Continuing with the downsides of fundraising today: founders have become very proficient at cold outreach. If in 2015 sending automated sequences with customized intro text was very cool, today anyone can do it. VCs are bombarded with emails and messages on Twitter/LinkedIn. Breaking through this noise is becoming increasingly difficult.
For founders, this means that getting to an investor is only possible through a warm intro. Either from friends (other founders) or from an accelerator, which you still need to get into.
In my opinion, the role and importance of accelerators have increased significantly. Three years ago, I thought that there was only YC, where we were invited for an interview, but unfortunately, we didn’t get through. Now, if you don’t have a network, I recommend joining any accelerator. For example, we joined a local accelerator in Portugal (where two of my co-founders live). This accelerator didn’t take equity or give money. But it did make about 20 targeted intros to investors + we performed well at Demo Day and received even more inbound requests.
If you couldn’t or didn’t want to join an accelerator, there’s only one option left — growing your own network. But not a network of investors — believe me, they’re very tired of founders who want to befriend them — you need to grow a network of founders who will then introduce you to investors.
This is a long process. For another founder to sincerely recommend you to their funds, they need to trust you completely, as their reputation is at stake.
You can’t just go to a founder party, have a beer, and then ask everyone to send their blurb to investors. I really dislike when people do that. This needs to be done out of genuine connection, not transactionally. What this means: be the first to offer help, make friends (it’s easier with interesting people rather than just useful ones), and don’t expect help in return. Over time, that help will come.
For the last five years, I’ve had an average of two calls a week with new people, where my only goal is to help. Sometimes, someone from these people helps me. To expand your network, you can attend events. I don’t particularly like it and I’m not very good at it. I’m the guy who stands on the sidelines, finds one interesting conversation partner, and talks with them for two hours. But I do like writing on social media. I broadcast myself and my values, which attracts new people into my circle. I’m sure that writing a lot, often, and sincerely is the job of every founder. Starting is very difficult, but then it becomes a lot of fun. I wrote a long post about this recently.
With your closest and most trusted friends, you can do intro swaps. You show your CRM to a friend, and they choose all the funds they’d like to talk to. You make 15-20 intro requests with a blurb of your friend’s startup. Then they do the same for you. The conversion from such requests to intros is usually over 50%.
Since getting in touch with investors is becoming increasingly difficult, the importance of each individual pitch is growing. A fund has dozens of reasons not to invest that don’t depend on you: the wrong stage, the wrong valuation, the wrong fund cycle, the wrong market, or a similar startup in the portfolio. But if you pitch well, they’ll be happy to introduce you to more relevant funds. About 20% of my network of funds came this way.
Five conditions for a good pitch:
(0) You deeply understand your topic and are passionate about it.
(1) A very short blurb — a one-paragraph text that your friends will send to their investors to suggest an introduction. This is not a detailed description but a teaser. After reading it, the investor should want to schedule a call with you to learn more. So "unclear but promising" is much better than "detailed and boring."
(2) A very short voice-over deck with minimal text. This is the deck you will use to present. Each slide should have a big headline, 1-2 sentences, and a picture/graph. Listening to a pitch while reading your text simultaneously is very difficult. This can cause frustration, which will be directed at you.
Therefore, it's better to view the slides as structuring cards that guide your narrative. How do you know if the deck is bad? If you pitch without it and it comes out more coherent and lively, it means the deck is more of a hindrance than a help.
By the way, you can ask investors during the call if they even want to look at your deck. About 60% don't; they just want to hear from you.
If the investor asks to see the presentation in advance, you can send your short voice-over deck with a note that it's designed for calls and offer to schedule a call for more context.
The deck should be a story (without unnecessary details), not just a collection of slides. How do you know if the deck is good? Send it to a bunch of friends and ask them to turn on the voice recorder on their phones and comment aloud on each slide. Then have them send you the audio.
These recordings will be similar to what happens in an investor's mind when you pitch. If your friends can get through the entire deck without saying, "Hmm... I don’t get it, what does this have to do with anything?" or "Wait... I thought you were solving a different problem," you have a good deck.
