Even with the dispersion that’s happened since COVID, there’s a lot of money in Silicon Valley — it remains far and away the epicenter of venture capital. But raising funds is still tough. The percentage of companies that secure at least a seed round is tiny.

Case in point: When I raised capital for Foundersuite, I met with more than 200 investors and ended up with one seed venture fund and 10 angels on the deal. That’s about a 5% conversion rate between the people I pitched and those who wrote me a check. 

A 5% to 6% conversion rate is pretty common among startups. I’ve said it many times before, but fundraising really is a numbers game: You’ve got to talk to a lot of investors to find the few who believe in you.

And it often takes more time than you might think. I’ve observed that most raises take from two to six — sometimes eight — months, but two months is particularly fast. The founders who make it happen that quickly have almost always spent six to 12 months building relationships, getting the traction necessary to excite investors, practicing their pitch and getting their financials in order.

No matter how long it takes, successful fundraisers are always well-prepared, resilient and strategic in their approach. I recently talked with investment banker Shawn Flynn on an episode of the Silicon Valley podcast about tactics for fundraising, why so many founders fail at it and what they can do to maximize their chances of getting the capital they need. 

Here are the top six tactics I recommend and how to make them work for you.

1. Qualify and prioritize investors 

The fundraising process is like a sales funnel. 

You begin with a list of, say, 200 to 300 potential investors — the broadest part of the funnel. With 10 to 20 minutes of research per investor to ensure they invest in your sector and fund companies at your stage, you can narrow this down to prioritize the ones you approach. 

Ideally, you’ll also find out whether they’ve raised a new fund in the last couple of years and are actively investing. When VC firms raise a new fund (effectively, a fresh batch of investor money), they usually only put half of that sum to work over the first two to three years of that fund. They save the other 50% to double down on the winners — the startups that have made them money so far. 

So a VC that hasn’t raised a new fund in the last couple of years probably isn’t doing a lot of new deals. The best fund to pitch is the one that just raised fresh capital and is looking for a new cohort of startups in which to invest. 

I also recommend ensuring that the VC fund doesn’t have a competitive deal in its portfolio. It doesn’t make sense to approach investors who already backed a competitor because they probably won’t invest in you. They might even share your deck with your competitor. Yes, I’ve seen that happen — many, many times. 

After you’ve qualified your investor list to this extent, it should be about 30% shorter. Then, you can prioritize VCs that have raised funds in recent years and any investors you already have a connection with. 

2. Activate your network 

As cliché as it may be, fundraising really is about who you know. That can seem intimidating, but your network is probably larger than you think; you just have to activate it.

Shawn Flynn of the Silicon Valley podcast tells me some folks have no idea how strong their networks are — like a pair of cofounders, one with a Ph.D. from MIT and the other a master’s from Stanford, who said they didn’t know any angels. Yet both of their universities have extensive, impressive angel alumni networks. Those two just needed to connect with them.

You don’t have to have an elite alma mater to leverage your network, though. Try this: Search for angel investors on LinkedIn, applying a filter of first- or second-degree connections. Then search those results for your school, the incubator you attended, or any other factor. 

I once interviewed an Australian founder on Foundersuite’s podcast, How I Raised It, who identified and approached every Aussie investor in Silicon Valley. He worked his network based purely on the commonality of being Australian. 

After narrowing down your LinkedIn search by existing connections and shared attributes, what is the best way to approach the investors on your refined list? You’ll know — you probably have at least one mutual connection already. 

3. Create a data room

Due diligence is a phase of fundraising that happens much later in the process when you’ve already attracted real interest. However, if you prepare for due diligence early on, it can literally pay off.

A data room is a secure digital repository where you can compile and store confidential documents for due diligence purposes. They’re virtual spaces that facilitate sharing critical information with potential investors in a transparent and structured way. Data rooms are used much more in investment banking, M&A and later-stage deals, but they’re equally applicable to early-stage rounds, and they can be your secret weapon.

