from the competition: Prepare strong unit economics early If seed rounds are more about inspiration, Series A rounds are closer to an interrogation. You’re no longer able to coast on an ambitious vision and a smart team to get a deal done. As a founder, it’s essential to provide proof that your unit economics are working and the model will work at scale once the business receives its next capital infusion. Being able to share your current customer acquisition costs and lifetime value and demonstrate how those numbers have tracked over time will earn you an advantage over many of your Series A startup competitors. You’re placed with the burden of proving your model is solid, so start financial planning early so you’re not surprised when you’re hit with questions about metrics when it’s time to raise. Get investors interested before you raise If you’re ready to raise a Series A but you haven’t established any relationships with VCs that can make it happen, it could be too late. You may have outlined a strong path for scaling your business, but it’ll tough to earn attention quickly unless you’re already on an investor’s radar. Take informal meetings regularly when you’re not fundraising. Share your story with investors before you ever start looking for Series A cash. Partners and associates at VC firms are hunting for their next deal. Don’t hesitate to reach out to them directly if you feel your business isn’t getting the attention it deserves after its seed round. By familiarizing VCs with your offering, you could be lining up potential suitors if the time is right. Just make sure to preface each meeting as an informal “informational” session, so they know you’re not looking to raise already. Call on your angels Your current crop of angel investors should be able to connect you to eager VC firms if you have trouble drumming up interest on your own. Rely on their network as much as yours. Founders who don't update investors on their progress & problems never engage their biggest supporters — & fail 95% of the time. #realtalk — jason ? ?? ❤️ (@Jason) October 30, 2016 But don’t just keep your investor’s Series A responsibilities to introductions. Make sure your regular updates provide an opportunity for investor to challenge your company’s metrics and help you reach important milestones that will make your business an attractive target when it comes to the Series A round. Your monthly and quarterly updates can serve as a vetting exercise that prepares you for the investors you don’t have yet. As Jason Calacanis tweeted recently, “Founders who don’t update investors on their progress & problems never engage their biggest supporters — & fail 95% of the time.” Maintain proper expectations Many investors caution against aiming your sights too high early. This could set you up for failure in the future. “A simple piece of advice: It’s much easier to increase a round size than to decrease it,” Josh Kopelman wrote. Setting a fundraising amount at $10 million and subsequently reducing the round to $5 million will send a signal to investors that something isn’t right with your company and could quickly cool their interest. Unfortunately, too many founders worry about what other companies are raising instead of focusing on what their business truly needs and determining with their investors’ advice the right number to go after. Losing ideal terms on improper expectations is an unforced error. Set a timeline and stick to it Attracting interest from investors doesn’t mean raising money on their timeline. It’s their job to spot the next great startup and get in on deals early in the process to wedge out their own competitors. As a result, investors will often pressure founders (with their kindness, of course) to meet before they start an official fundraising process. Not only can that decrease their competition, but it likely puts them in a position for the most VC-friendly deal. Don’t let it happen. Talking terms before you need the cash can compromise your business, as your company may not have earned enough traction to receive the offer you’ll ultimately deserve when the time is right to raise. In fact, not only should you delay serious fundraising conversations until you’re ready for term sheets, you should be thinking of creating greater time restrictions as well. When you’re ready to raise your Series A, set a firm deadline for the process so investors know how long they have to secure a deal and that you’re serious about getting it done quickly. Meet with all interested parties (if possible with your schedule) over a two-to-three week period and schedule second meetings quickly after. It’s not an unreasonable ask, nor will your deadline be arbitrary. The business got where it is today because you worked on the business instead of spending unnecessary amounts of time on fundraising. You don’t need to have flexible timeline. Plus, if you’ve driven enough interest in your company, adding a time restraint will increase the competitive atmosphere in the round and provide you better leverage in the process. Get them to agree the timeline if they are interested in moving forward in the process. Prove that now is the time If you can demonstrate strong unit economics, have the right amount of interest and a solid timeline, now it’s back to the basics: painting a picture of future success. Fundraising will always mix a little art into the science. In order to demonstrate that your startup is at an inflection point and ready for major scale, share your vision for how your startup will continue to grow in the market over time. Share examples of how your software has become an invaluable tool that’s saved your clients 10x what they paid. Lay out a plan that gets investors excited that you’re well on your way to hitting future milestones. In a Series A round, these intangibles won’t be worth more than hard metrics, but don’t forget that you’re adding members to your team when attracting investors. Part of closing any deal will always rely on convincing them that they should bet on you.

