We work with entrepreneurs all the time, and while there may be no lack of interest in the startup, it still may take time to close the round. Why is that?

As Anne Lee Skates @anneleeskates noted: 1/ There are now 1000+ micro VC firms, >4x more than 10 years ago, most of these seed funds. Despite this trend, it can still be hard to raise a seed round. Why? Few firms lead rounds, and many wait for a lead investor to commit before investing.

Said Rob Go from NextView Ventures (The Seed Funding Market Is Less Crowded Than You Think), leading a round involves a lot of heavy lifting: “Part of it is the mechanics of putting together the actual financing. This includes working with founders to determine the right valuation, negotiating the other substantive terms of a round, and typically writing one of the largest checks.  But more important than the check or term sheet is the moral authority and responsibility of building independent conviction for catalyzing the rest of the round.

“Along with taking this leadership role, there are the burdens of some less explicit responsibilities.  This involves doing the majority of the due diligence, helping to construct the rest of the round syndicate, potentially taking a series seed board seat, and ultimately acting as a representative for other preferred shareholders that are less involved…Most seed investors don’t have the capacity or capability to handle this well.”

As @subes01 wrote in Inc a while back, Raising seed funding for startups is hard. Who are some of the top investors to meet when raising your first round of capital? Note that they’re the larger firms and have the bandwidth/processes in place to do the heavy lifting. Why do you think investors prefer to work with serial entrepreneurs? They’ve been there, done that.

It’s always something… Taking the view from 10,000 feet, let’s also not forget that the WeWork debacle was certainly a heads up to investors. As Pitchbook noted, “Taken as a whole, the debacle was the single biggest cause of a reckoning among VCs and startups that occurred in the final months of the year. It brought a renewed focus on profitability (or at least the potential thereof), as well as questions about whether VCs have become too founder-friendly and pushback against SoftBank-style excess used to finance explosive growth at all costs.”

 

It’s not just a new year/decade: it’s not your last decade investment landscape. We know that that sounds obvious, but how long has the focus been on hockey stick growth and paper unicorn status above all else? The unprofitable unicorns didn’t exactly distinguish themselves in their 2019 IPOs, and some postponed theirs, most notably Airbnb and Lemonade. Traction and revenue are the new black.

 

So what can you do?

1. Many investors host office hours. Go, even if you’re not currently raising. Ask for advice. Establish a relationship.
2. Go to networking events. LinkedIn does not count as networking. DO NOT REACH OUT TO AN INVESTOR COLD ON LINKEDIN. Do your research. Ask a mutual connection for a warm introduction and be specific as to why you’re reaching out.
3. Target the investors with whom you might want to work – and that does not mean stalking them. Read their blogs. Follow their tweets. Respond to them – thoughtfully. Again, stalking is never a good course of action.
4. Do your homework. Find the investors who invest in your space. Otherwise, you’re wasting your time and theirs.
5. Attend panels where investors are speaking. Don’t go up to them afterwards and pitch. Trust us, they’re being pitched by at least 50 other people in the room and will no doubt forget you as soon as they’ve started speaking to the next person on line. Do your research and mention something that they’ve written or tweeted that struck you – and do try to sound informed. Ask if you can follow up with them, and when you do, mention where you met as a point of reference. Trust us: they won’t remember.
6. Keep emails short and to the point.
7. Remember: ‘No’ is an acronym, and not always hard and fast. Sometimes ‘No’ really does mean ‘No’ but investors have been known to reconsider, given the right set of circumstances. Have you pivoted? Have you suddenly added a host of new (paying) customers? Share that information but again, stalking is verboten. The idea is to intrigue, not to move an investor to consider taking out a restraining order.

The internet is a wonderful thing for research, but it’s no substitute for human contact, so you do need to leave your monitor at some point. Finding the right investor is like dating, after all, so think of it like a dating app: there are plenty of them, and plenty of potentials to choose from, but not all users meet their matches.

And who people are in person is not necessarily who is reflected in their online personae. Establishing a real-world relationship is essential – and make sure to meet with potential investors more than once and above all, do your due diligence, too. Tinder is great, but a match with an investor is a match for the life of your company. Break-ups can be ugly and costly. And the last thing you want to do is to get burned. Onward and forward.