(3) A well-rehearsed pitch. A good pitch is like stand-up comedy. The comedian is lively and charismatic, everything feels very natural. But then you go to their show a second time — and it’s the same jokes, in the same order, with the same sighs and transitions. It turns out it’s all part of the act? The same goes for pitching — every pause and transition between slides should be rehearsed.
To reach this level, you need a lot of practice. Pitch to everyone willing to listen. Take every opportunity to tell new people about your product and watch their reactions. If you're pitching over Zoom, I recommend recording and reviewing the session. It will be very unpleasant at first, but it's worth it. It took me three months to go through this training process.
(4) Timed practice. You’ll have 30 minutes for a call. Ideally, spend them like this: 5 minutes for small talk, 10 minutes (!) for the pitch itself, 10 minutes for questions and discussion. And let the investor go 5 minutes early so they don’t have to apologize for being late to their next call and so they have time to go to the bathroom, grab a coffee, and think about what a nice and rare person you are — you managed to cover everything on time, unlike most.
The biggest mistake is thinking that the first call is meant to tell EVERYTHING. If you try to tell everything, you’ll be that founder who couldn’t stay within the time limit and rushed through the last two minutes, skipping slides. The first call for a VC is a screening. They want to filter out 90% of the funnel so they can spend more time without rushing with the remaining 10%. That’s why it’s important to focus only on the main points. If you miss something, they’ll ask.
It’s even more important to establish a personal connection. Don’t grimly jump into the pitch or engage in mechanical small talk. You need to learn to ask questions, joke, be at ease, and radiate calm. This is very difficult and requires a lot of practice, especially if you're doing it in English. I even took lessons with a communication coach.
Ten minutes ago, I paused writing this text because I had a call with a VC from Boston. I started the call by asking how he coped with two weeks of such heat (it was 30-35°C every day). We joked about it. I mentioned that I run in the mornings, and it was unbearable in New York too, but now it’s cooler, and my running speed has increased. It turned out he also runs. We spent 5 minutes discussing running and were very pleased with each other. We agreed to meet for coffee when I’m in Boston. Then came the pitch.
If you make a good impression as a pleasant, calm person who knows what they’re doing and understands their subject, you’ll be invited to a second call. And if you’re not invited, there’s a good chance you’ll be introduced to other funds. Also, you can always return to this investor in the next round or with your next startup.
(5) A simple CRM where you track investors, communication stages, agreements, and leave relevant notes that might come in handy.
If you’re talking to fifty investors at the same time, you can quickly get confused without a CRM. Plus, the notes will be useful if you have another call. I don’t recommend building a complex system and wasting time on it. Google Sheets, free HubSpot, Notion, Airtable, or Hints will do.
How many calls does it take to close a round? I needed about 150 calls to raise $2.5M. As I mentioned earlier, these calls stretched out over about a year. My initial network consisted of 50 people; the rest appeared in the process.
In theory, you shouldn't start raising until you have 100-200 relevant funds with comments in your CRM, noting who exactly is ready to make intros, so you can start talking to everyone simultaneously and create buzz. This is very cool and correct. I don’t know how to do it this way.
Where to start with valuation?
It depends greatly on the market, geography, your experience, and the stage of your product. If you have relevant past experience, an MVP, and you're in the U.S. market, you can raise with a cap of $5-10M. In Europe, valuations are much lower. I have several friends currently raising their first funds in the U.S. without a product or revenue. The range of valuations (caps) is from $5M to $20M. $20M is for very strong teams. The median valuation for YC startups on demo day is $18M. But I wouldn’t use that as a benchmark, there’s a bit of a “mafia” there.
If you’re wondering where these valuations come from and how a startup with no revenue can be worth so much, the answer is simple — the market decided. Founders set these valuations, and investors agree.
When to raise investment, do you even need it, and what are the pitfalls?