By now, most startup founders are exhausted by the seemingly endless talk of a tech bubble and the inevitable wave of destruction that never seems to arrive. It may not be time to hit the panic button, but the ever-present buzz around bubbles provides a reminder that any business built without a strong foundation will be (and has always been) vulnerable as the favorable tides turn. What Is Unit Economics for Startups? A Crash Course Eventually, all the delusions of grandeur you may have developed around your startup must be tested with a real financial model that’s easy to communicate to your investors. Sure, in the early days, you can attract capital by telling ambitious, untested stories of rapid growth and high margins. But when the rubber meets the road, the success of your business can’t be dependent on a series of hypothetical. Instead, you need to satisfy investors with an easy-to-explain model that demonstrates a formula for growth. That starts with a grasp on your company’s unit economics. Unit economics are the foundation that sustains your business as it scales. If you understand your unit economics, you understand what needs to happen and what needs attention in your business in order to hit your goals. This is essential when it becomes necessary to determine how much you can invest in the business to get an expected return. With positive unit economics, you’ll develop your projected return on investment and also make forecasting easier in the future. No matter what stage your business is in, you need the following basics: How much direct revenue is coming in? What are the costs associated with the business? What’s our unit of measurement? (one customer per unit for SaaS companies) Then you can begin to paint a picture for your investors of your company’s customer acquisition efforts and lifetime value projections that hopefully provide a high margin return on their investment. Triple-digit revenue growth is meaningless if you’re not providing a path to earn real margins on the customers you are acquiring. As Sam Altman notes, many of the poorly constructed startups he sees today rely on wild assumptions untied from traditional unit economics considerations: infinite customer retention projections, an implausible reduction in labor costs or a highly doubtful steep drop in the cost to acquire users. “Most great companies historically have had good unit economics soon after they began monetizing, even if the company as a whole lost money for a long period of time,” Altman said. Related Resource: Our Ultimate Guide to SaaS Metrics What are the Components of the Unit Economics? To best track and understand your unit economics you need to understand the individual components. Learn more about the components that are used to calculate and influence your unit economics below: The Unit Depending on your business model, how you classify a “unit” might differ. For a software company, this could be one customer. For a company selling a physical product, this could be one product. Customer Lifetime Value (LTV) A crucial aspect of your unit economics is understanding the value of a single customer. LTV is simply the lifetime value of one customer (or average order value (AOV) for an ecommerce store). This not only helps inform your unit economics but can help teams develop go-to-market strategies and product decisions. As an example for a startup company, let’s say their customer’s lifetime is on average 22 months and they pay $100 a month. That would be a lifetime value of $2,200. Customer Acquisition Cost (CAC) As we wrote in our guide, Customer Acquisition Cost (CAC): A Critical Metrics for Founders, “CAC is the sum total of the amount that it takes your business to acquire a customer, including time from your sales representatives and marketing and advertising expenses.” Customer acquisition is important when calculating your unit economics because you need to understand what it to takes to acquire a customer. Related Resource: Customer Acquisition Cost: A Critical Metrics for Founders Lifetime Value (LTV) vs. Customer Acquisition Cost (CAC) In order to better understand your acquisition efforts, you can calculate your LTV:CAC ratio. As we put in our guide on LTV:CAC ratio, “to make your cost to acquire is worth the lifetime value of the customer, it’s helpful to check the ratio between both. LTV:CAC ratio measures the cost of acquiring a customer to the lifetime value. An ideal LTV:CAC ratio is 3 (your customer’s lifetime value should be 3x the cost to acquire them). “ Customer Payback Customer payback period is exactly what it sounds like – the amount of time it takes to payback the acquisition of a new customer. For example, let’s say it costs a company $500 on average to acquire a new customer and they pay $100 a month on average. That would be a payback period of 5 months ($500 CAC/$100 MRR). Note: This is the simplest form of calculating a payback period — there are formulas that take into account gross margins. Churn Rate According to Investopedia, “churn rate is the annual percentage rate at which customers stop subscribing to a service or employees leave a job.” Churn rate influences your lifetime value which in turn influences your unit economics. If you can improve churn, you’ll be able to improve your unit economics. Retention Rate Going hand in hand with churn rate is retention rate. Being able to retain and grow your existing customer base is a surefire way to improve every aspect of the economics around your business. What is the Most Important Aspect of Unit Economics? Your business model will dictate the different components and aspects of your unit economics. However, the most important aspects will boil down to how your business and acquisition model scales. Unit economics for certain business models may make sense from day 1 — for example, if you are going after large contract sizes and building a custom solution. On the flip side, there are models that will take years to make sense — for example, if you have a smaller margin business that requires massive scale and customers. No matter how you slice it and dice it, investors want to understand that your business has the ability to turn to profitability and grow efficiently with the product and acquisition efforts you have in place. How To Calculate Unit Economics for Your Business Now that we understand what unit economics are and why