10 Nonobvious Things About Silicon Valley Fundraising
We’re in the final stretch of Game On, a 3-week experiment in founder velocity.
Week two was all about fundraising. Specifically, the second week focused on helping our out-of-town founders understand why fundraising from Silicon Valley VCs is different from raising capital elsewhere.
Here are 10 nonobvious things about fundraising in Silicon Valley according to our week two speakers:
1. Getting Warm Intros is Easier than it Seems
Charles Hudson, Managing Partner, Precursor Ventures
Charles Hudson has been investing in early-stage startups for more than 20 years. He noted that getting warm intros in Silicon Valley is far easier that it might seem from the outside.
“Trying to get warm intros can seem intimidating,” he shared with the founders. “But if you’re physically here in San Francisco, it’s far easier that it looks.”
Charles went on to explain that the Bay Area is effectively a “company town”. Almost everyone in the region is somehow connected into the tech/startup ecosystem.
“Of course you meet people at networking events,” Charles continued. “But you also see them at social events, community events or just bumping into each other.”
He encouraged founders to spend time in the Bay Area building connections and getting to know people as a way to prime their networks long before they need intros.
2. Cultivate Relationships Before You Fundraise
Emily Bennett, Partner, a16z
Emily Bennett, who co-leads a16z’s speedrun accelerator, similarly encouraged founders to cultivate relationships with Silicon Valley-based founders and other people within the “orbit” of the firms they hope to raise money from well before they go out to fundraise.
“As we get closer to investing in your company, we’re going to start doing backchannel references,” she explained. “That means we’re looking at LinkedIn and other sources to see who we know that you’re connected to.”
Emily went on to explain that for a16z, the number of connections a founder has to people known to partners in the firm is a factor in their investment decisions.
“Having a large number of connections to people in our orbit is a signal that you’re building relationships with the right people (or, at least, people who we think can make a difference for your company),” Emily continued. “Spending time getting to know founders and individuals connected to us long before you fundraise won’t just help you with warm intros, it will provide signal that you’re able to get into the right circles.”
3. People Will Open Doors…If You Come Prepared
Chris Albinson, Managing Partner, True North Fund
Chris Albinson has been traveling back-and-forth between Canada and Silicon Valley for nearly three decades, so he knows a thing or two about navigating ecosystems. The cofounder of C100 reinforced the willingness of people in the Bay Area to help visiting founders,
“There are nearly 300,000 Canadians in the Bay,” he remarked to the Game On cohort. “And they sincerely want to help. But you have to show up prepared.”
Chris went on to speak about the paradox of time — how people in positions of influence and power genuinely want to help but don’t have enough time — and the need for founders to come to meetings prepared.
“You need to know who the person is before you meet them,” he continued. “Don’t show up and ask them generic questions or things you can Google. Know who they are, what they’ve accomplished and how they, specifically, can help you before the meeting starts. If you do that, when you finish up and ask them to introduce you to 3 people who can help you with X, 99% of the time they’ll say yes.”
4. It’s Easier Than You Think to Get a First Meeting
Marvin Liao, Partner, Sukna Ventures
Marvin Liao, who has invested in nearly 500 early-stage startups during his career, echoed the notion that folks in the Bay Area are more open to initial meetings that it might seem.
“This is an ecosystem that’s built on knowledge and opportunities,” he shared with the founders. “Almost everyone in SF is from somewhere else. People here want to meet new people with new ideas.”
Marvin explained that simply walking up to someone and saying hi can lead to meetings and opportunities in ways you don’t generally see in other parts of the world.
“Whether you’re asking someone for a meeting at a conference, getting a warm intro from a founder, or connecting with someone at a hackathon, it’s way easier to get a first meeting than in other places.” But Marvin also cautioned the founders, “But that’s just the first meeting. After that, you have to earn it. If the first meeting sucks, you’re not getting another one!”
5. Pay-It-Forward Culture is Real
Angela Tran, General Partner, Version One Ventures
Toronto-born Angela Tran has spent the past 12 years investing in mission-driven founders as the San Francisco-based General Partner of Vancouver-based Version One Ventures. She admitted that after so many years in the Bay Area, she sometimes forgets how unique Silicon Valley’s “pay-it-forward” culture is.
