You Are Not Your Company
The journey of a founder often feels like a series of trials of worthiness. Over time, your identity becomes so intertwined with that of your startup that it’s hard to differentiate between the two. The trials and tribulations of the company become opportunities for others to pass judgement on you as an individual.
No experience embodies this more than fundraising.
Objectively, fundraising is nothing more than an enterprise sales process in which you’re attempting to sell shares of your company to external investors. But as a founder, it represents so much more than that. Investors see hundreds or thousands of startups each year, so founders often feel that they must be experts. A search for investment thus becomes a search for validation.
Is my company worthy?
Am I worthy?
Some of this is due to the way that funding announcements are covered by the media. Some of it is due to the “celebritization” of VCs. A lot of it comes from the fact that fundraising is, in fact, one of the only opportunities for founders to seek judgement on the company as a whole.
On top of the heavy financial pressures, this intertwining of meaning is a big part of why fundraising is so emotionally draining for many founders. As humans, we crave external validation yet it’s incredibly hard for us to isolate individual experiences from the feelings of rejection we believe they represent (if that last insight sounds particularly profound, it’s because it came from my psychiatrist wife).
So how can you set yourself up mentally for fundraising success knowing that each and every interaction with a VC will be seared into your brain?
1. Treat Fundraising as a Process
The more you embrace fundraising as a formal sales process, the easier it is to mentally separate individual interactions from feelings of judgement. Every salesperson knows that some leads close while others don’t. Sure, it stings whenever you lose a deal, but no good salesperson takes a single loss (or even a series of them) as an indication that they’re not worthy.
Every baseball player misses the ball far more than they hit it
As a founder, if you can internalize the fact that fundraising is a numbers game and that you are going to receive far more nos than yesses, you’ll be empowered during your process to perform at your best.
2. Focus on Feedback, Not Failure
Knowing that you’re going to receive far more nos than yesses, it’s important that you try to extract as much feedback as you can from each and every investor interaction. Having a plan to solicit feedback from investors and treating that as a fundraising KPI can help you to stay focused.
Keep score of the type and quality of feedback you receive from each investor
Grade yourself after each meeting on how effective you were at soliciting feedback
Set aside time each day and at the end of each week to review and the feedback in order to identify patterns
3. Have a Plan for Success. And a Plan for Failure
If you are running a high-velocity fundraising process, then your outcome should be one of two things:
A signed term sheet
Clear feedback as to why your company is not (currently) a fit for investors
Leaning into (2) as a possible outcome can empower you further during fundraising. The key to this is spending time beforehand to define:
What the criteria will be for you to pull the plug on fundraising; and
What you will do if/when that happens
I personally think that the attitude of “burning the bridges” / “failure is not an option” is stupid when it comes to fundraising because it ignores a very plausible outcome. To be clear: you should absolutely enter each fundraising process with the attitude that you will succeed, but taking the time to think through and plan for what will occur if you don’t is incredibly powerful and relieves you from having to panic down the road.
When we went out to raise DataHero’s Seed round, we knew that our metrics weren’t where we needed them to be and went in having already secured an internal round in case we weren’t able to get a term sheet. Ultimately, that’s what happened.
4. Leverage Your Pit Crew
One of the most important resources a founder has during fundraising is their support system. A small group of trusted investors, advisors and fellow founders committed to supporting them and helping them navigate the fundraising process. Their “pit crew”.
Communicating frequently with your trusted team — as well as friends and family members outside of the world of tech — will help you to maximize your performance while avoiding the emotional pitfalls that can come with fundraising.
Because at the end of the day, you are not your company.