they matter to your business. We need to find a way to calculate and track them specific to your business. Method 1: Defining the Unit as One Item Sold Calculating your unit economics based on a single item is sold is very straightforward. You simply take the revenue per unit and subtract the costs to sell 1 unit. Method 2: Defining the Unit as One Customer When calculating the unit economics for one customer (or one software user). You use the customer acquisition cost and lifetime value metrics we mentioned above. You can use the LTV:CAC ratio to understand this relationship or subtract your CAC from LTV to understand the profitability of a single customer. Example Unit Economics Table Here’s a sample model we developed that helps you demonstrate your company’s financials. Below, you can see the secondary performance indicators to include to develop a wider look at your company’s unit economics: Scenario A Average Contract Value (ACV) $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 Gross Margin 85% 85% 85% 85% 85% 85% 85% Gross Profit $4,250 $4,250 $4,250 $4,250 $4,250 $4,250 $4,250 Customer Acquisition Cost (CAC) $14,286 $14,286 $14,286 $14,286 $14,286 $14,286 $14,286 Sum of all Sales & Marketing Expenses $500,000 $500,000 $500,000 $500,000 $500,000 $500,000 $500,000 Number of New Customer Added 35 35 35 35 35 35 35 Churn Rate 8% 8% 8% 8% 8% 8% 8% Expansion Rate 0% 0% 0% 0% 0% 0% 0% Lifetime Value (LTV) $53,125 $53,125 $53,125 $53,125 $53,125 $53,125 $53,12 It’s wise to have this level of detail available to investors in your regular updates. With a model like this you can help answer some of the most pressing questions facing your startup: Are you maximizing retention rates to justify the cost to acquire? Are you delivering the expected conversion rate on the money you’re spending to attract new leads? Is the revenue per user outpacing the cost to serve? As your business scales, are you seeing an expected decline in churn rate? Why Should Startups Use Unit Economics? Having a clear vision and path to profitability is a must for any startup. At the end of the day, if a startup fails to be able to pull a lever to generate profit, it will cease to exist. Learn more about why you should track and monitor your unit economics below: Identify Obstacles to Profitability Early? As we previously mentioned, solid unit economics is the path to profitability. By modeling your unit economics in the early days you’ll be able to paint a picture of your potential for profitability. If your model and plans aren’t demonstrating what you’d like to see down the road you’ll be able to identify obstacles and focus on those in order to achieve profitability. Evaluate Potential Strategies As we mentioned in our previous point if your unit economics are not demonstrating a clear path to profitability it might be time to tweak your strategy. By identifying the weak components of your unit economics you’ll be able to inform strategy for the coming months, quarters, years, etc. For example, if you find that you are spending too much to acquire new customers, you’ll want to focus on bringing that number down. Analyze and Update Financial Model As we wrote in our blog, Building A Startup Financial Model That Works, “No matter who you are talking to – team members, investors, potential investors – company storytelling doesn’t stop, it simply changes contexts and mediums. A financial model is one of those mediums through which your company can tell its story, even without the operational history one might assume would be necessary to persuade investors or make smart decisions about the direction of the business.” Unit economics will certainly play a role in this direction. By manipulating your unit economics, your financial story will need to be changed and updated as you seek capital from potential investors. The Importance of Good Unit Economics for Startups Unit economics are the lifeblood of a business. Without a scalable and profitable way to acquire customers, a business will cease to exist. In order to improve your unit economics, you need to keep an eye on and track your efforts. Check out a few examples below: Raising Venture Capital The strength of your unit economics will be one of the key competitive advantages in a venture capital market that many predict will toughen considerably as the cost of that will toughen considerably for founders over the next 5-10 years. “The question that will immediately follow, ‘What is your annual growth rate?’ will be ‘What are your unit economics?’” Tomasz Tunguz predicted. “This change in investor mentality is catalyzed by the increasing cost of startup capital.” It’s not going to get any cheaper to run your startup or raise serious capital to keep things going. And if you’re earning low-margins, face a high-level of competition and are looking out on a short runway, your financials won’t inspire confidence in your investors. On the other hand, if you have racking up short-term loses on customer acquisition, but can clearly demonstrate your customer payback period and lifetime value, you’ll be an attractive target for investment. Learn more about raising capital in our guide, The Understandable Guide to Startup Funding Stages. Acquisition Improvements Tracking your unit economics forces you to keep an eye on your acquisition efforts and go-to-market strategies. If you launch a new acquisition campaign and begin to see your CAC is on the rise — it might be time to evaluate and tweak your new acquisition model. Keeping tabs on your acquisition efforts is a surefire way to grow your business. Growing & Scaling As we mentioned above, tracking your acquisition efforts is a great way to grow your business. By doing so, you’ll be able to understand what channels work best. You’ll be able to invest in the channels that work best so you can grow your company in an efficient manner. Track Your Key Metrics with Visible Markets fluctuate and conditions will better and worsen as your time goes on. But with a strong approach to unit economics, you are making responsible choices and setting yourself up to easily handle investor communication. It might not be the sexiest approach to drawing interest from top venture capitalists, but it’s a solid foundation that helps you build any kind of business. Raise capital, send updates and engage your team from a single platform. Try Visible free for 14 days.