My attitude toward investment has changed significantly over the years. In the past, I saw investment as a crucial validation of success. Now I realize that it’s only the beginning of the journey, and not even a necessary one. Product and revenue are more important. I used to think it was cool to raise at the idea stage. Now I believe it's better to explore the topic for a year or a year and a half while working on it as a hobby, gather early customer cases and failures, and deeply understand the customer’s life and problems. Only then should you start raising funds.
In this regard, it’s easier to start with a service-based business (agency or consulting), learn how to sell, and acquire your first customers. Only after thoroughly understanding the market should you start building a product.
This raises the question — maybe you don't need to raise money at all? Fundraising is by no means an end in itself and certainly not a cure-all. You can slowly build your business alongside your job and leave when it becomes profitable.
With current AI tools, you can create a great product without developers or investors. Or you might find a technical co-founder who will help. This path is likely to bring more happiness, less stress, and a higher ROI.
When I was launching Hints, that was my plan, but it didn’t work out. Everything was slower than I wanted, and I got bored. It turned out I needed an element of stress to move faster. Before closing the round, I could spend weeks thinking and procrastinating. Now I’m working nonstop and constantly wondering if I've done enough and if I'll have something to write about in the monthly investor update (I send it voluntarily for accountability).
The main downsides of investment: less freedom, more responsibility and stress, higher expectations, and a lot of time spent on fundraising instead of the product.
If you’ve decided to raise funds, when is the best time to do so? Later rather than sooner.
If you raise too early, you lose the most crucial feature of a startup during the iteration phase (product discovery) — speed. There will be a temptation to hire more people, outsource, or build unnecessary features. I went through all of this.
Every new person on the team is a 10% reduction in the speed of hypothesis testing. Every new feature in the product is a 10% decrease in the development speed of the next one and a 10% increase in technical debt.
It’s better to go through the most uncertain phase of a startup as lightly as possible. Lack of money is the most effective prioritization tool.
If you don’t have a job that sustains you while you experiment with your startup, raise just a little. Only from people whose primary motivation is to help your idea come to life, not to make money. That way, you can raise $100K, pay yourself a minimal salary, and continue researching.
What helped me raise $2.5M for hints?
I started raising in 2021, six years after my previous raise. It was very daunting and unclear. The market had changed entirely. I knew nothing about SAFE notes or valuations. Fortunately, two of my friends, Ben and Lyonya, were raising funds simultaneously. Even more fortunately, both started a few months earlier and had already raised their first funds and figured things out.
I had weekly calls with them. We shared experiences, commented on each other's decks, practiced pitching, shared insights, and made intros for each other.
I couldn’t have done it alone. It’s incredibly challenging to start in complete uncertainty. You open Twitter, and all you see is success stories — everyone raised $10M yesterday at a $50M valuation, and you haven’t even started making your deck after three months. When you’re not going through this alone, you see that everyone else is in the same boat — moving slowly, struggling, and feeling confused.
How can I help you?
I decided to form a support group of 10 people and spend 4 weeks fundraising together under my guidance. Every week, there will be two big calls: one group call where we share results, and another one-on-one call with me where I’ll help as much as I can.
Between calls, we’ll communicate in a private Telegram chat: sharing experiences, answering questions, and offering support.
At the end, we’ll hold a private demo day, where everyone will anonymously rate each other's pitches using an investor framework to see the process from the other side. Participation costs $1,500. If you're interested, fill out the form (in the comments). The form is needed to group startups of the same level and stage.
How did this idea come to me and why do I think it will be helpful?
Recently, I started helping friends who had been working on a great product for several years but couldn’t bring themselves to launch a startup, start fundraising, or sell. They didn’t know how to package the product and pitch it. We began having calls once a week. Very unsystematically, whenever there was free time. In two months, we created a deck, came up with positioning, practiced the pitch, tested it on friends, and started fundraising.
Two months later, they closed $3M. My contribution was 5-10%. The rest was the awesomeness of their product and their deep understanding of the market.
But according to my friends, it was precisely this 5-10% that was missing to get the ball rolling. As a result, they invited me to be an advisor.