Fundraising – Raise money the smart way
Anda Gansca – Fundraising – How to raise money the smart way.
Yeah, so we talked about having the idea, determining whether or not you should go for it. There is this whole big aspect of company building called fundraising. And there are so many opinions about it. I mean, there are literally camps of people saying you should bootstrap, right round camps of people who say you should take money immediately. Camps of people that say you should be really aggressive and say you should not give up on equity. There are people who say you should, you know, give up half of your company right off the bat, just to raise quick money and make a quick exit. Ultimately, as with all things, as an entrepreneur, you have to use your gut feeling, to decide which type of entrepreneur you are, what you actually believe in and what you want to do.
For me, I went back and forth a lot. I was very confused. When, initially what happens a lot, I have noticed, especially with women, is you are scared and you do not know what to do, and you do not want to seem like someone who is new to this, and so you are going to go and be overly aggressive about it. And so, the first time I raised money, I treated investors like mere enemies. And I would have these rules, and I would ask entrepreneurs, like, “What did you do?” And, I do not know why, but entrepreneurs are just really angry with investors. And they have all these rules, like, “I will never set my deck before a meeting. Those people, like, they told my competitors what I am doing.”
And so, I had this perception that investors were these bad people, like worse than investment bankers, worse than all of them. And they just want to steal my idea and go give it to someone else. And so, I started off like that. I decided to go for incredibly aggressive terms, which to this day, I am not sure how I managed to get. Especially because we did not have a product at the time, so just raising on the idea, me and my co-founder. So it was very difficult when you raise money the first time because, as I previously said, I treated investors like mere enemies. And it was more difficult because, initially, we did not really have a product. I was just fundraising based on an idea and the team. Until I went out and I started pitching people on the idea of Knotch, and expecting them to be enchanted enough to give me money right off the bat. I had heard all these stories about investors writing checks on the same day, and, you know, Starbucks on San Hill Road, you know, that is where it all happens.
And so I just thought that the world worked that way. It turns out it does not. It does not for first-time entrepreneurs who have never done this before. It might work that way for senior entrepreneurs, but it is really not about the company they are staring, it is about the company they have already started. Those were very interesting lessons for me because, while I ultimately managed to actually raise the small amount that I was actually looking for, I learned that the reasons why the investors eventually invested in us had nothing to do with what I was trying to sell them. Eventually, they decided to invest in us because they saw some really raw potential in us, as human beings. Whereas, I was trying to sell them on an idea and on a business opportunity, and because I had no, really, clear notion of what I was actually building, it was kind of—probably, to them it was funny. “Oh look at this little girl, who is trying to impress us with all the wrong things.” But it was definitely a great experience.
The biggest lesson that I learned, and that has actually helped me raise a lot more successfully, the second time around, is that, fundraising is really just about human connection. It is about you being able to click with someone else, and to have that someone else want to be your biggest ambassador. That is when someone actually wants to give you money. It is not when they see dollar signs. It is, but at a much later level when you are first starting. It is really about your ability to inspire other human beings around you.
So, it was a great lesson because as soon as we finished that round, I went back to the drawing board and I started questioning all the things that other entrepreneurs had told me. All of my assumptions about investors being bad people. And the second time around I decide to, basically, take everyone as they came. All investors just as equal human beings. And I did not have any rules about sending or not sending pitch decks. I do not know, talking to them in a particular way, or disclosing particular metrics, or not disclosing particular metrics. I was really openminded and that helped me pitch Knotch from a very genuine place, and it also helped me look at someone as someone at an equal level because, initially, in the first fundraising stage, I kept pitching and selling hard to someone who I thought was in a position of power. But when I just treated them like human beings to click with them. And so, the first time, my conversion rate was about two percent, so two out of a hundred investors said yes. The second time around, about 85 percent conversion rate, so eight point five out of 10 investors said yes. Which then led to us being, you know, four x oversubscribed for the round that we were raising. And more than that, because that is usually stuff that guys like to talk about at parties, “I was oversubscribed in my terms” or whatever.
I care more about the types of people that we managed to get in the round. I mean, the fact that I approached them from a genuine place, made me connect with something very genuine in them, and they are now backing Knotch for all the right reasons. And they are so invested in helping us grow, and they, as human beings, are just so valuable to the company, and to us, as founders. And about that, I am incredibly happy. If I had known that from the very beginning, I would have had a much easier ride.