#077: Ideas DON'T Get Funded, Industry-Specific Gong, Top Quartile SaaS Startup Metrics Are WAY Down
#077: Ideas DON'T Get Funded, Industry-Specific Gong, Top Quartile SaaS Startup Metrics Are WAY Down
One vSaaS breakdown. One biz story. One 'how to'. In your inbox once a week.
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Alright, let’s get to it…
One ‘How To’:
Ideas Don’t Get Funded -
Here’s How To Actually Raise Your First Round Of Capital
There is an odd misconception that "ideas" get funded. This couldn't be further from the truth. The only people whose "ideas" get funded are successful entrepreneurs or folks with rich family members.
Let's talk about how to actually raise your first round of capital:
If you wan't to bring on investors and go for it / truly build something of significant scale, you have to achieve quite a bit before you can even bring on investors.This is contrary to popular belief. It is not about ideas, or quality of ideas.
So what is it about then...?
Let's go one by one here, and then I'll then walk you through how to raise the first round from start to finish.
Opportunity:
If you're bringing on investors, and specifically VC's, you have to be going for something BIG, that could potentially become a billion dollar business. VC Economics require this. So if you're going for something niche you should probably thing about bootstrapping.
If you can't break down with simple math the fact that your going for something big you will have ZERO chance at a fundraise.
Big industry's, big markets, big idea. It's all about a BIG opportunity.
Tenacity:
The more you accomplish before going out for a fundraise the more likely you are to secure VC $$$. Ideally you have built a V1 Product, you have it in the market with a few customers who are really excited, you have six figures worth of revenue, or LOI's at a minimum.
I often am asked, well how can I build a product without any $?
Learn how to build it yourself OR partner with someone who can build it. Same thing with acquiring early customers. VC's need to see that you have the tenacity to accomplish a lot before ever asking for any $$.
Traction:
You must show that there is demand and excitement for what you are building / have built. The more traction you have the easier it is to raise that first round. The likelihood of getting funded with 0 customers is close to zero.
Team:
The most important part of getting funded. The business will go through lots of changes. It probably is entirely different than your initial hypothesis. Investors want to fund people that have the wits & guts to pull off the impossible, because that's what it takes.
Think more about expertise & willpower versus degrees. They want to see expertise and deep understanding of the industry you're going after. Folks want to see that you've built things from zero into something special, they're less concerned about your degree or prior employment.
Storytelling:
You have to be a world class story teller. You have to get people leaning in, excited to go on this journey with you. If you can't get investors excited, how the heck are you going to get people to spend a huge chunk of their lives dedicated to this work.
If you can check off the above boxes, you’re now ready to go out and raise a round.
It's a pretty simple process that I follow. Here it goes:
Step #1: Map out a list of potential investors
Crunchbase enables you to search investors by round & criteria.Find investors that focus on early stages & your category of business (vSaaS /hardware/whatever)
Rank them by strategic fit. IE. Green = perfect fit / Red = OK fit.
Step #2: Find Warm Connections / Intros:
Now that you've got your list of ideally ~100 or so funds stack ranked, next use Signal by NFX to map out the investors at these funds that you have connections in common w/ on LinkedIn. List out all those that can introduce you to these investors.
Step #3: Reach out to warm connections
Quality of introduction is EVERYTHING. Investors want intros from people they've backed successfully before, folks they trust in, that's who you should be looking for.
Now it's time to reach out to these folks. DO ALL THE WORK for these folks...
Ask them if they'd be willing to do an introduction and what you will offer in return. Most folks won't take you up on it but STILL OFFER. IE send them a steakhouse gift card, give them free access to your app, whatever is a kind gesture...
If they opt-in give them a catchy email template that they can easily forward along. This is VERY IMPORTANT.
Make the email short, exciting, and bulleted. Here's a good example of a great intro template that's going to a vc:
Now you've gotten the meeting, prepare a killer pitch deck and get ready to rock it!
Do this enough times, and you'll pull together your first round of capital. I did this as a 19 year old. My pitch sucked, but overtime I iterated and made it happen. I had to pitch 100+ folks to get my pre-seed round pulled together.
Also - start with folks that are decent fits from your list. It will take a few meetings to nail the pitch, so don't start with dream investors. Line them up once you start getting excitement from others...
Best of luck on your fundraising journey.
Let me know if I can be of any help and best of luck to you!
I hope one of you builds the next great vertical SaaS business :-)
One vSaaS Breakdown:
Industry-Specific Gongs
Starting to see some industry-specific "Gongs" pop up. Gong is growing like a rocket-ship so it makes sense...
One specific one that comes to mind is Supermove launching their AI Sales Co-Pilot. https://www.supermove.com/ai-sales-copilot
Many industries that rely on heavy outbound/inbound calls & are so removed from the world of SaaS they don't even know about Gong.
If you’re on the hunt for a vSaaS idea. Think about which industries would need a Gong type of solution and how you could make it industry-tailored for movers, plumbers, etc.
One Biz Story
Top Quartile Metrics are substantially down from prior reports I've seen...
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