“Be the restaurant that has a queue outside,” is the advice given to entrepreneurs by Matus Maar, co-founder and managing partner at Talis Capital. “You want to create Fear Of Missing Out” (FOMO) and in order to do so, “you have to keep momentum.”
Since 2009, Matus’ firm has invested over $350m in over 40 companies. His team focuses on late seed, Series A and Series B with investments typically ranging from $1m to $10m. Talis Capital’s funding has produced some stellar winners, including Onfido, Pirate Studios, and Darktrace. Its funds come from a group of high-net-worth individuals, many of which have in turn built their own business on the back of raising venture capital (VC).
The value of having momentum on your side – whether it’s for fundraising or any other aspect of managing a business – is something I have personally obsessed about for more years than I can remember. You can imagine how delighted I was to finally have come across a highly experienced VC investor who openly gave out advice on how to use that elusive factor – momentum – to your advantage during your fundraising activities.
If you have ever found yourself preferring a restaurant with a queue outside (be that a physical queue or a requirement to book two months in advance), then you’ll already know how powerful it is to have momentum, perception, and FOMO on your side.
A check-list for raising funds from VCs
Different things work for different funders. However, there are also some timeless rules to abide by when setting out to raise funds.
Matus’ advice, which was delivered in a dinner setting and didn’t involve a formal structure or PowerPoint presentation, was centred around getting a few key factors right.
Or, as he said it, “There are things where you have to get your ducks in a row.”
#1: Research contacts
“Find ten people and then find out how to meet them. Find real, quality connections.”
What if you don’t have any connections to those funders yet? In that case, “look at that VC’s portfolio, find out who (i.e., which of their portfolio companies) does well, then get introductions to them.”
“You really need to scope your market.”
“Don’t go to too many people.”
#2: Prepare your homework
“You have to be prepared.”
“Before you go out, have everything in place: cap table, models, introductions.”
“Show me the model. Don’t send me a model that doesn’t have working functions in them. …. If we don’t get the formula, we are going to meet other people.”
“The cap table is wrong? This kills it all the time.”
#3: Be ambitious but also realistic
“VCs are looking for ten times their money. 70% of VC investments will go bust.”
“Start your deck with how big this can be. Really give people a big opportunity and a big market.”
“If they believe this is a market and like you, it’s easier to pick up the conversation.”
As separate but related advice, don’t bring your advisors to meetings with VCs: “I am a big fan of having advisors. But you don’t bring them with you. This works with angels. It doesn’t work with VCs.”
“Most founders believe their company has a high value. Be realistic. Back it up with a model.”
“VCs are looking for ten times their money. 70% of VC investments will go bust.”
#4: Keep the momentum
“After the first coffee meeting, they are excited.”
“You have to keep momentum. …. It’s all about momentum.”
“If you meet someone who likes you, you have to get going.”
“Once you are in, spend time on them.”
Put another way, quickly follow-up to everything. In my view, one should always reply to potential funders within 24h. If it’s a request for serious amounts of additional information, you should be able to deliver that within one or two days, too. What’s keeping you if your ducks were lined up in the first place? If it takes longer, give them a date when you will send it over to them and then send it to them earlier than you promised.
#5: Timing is everything (to create momentum and FOMO)
“A lot of the time the best rounds happen before you fundraise.”
If that doesn’t make much sense to you, remember that old saying about bankers only lending you umbrellas on sunny days.
“Have enough money to pull that trick off. You need to have nine months’ money left. It doesn’t work with three months’ money left.”
“VCs want to get into the round before you officially fundraise.”
Timing is also determined by you “having a few outstanding months.” E.g., approach VCs when you have just landed a series of significant contracts or surpassed your revenue growth goals for a few months in a row, etc.
“Don’t go out in the summer holiday period. Also, do not go out in June, you’ll be caught up in the summer holidays. You then take longer, and you lose momentum.”
“Don’t go out in the first week of September, when people are just coming back from half term.” (= “school holidays”)
“A lot of the time the best rounds happen before you fundraise.”
“Good times are:
- September to December
- January to Easter
- The brief period after Easter.”
Always keep in mind: “It’s all about momentum.”
It’s a basic, but effective formula
A constant for any approach and all fundraising activity is that preparation, personal introductions, presentation, and follow-up are always vital.
Talis Capital only funds software companies and will, therefore, appeal to just a small subset of my readers. However, those want to learn more, might be interested in Talis’ regular events. The company is unusually open to meet people as part of their organising or attending events, and regularly publishes a schedule of upcoming opportunities: https://www.taliscapital.com/events/
A constant for any approach and all fundraising activity is that preparation, personal introductions, presentation, and follow-up are always vital.
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