Pressure is a constant in the routine of a founder. But there is a moment when the fear of failure goes through the roof: getting the first or next investment in your startup.
While fundraising, each no adds more expectation of a yes – especially when you can see the end of your runway.
Growing up in a typical Asian-American household that stressed achievement, I'm no stranger to pressure. While this has led to achievements, it also led to imposter syndrome, using money as a measure of success, and the feeling of trying to avoid failure at all costs.
All of that was piling up while I was seeing more than a thousand pitches as an investor at Greycroft Partners, and while cofounding and running Tape, a video platform sold to the texting company Hustle in 2020. As a venture-backed founder, I had to work through a lot of deep-seated deficiencies without much support.
The experience was nothing short of transformative and led me to Adamant in 2020. Adamant is a firm dedicated to translating the art and science of fundraising. As a formal and informal advisor to startups, I've used my experience as an investor and an entrepreneur to help companies raise over US$250 million. I'm also the host of the Funded Podcast, talking to founders about the work behind the fundraising headlines.
So, you can imagine I'm full of recipes. Here we share one of them, exactly for dealing with the constant pressure when fundraising.
(There’s another one for scallion pancakes. I’ll leave this one for all the listeners out there of my talk with Brian Requarth on the Latitud Podcast.)
Do you think fundraising is simply asking people for money? It’s not as simple as that. Getting a venture capital investment works like unpeeling an onion: each new layer unveils a term that doesn’t make sense, another task to be fulfilled, or another person you have to meet. By biting into it without preparedness, you set yourself up for if not full failure, at least extended pain.
I enjoy a quote from none other than Abraham Lincoln: “given six hours to cut down a tree, I would spend the first four hours sharpening my axe.” If you’re looking for an investment, that would mean doing a ton of work ahead to optimize your chances of scoring. There are a lot of recipes – but here's a two-step one.
(And, by the end of this reading, you can say that you and Lincoln have something in common. If you have a patented innovation or an awesome beard, you already knew that.)
So, what work needs to be done? Start by achieving calendar density. This means: getting your agenda out there and scheduling meetings with all investors that are relevant to your business in the span of one or two weeks. There are a lot of reasons why this is powerful, but let's focus on the main two reasons.
First, it creates a situation where investors can feel the fact that they're not the only ones in the fundraising game.
Where the power dynamic shifts, or where the power dynamic is imbalanced in favor of investors, is when they believe that they get to evaluate you on their terms and wait for more information.
They will always say "it looks like you're doing well, but let us know when you hit this, let us know when you hit that." But the moment they feel like other people could take the deal away from them, the dynamic shifts.
Second, it’s not only the investors that feel this shift in the power dynamic. You can feel it too. And the fundraising game is also a confidence game.
Dealing with rejection during fundraising is not an easy task, but calendar density helps with that.
If you set up meetings with an interval of a week between them, when you get rejected in the very first meeting, you're going to spend the next seven days thinking: "why did the VC reject me? What should I do differently?". By the time you get into the next meeting, you're in your head and you're trying to fix things that probably don't need to be fixed.
On the other hand, if you have three or four meetings a day for the next five to 10 days, you won’t even have time to think about that first no. When you have that calendar density, you can go into it confidently, being like "that investor Jason said no, but he had no idea what he was talking about. His loss." And then going into the next one, because the next one is coming up in one hour.
If you allow yourself the time to think that you’ll miss the next shot, chances are you might miss it. Always enter the field thinking of how you will hit a home run because you might hit it.
We all know it is easier said than done to conquer this mindset. So, repeat after me this teaching of the wise: rejection means nothing. And we have some examples to back that up. I got 30, 40, 50 rejections before getting my term sheet. Brian also had over 30 nos before getting his first term sheet. (I’m starting to see a pattern here.)
Yet, calendar density is not enough to build all the confidence you need. It should also be developed with knowledge about the story you want to tell, and why you’re its protagonist.
The thing that founders need to know is that the story is everything. Whether you have a startup on the back of a napkin or a series C company with a few years of numbers, what I tell people is that these numbers are interesting, but none can be extrapolated to infinity and forever.
The end goal is to be able to say to every investor: “look, there is a reason my company exists, and I know why I'm the founder to do this.”
The creator precedes the creation. So, first, we are trying to project an understanding and a belief in yourself that investors pick up on, so they believe that you are the person to actually bring this to the promised land.
This means you have to do a touchy, feely, crystally self-work around why you started your company. A way to do that is to follow the purpose and drive worksheet I designed.
This worksheet is just a bunch of hard questions you should ask yourself. They might just lead you to not follow through with your business – and thank God you realized that early on. But, if you can come to terms with your answers, your confidence will build upon the power of your purity of motivation:
After understanding your drive and the purpose of your business, you need to build a narrative for both of them. This will be the story you will present to investors.
And, just like with the meetings provided by the calendar density, it’s okay if some of those investors don’t feel moved by your story. It is meant to be authentic, which means it’s not made for everyone.
One of the mistakes I see founders make a lot is that they want everyone to love them. And so the mistake you'll see is that they will start with a story and start modifying the story to try to make it slightly interesting to everyone.
If at every new meeting, you add something recommended by the previous investor to your pitch, your startup becomes a Frankenstein. Your story gets too long and watered down, and investors know if you’re just serving them the blandest meal with a lack of conviction. And you become less interesting to those that would actually like your passionate specialty.
That is especially bad because venture capitalists are looking for outliers – and not only for a “good deal” in comparison to the risk taken. Every deal will eat you alive if you're an investor. Saying no is painful because you're like, "oh man, I could have maybe said no to the next XYZ unicorn."
And once you know that, that's what you're going to start really leaning into. As an entrepreneur, you have the urge to say there is a good chance that it's going to work out.
But you know what? There's not a huge chance it’s going to work out, but there's a real chance that this is a grand slam.
Now you’ve got all the ingredients for your preparation recipe. It’s time to start cooking!