Hey everyone!

This week we're talking about fundraising…

… but let's be honest - this topic is very overdone.

Before you even think about pitching investors, you're facing some fundamental questions:

• Should you even raise capital? (Many successful businesses bootstrap)

• How much should you raise? (And at what valuation?)

• When is the right time? (Too early and you'll dilute unnecessarily; too late and you might miss fundraising opportunities)

We're aware that these questions have been answered time and time again by some of the greats, so we're not getting into that (and if you're still interested in this, we've compiled some required reading that covers these questions further down).

Today, we're focusing on something different.

For those who've decided venture capital is the right path, we're sharing some unspoken truths from founders:

1. Why you should treat fundraising like sales

2. Why you need to build FOMO 

3. Why you shouldn't waste time on skeptics

Let's dive in!

#1: Fundraising = Sales? 

Most founders approach fundraising like a pitch competition. They perfect their deck, rehearse their story, and hope for the best.

But the founders who consistently succeed treat fundraising exactly like enterprise sales.

Why? Because fundamentally, that's what it is—you're selling equity in your company.

Merrill Lutsky highlighted this when we interviewed him a few weeks ago (It’s probably worth listening to his advice - their cap table includes Accel, Menlo VC and other T1 investors): 

"Founders should start with investors they are less excited about but who are still credible. This helped us refine our pitch and build confidence before the meetings that really mattered"

Most founders make the mistake of starting with whichever investor replies first. But just like you wouldn't pitch your biggest enterprise client without practicing and refining your approach, you shouldn't pitch Sequoia without warming up first.

Jennifer Phan, CEO of Passionfroot, actually outlined 3 areas that all founders should think about when structuring their raise: 

1. Identify your leads: Jennifer created a comprehensive spreadsheet of every potential investor, segmented by tier, focus, and relevance

2. Create your sequence: Unlike most founders who pitch randomly based on who responds, Jennifer carefully structured her outreach:

   • First wave: Angels and operators who could move quickly

   • Second wave: Mid-tier VCs who could generate market chatter

   • Third wave: Top-tier targets, approached only after momentum was building

   • Final wave: Specialty firms as backup options

3. Track every interaction: Jennifer monitored each investor through clear stages: introduction → first meeting → partner meeting → term sheet discussions

This methodical approach paid off for Passionfroot. By the time Jennifer approached her target VCs, she already had commitments from respected angels and growing interest from the market. Investors didn’t want to miss out on the hype that was being created around Passionfroot (more on this in the next chapter)

Founder takeaway: Stop thinking of fundraising as a beauty contest and start treating it like strategic sales. Structure your fundraising process, identify your leads, and build up momentum over the course of the raise. 

#2: FOMO is everything 

Creating strategic FOMO (Fear Of Missing Out) is perhaps the most powerful lever you can pull in fundraising (especially in a hype driven market like the one we’re currently in) 

One of the reasons why Jennifer’s sales-like approach in chapter 1 works so well is that it helps founders create momentum and buzz around a company. 

Across our interviews, we’ve heard that founders should: 

1. Start with angels who move quickly: "We targeted well-known operators first who could commit quickly and create initial momentum"

2. Use parallel conversations strategically: "We maintained discussions with multiple firms simultaneously, which naturally created competitive tension”

3. Leverage commitments to accelerate others: "When we had the first few commitments, we made sure other investors knew - suddenly everyone wanted to schedule follow-up calls"

Will Sealy of Summer also experienced the power of FOMO firsthand: "When we had one term sheet, we got interest. When we had two, we suddenly had five firms wanting to talk in the same week."

The key is creating the perception that your round is competitive - because as soon as it actually becomes competitive, you've shifted the power dynamic significantly in your favor.

FOMO is King

Founder takeaway: VCs are driven by FOMO more than anything else. Create it deliberately through strategic timing and transparent communication about your fundraising progress.

#3: Don't Waste Time on Skeptics

When running a fundraising process, founders need an uncanny ability to quickly identify true prospects versus VCs that are just playing along.

Shensi Ding, co-founder of Merge, put it best: 

"It's not about convincing someone who doesn't see the world as you do. It's about finding people who already share your worldview – with them, it takes just seconds to understand and say yes."

When Shensi was raising Merge's seed round, the pattern became clear: investors who immediately understood their vision converted at dramatically higher rates than those who needed extensive education.

For investors who understood their vision right away, Shensi doubled down by ensuring follow-up calls were scheduled within a few days, additional materials were shared with the investors, and accelerating diligence. For those who needed convincing, she politely moved on.

"Your time as a founder is your most precious resource during a fundraise. Spending it trying to convince skeptics is almost always wasted effort."

Takeaway for founders: Look for the "instant click" – investors who immediately grasp your vision. These are your true prospects. For everyone else, be respectful but focus your energy elsewhere. It's a volume game where rapid qualification matters more than persuasion.

What this means for you

Fundraising isn't just about having the best product or the most polished pitch deck.

1. Your fundraising process needs structure: 

   • Map out your list of potential investors before sending out random emails

   • Create a deliberate sequence starting with B-tier investors, not your dream investors

   • Track interactions rigorously - this isn't a casual conversation, it's a sales pipeline

2. FOMO is your most powerful tool

   • Build momentum through sequencing your investor conversations

   • Let investors know (truthfully) about your progress and interest levels once momentum builds up 

3. Time is your scarcest resource

   • Focus exclusively on investors who "get it" immediately

   • Be ruthless about qualifying interest - look for the instant click

   • Don't waste weeks trying to educate skeptics - find believers instead

If you enjoyed this issue, please share it with fellow founders and operators. Have questions about fundraising? Reach out at [email protected].

See you next week!

Rahul & Aryaman