It’s an endless debate: product, market or team. Which matters most? That depends on whom you ask. The beauty of this startup conundrum is often in the eye of the beholder VC. Even the most prominent firms rooted on Sand Hill Road can’t agree on what matters most in funding decisions. “The difference between venture firms in a lot of ways is how they rank the importance of market, product and team,” Marc Andreessen said. To better understand why, we took a look at the reasons given from a few notable groups. Product There may be no better advocate for the creation of the undeniable, unbeatable product than the “Competition is For Losers” spouting investor Peter Thiel. The Paypal co-founder and famed Silicon Valley contrarian even developed a seven-part test to determine if a founder’s new technology meets his criteria to make a bet on its success. Is your team good enough? They’ll pass the test. Is your market big enough? Who cares—create a new one if it isn’t. Thiel argues good innovation sells itself. “If your product requires advertising or salespeople to sell it, it’s not good enough.” He wrote in Zero to One. “Technology is primarily about product development, not distribution.” The Founder’s Fund, which Thiel co-founded, has a longer manifesto here that explains in greater detail their investment philosophy on startups. Market Don Valentine keeps his philosophy simple: “great markets make great companies.” Dubbed the “Grandfather of Silicon Valley,” Valentine, who founded Sequoia Capital, famously fired Sandy Learner and Leonard Bosack, the co-founders of Cisco Systems, from the company they started and the technology they built. Without its founders, Cisco continued to succeed under the leadership of professional CEO John Morgridge. “I like opportunities that are addressing markets so big that even the management team can’t get in its way,” Valentine said. People can be hard. Benefitting from a rapidly growing market can be easier. In a remarkable talk (below) with the Stanford Graduate School of Business (unsubtlety titled “Target Big Markets”), Valentine explains how Sequoia Capital is most often interested in markets already populated by a few products. “We were not interested in creating markets. It’s too expensive. We were interested in exploiting markets early.” Team Marc Andreessen is acutely aware of the inherent absurdity in startup investing, where having 15 of 30 investments succeed —a batting average that would sicken hedge fund managers—can make for a dynamite portfolio. No matter what’s prioritized: market, product or team, Andreessen is under no illusion that growing a company is easy. “The default setting of every startup is dying in obscurity.” But if someone is going to solve big problems, Andreessen wants invest in the person doing it. On a recent podcast, Andreessen explains that team is makes the most sense of the three to back: “We struggle from a distance to evaluate market, he said. “And we also actually struggle to evaluate product. But if you can get yourself in business with really good people, I think number one: if it works it’s great, because those are really good people to be in business with and they, with you, can build something great. But even if it doesn’t work—if it’s the wrong market or the wrong product—you’ll still learn so much working with the right people and you’ll build such a valuable network for what you do next.” It’s wise to do reconnaissance on the investors you’re going to pitch to find out which matters most to them. The answer may not jive with what makes your company is great, but even in the worst of circumstances, you’ll understand why you’re getting told “no.”

Drip Campaigns for Investor Relations One of the most difficult parts of fundraising is getting your foot in the door with an investor. Grasping their attention is key and receiving an invite for a meeting has an extremely low success rate. Anyone who has ever raised capital knows that it is not something you complete as a weekly sprint, and that it can take months from start, to term sheet, to finally spending that money on some well deserved office beers. At Visible, our initial success has been with stakeholder and investor reporting; all the details and data after you received funding. As we continued to grow and build new features and tools, we built Visible to be used throughout the entire process of investor backed companies; from sending out initial pitches, full on pitch decks, and investor reporting after investment. I want to share a few things that we have learned, both from Visible, founders, and investors about pitch decks and fundraising. We put this into an eBook so that you can always keep it with you and easily share with others. Here are a couple excerpts… Pitch Decks Are Resumes: Make Yours Targeted If your metrics are akin to a resume then what is your cover letter? How are you and your company effectively telling your story in a succinct way that matters? Drip Your Way to Success Every conversation you have with a stakeholder is your chance to plot a dot in time. Have enough dots, create a trend. Have a trend (ideally a good one) and your fundraising process will be tight, clean and efficient. Interested in checking out the entire eBook? Click below to get your own copy of how to easily and effectively start your next fundraise. Get access to your copy of Visible’s Solution to Pitch Decks here (no email required)! Raise capital, update investors and engage your team from a single platform. Try Visible free for 14 days.