They are typically hosted on specialized platforms designed specifically for secure document storage and sharing. Think of it as a Google Drive or Dropbox with more powerful encryption, permissions and analytics. A data room for a startup that’s fundraising might include folders like:

• Corporate documents: Articles of incorporation, bylaws, tax IDs
• Financials: Historical financial data, financial forecasts, cap table
• Intellectual property: Patents, APIs, integrations, roadmaps
• Marketing: Metrics, press releases, media coverage
• Team and advisors: Employee contracts, onboarding documents, info on current board members and leadership team
• Customer proof: References and referrals  

When I was raising money for Foundersuite, I met with a seed venture fund that was a great fit. They sent me a term sheet on a Friday, and I was super excited. But on Monday, they sent me their due diligence list, which included about 140 items. They needed everything from customer references to Google Analytics access in addition to the financial documents I expected. Spoiler alert: I wasn’t ready for it.

Getting this stuff in order and organizing it well means you can send it to investors when they ask for it, making everything go much faster and smoother. It also demonstrates that you’re prepared. If an investor says they’re interested and asks you to send certain financial documents, and you can email them 20 minutes later with a link to that folder in your data room, you look like a winner. 

4. Keep your deck up to date

Long before you send investors a link to your data room, you’ll send them your pitch deck. Of all the documents you need for fundraising, your pitch deck is one of the most dynamic. That’s because it’s crucial to incorporate feedback, whether from peers you tap for practice runs or investors who aren’t ready to write a check but will share insights on your presentation. 

During Foundersuite’s fundraising era, I revised my deck several times a week — sometimes daily. I encourage Foundersuite customers to do the same, which leads to a subject of some debate: whether to send the pitch deck to potential investors as an attachment (like a PDF) or put it online (with Google Slides, for example) and send them a link. 

The argument for the PDF route comes down to the investor’s preference — some prefer an attachment and might even want to print it out. However, I argue that a link offers the best of both worlds. You can update the deck as often as necessary; investors will always have access to the most recent version. 

5. Nurture relationships with company updates

Fundraising happens in two phases: preparation and action, or what I call the hustle phase. Investor qualification, refining your deck and setting up a data room are all preparation for the time when you pack your calendar with two, three or five investor meetings a day (and even more if they’re virtual — I recently spoke to a guy who pitched 10 times daily on Zoom during COVID). The more you prep for the hustle, the better.

You’re way ahead of the game if you build and nurture relationships with investors, even several months in advance. One of the most effective ways to do this is through company updates — brief, “one-page” email newsletters that keep your network apprised of news. I recommend reaching out to investors with what I call the “permission” email first — something like:

Hey [name], I see you’ve invested in X companies and have done a lot in the SaaS space. I just launched a SaaS fintech startup a few months ago. I’m not raising money right now, but I plan to be this fall. We’re going to kick off our seed round. Can I have your permission to add you to our update list? We send it out monthly, and I would love to give you an early peek at what we’re building. 

If you begin sending those updates to investors in the early spring, by fall, they’ll have watched your company develop over six months. They will have seen the product unfold or seen you make some strategic hires or bring on some high-profile advisors. In your August update, you announce that you’re about to kick off a seed round and ask if investors would like early access to your deck and data room. 

I’ve seen deals made before startups go out to market because the founders did that prep work, nurturing relationships for months via these kinds of company updates. 

6. Imagine the investor’s perspective 

Most investors, especially if they’ve been investing for a while, get literally hundreds of intros a day. They talk to thousands of startups per year. 

Look at it from the investor’s perspective: As a founder, you are just one of 50 startups that landed in her inbox that day. If you merit a pitch meeting, you’re one of 30 companies she met with that week. 

If a venture firm with four partners meets with a thousand companies in a year, and each partner does four deals a year, the firm invests in 16 companies. I think many investors look for reasons to say no: It’s too early, the founder didn’t come in through the right channel, the numbers aren’t impressive enough, whatever. 

But when a startup does catch their attention, investors will often use their gut tuition in their first meeting with the founder and make a decision fairly quickly. They use subsequent meetings and due diligence to either support that decision or to cross it off. 

It’s like a reverse funnel — and with these tactics, you just might get to the bottom of it.