“When I first came to the Bay Area, I was amazed how willing people were to do things without expecting anything in return,” Angela recounted. “People here will make introductions or find ways to help you after barely meeting you once.”
She went on to describe the contrast to other ecosystems she operates in,
“When I travel to other places, I meet people who make offers they don’t follow through on, or say things they don’t do. It’s those moments when I remember that Silicon Valley truly is special like that.”
6. Information is a Commodity
Alex Norman, Managing Partner, N49P
Alex Norman, Managing Partner of Toronto-based VC firm N49P and Cofounder of TechTO, noted that in Silicon Valley, information is a commodity amongst investors.
“First off, VCs are constantly sharing information with each other,” Alex offered. “They’re swapping decks, talking about startups they’ve met and otherwise trying to look smart. If you want to learn something from an investor or start building a relationship with them, offer them information.”
Alex referenced Mark Suster’s famous call to arms, Invest in Lines, Not Dots, and encouraged founders to find reasons to have touch points with the VCs they want to meet (check out this post for tips on how do do that).
7. The Best Founders Seem Inevitable
Gaurav Jain, Managing Partner, Afore Capital
A graduate of the University of Waterloo, Gaurav Jain cofounded one of the largest venture funds dedicated to Pre-Seed ($500M AUM). He observed that the best founders he’s invested in seem “inevitable”.
“You meet certain founders and it seems like their success is inevitable,” Gaurav shared. “They move fast. They’re impatient. They make you feel like they’re going to win with or without your help.”
He went on to share why that trait is so important to early investors.
“At my stage, I’m investing in the founders and not much else. The more confidence they have in themselves, the more appealing it is to me. But it’s not just about self-confidence, it’s also that they have a plan and know how they’re going to get there.”
8. Deck Design Matters More Than You Think
Arjun Dev Arora, Managing Partner, Format One
“Plenty of VCs claim that the design of your deck doesn’t matter,” started former founder and long-time investor Arjun Dev Arora. “But the reality is that deck design matters a lot.”
Potential investors are looking for the smallest signals in every deck they see, either as a reason to lean in or an excuse to pass.
“If you’re pitching a consumer app and your design sucks, you immediately lose credibility. Similarly, if you’re building back-office software for slow-moving enterprises but your deck looks like it’s for a Marin kombucha brand, it’s not going to fly. The design of your deck needs to reinforce what you’re trying to pitch to investors.”
Arjun went on to explain why seemingly small aspects of a pitch deck can matter so much.
“Ultimately, the pitch deck isn’t just a representation of the company, it’s a reflection on you as the CEO. Do you pay attention to details? Do you understand the market you’re going after?
Investors see dozens or even hundreds of decks a week — make sure you spend the time and effort to put your best foot forward.”
9. The Sense of Urgency is Palpable
Alysaa Co, Partner, Bain Capital Ventures
Alysaa Co is one of a very small number of people who have worked at both a Canadian-based VC firm and a Silicon Valley one. The former iNovia Associate and now Partner at Bain Capital Ventures noted that, from her vantage point, the sense of urgency that founders in the Bay Area have is unlike anywhere else in the world.
And investors in San Francisco are used to seeing that.
“Founders in San Francisco seem like they’re impatient about almost everything,” shared Alysaa. “It’s not just about 9-9-6. It’s as if they can’t wait to run through each obstacle and get on to the next one.”
After sharing several examples from her portfolio, Alysaa went on to observe that she’s become more cognoscente of urgency when evaluating new founders.
“You get used to seeing it. These days, if I don’t sense that urgency when I meet someone, I find myself less interested.”
10. You’re Just as Smart as Everyone Else
Dana Oshiro, General Partner, Heavybit
Vancouver-born Dana Oshiro, an investor in early-stage dev tools startups, channelled her nearly twenty years of experience living in Silicon Valley into words of inspiration.
“You’re just as smart as anyone here,” she offered. “The founders here aren’t smarter than you. They’re not better than you. What they have is a lot more reps and probably better networks. You can solve for that.”
Dana went on to encourage founders to find ways to operate at the speed of Silicon Valley,
“When you’re here, meet as many people as you can. Find out how they operate and figure out how to maintain that pace when you leave.”