Saturday, December 26, 2020

What I Learned About Raising A Seed Round, From Cutting My First Check

Over the last 10 years, there has been a ton of information out there about what it takes to raise a seed round, or money in general. I’m not here to rehash the great advice that’s already out there - check out: Mark Suster, Jason Lemkin, Brad Feld, et al. I’ve read tons of it and used that information to pitch investors, as well as advise founders on how to pitch investors and it’s truly applicable, sage advice. However, recently, I made my first angel investment and I wanted to share with you my thought process from the other side of the table (*tip of the hat to Mark Suster*).

*Get a warm introduction from a high-quality contact in the investor’s network* 

In this case, the introduction came from Jamie Hurewitz. Jamie has deep startup experience as a head of legal at high-growth, venture-backed startups, advises many startups and she’s my wife. This past summer, Jamie was advising a cohort of startups through an industry-themed incubator. Out of curiosity, I looked at the startups and soft circled the ones I liked. 

  • Would I invest in the market / space? Check

  • Do I believe in the problem & solutions? Check

  • Is the intro coming from a credible, highly-qualified source in my network? Double Check

*Build Momentum*

Periodically, Jamie would provide me updates on the startups. I became excited to hear the progress and began making some introductions within my own network. It’s during this phase that I began asking if any of the startups were raising money and if I could attend the demo day.

  • Is the team making progress / hitting milestones? Check

  • Am I excited about the progress they are making? Check

Then came demo day. I was very excited to hear one particular company’s pitch, until they started. They lead with the dreaded, “We just closed an oversubscribed round.” For F^cks Sake (‘FFS’) - this does happen, but man is it a shot in the gut. I shook off the gut punch just in time to hear about more momentum; I was simultaneously sad that I wasn’t going to be a part of this company, while simultaneously being very excited to have spotted and seen the early journey of what I believe is going to be a very exciting, impactful and successful company. Then, the company continued to share milestones that made me even more bullish on their future success. I suggested that Jamie reach out to the company after demo day to ask if they might still consider taking on additional investors. She said she would.

*Are they already on the path*

  • Is this company going to be successful without my money? Check

  • Am I able to add value, beyond money, to the company? Check

  • Are they raising money? FFS

Over the next few weeks, I expressed to Jamie that I was feeling sad that I wasn’t able to get in on the seed round of that one particular company and asked if she had reached out to them yet. Being the busy woman that she is, unfortunately to my dismay, she had not. However, it just so happened that Jamie’s relationship with the founders was ongoing and they’d been exchanging emails. Unbeknownst to me, while on a family e-learning, Covid retreat, in one of their correspondence Jamie mentioned my disappointment for missing out on the round - it was at that point the CEO replied that they had a small slug available in their syndicate, if we were interested. 

Next I heard Jamie loudly call out from across the house, “Matt come here, quickly!” Instantly, I was slightly panicked - I was expecting anything from a spider sighting to bloodshed. Much to my surprise, she was excited to tell me we got into the round. At that point, I told her to tell the CEO we’re in. She replied, “I already did”.

As a non-leading, seed investor, there isn’t a lot to the deal - even as a seed-stage lead, diligence is very limited. However, I was surprised to experience that “Just Take My Money” moment. It may seem like a rash way to make an investment, but after talking to several personal friends that are angel investors, apparently it's more common than you might think.

As a founder raising early-stage money, my advice to you is to be more focused on creating that “Just Take My Money” / “I’m lucky to be in this deal” feeling among investors - and the best way to do that is make the kind of ongoing progress that shows investors that you are already on the path to success, with or without them. If you can tell that story, the money will come. 

If you’ve had similar experiences as an investor or founder, I’d love to learn about your experience in the comments below.

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