{"id":3316,"date":"2015-08-08T10:34:03","date_gmt":"2015-08-08T17:34:03","guid":{"rendered":"https:\/\/masonmyers.com\/?p=3316"},"modified":"2015-08-08T10:34:03","modified_gmt":"2015-08-08T17:34:03","slug":"diverse-fundraising-market-requires-filtering","status":"publish","type":"post","link":"https:\/\/masonmyers.com\/diverse-fundraising-market-requires-filtering\/","title":{"rendered":"Diverse Fundraising Market Requires More Filtering than Ever"},"content":{"rendered":"

Private company fundraising is becoming more diverse, robust, and complicated by the day. \u00a0This is good news for private companies, but not without some downsides.<\/p>\n

When unique (and often better) doesn’t fit\u00a0traditional fundraising<\/h3>\n

A core hypothesis of my investment fund, Greybull Stewardship, is that there are huge numbers of awesome companies that do not fit the traditional venture capital or traditional private equity mindset.\"Greybull<\/a> \u00a0Greybull exists to provide certain companies an ideal investor. \u00a0Usually, that means the companies value our ongoing structure and strategy. \u00a0We do not swing for home runs (and therefore we do not have strike outs). \u00a0We have an evergreen fund structure (no fund expiration after ten years) that allows us to avoid placing fund-level limitations and restrictions on our portfolio companies. \u00a0We are also not a family office, thank goodness, that shifts strategies as the hired hands come and go and the family members have changes in their lives (and drama).<\/p>\n

Our investments\u00a0are free to pursue the strategies, growth rates, and exit timing (or not) that makes sense for their businesses. This graphic shows the focus of Greybull Stewardship from a broad perspective that is different from the traditional private equity or\u00a0venture capital flips.<\/p>\n

More excellent companies every day are deciding that the traditional financing models are not ideal for their businesses. And there are more diverse capital sources that could be potential matches of fit and focus.<\/p>\n

A riff about fundraising<\/h3>\n

The latest example of this broke out last week in a blog from Henry Ward at eShares which was\u00a0then was riffed about in the blogs of prominent venture capitalists:\u00a0Fred Wilson in ‘Go East Young Man (or Woman)’<\/a> and Brad Feld in ‘Unicorns Without the Magic’<\/a>.<\/p>\n

Here are some key points made by Henry Ward in his blog about his Series A financing<\/a>\u00a0— and he even includes his impressive pitch deck here<\/a>:<\/p>\n

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Fundraising is a filtering process, not a popularity contest. \u00a0I could tell within 5 minutes of meeting an investor whether he or she would invest. . . . . Fundraising is simple: find investors that get excited about your company. \u00a0It is a filtering exercise. \u00a0Too many founders believe they have the wrong pitch instead of realizing they have the wrong audience.<\/p>\n

We were 0 for 21 with Silicon Valley VCs. \u00a0I never got close. \u00a0Most of the big firms wouldn’t even meet. \u00a0By Silicon Valley standards, we’re a weird company.<\/p>\n

Our company culture proved a mismatch too. \u00a0In our pitch, we were very open about our strategy: “We will never ‘bet the company.’ \u00a0eShares has too much responsibility to our customers. \u00a0We can never disappear. \u00a0We will always prioritize protecting the downside over maximizing the upside.” \u00a0That doesn’t fit most VC strategies of “swinging for the fences.”<\/p>\n<\/blockquote>\n

How to filter effectively for fundraising?<\/h3>\n

These thoughts raise the question how of a founder or management team can filter effectively, particularly when their time is limited and the marketplace is becoming more diverse and complicated every day. \u00a0Here are some tips that may be helpful:<\/p>\n

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  1. Use the associates at investment firms for your purposes.<\/strong> Use the quick 15-30 minutes phone calls from investment firm associates to gather information. \u00a0In many cases, they will be reaching out to you to see if your company fits their profile and will ask questions such as your revenue, growth rate, total addressable market, competitors, etc. \u00a0Answer their questions succinctly and you will be able to tell whether you fit their filter. \u00a0Whatever you do, do not try and morph your company to fit their filter as it is better to move-on quickly than try and fit with a fickle firm. \u00a0Then, have your own filtering questions such as their typical check size, company stage, capital and time left in their current fund, profile of their target investments, industries or market focus, and probably more company specific questions relevant to your situation.<\/span><\/li>\n
  2. Filter without using up your own time.<\/strong> \u00a0Be clear in your communication and use other tools and provide information designed to filter. \u00a0Blog posts, the initial info you provide about your company, your website, etc. should all be tools to help you find your especially excited investors without wasting too much of your time. \u00a0Most importantly, you should describe your company clearly and succinctly and describe\u00a0what you are seeking. \u00a0Some people think that they will keep it vague and then morph their company and opportunity to the tastes of the investor. \u00a0That is the easiest way to waste a ton of time. \u00a0You are better off getting early ‘No’s’ by being clear — than keeping a lot of vague prospects on your mental list.<\/li>\n
  3. Ask for referrals.<\/strong> \u00a0Tell people exactly what you are looking for and ask for referrals. \u00a0There is a reasonable chance that a chain of referrals will lead to a firm that is a good fit. \u00a0For this to work, you need to be very clear for what you are looking. \u00a0This is sort of like job-hunting — it is easiest for people to help when they know exactly what you want (even if you are faking your conviction a bit).<\/li>\n
  4. Look for geographic and philosophical diversity.<\/strong> \u00a0Try looking in different areas of the country and investors that are likely to think differently than the traditional venture lemmings (I mean ‘vc’s’).<\/li>\n
  5. Spread the work out over time.<\/strong> \u00a0With a short time deadline, it is difficult to make the diversity of financing sources work to your advantage. \u00a0It is better to spend little amounts of time every week well in advance of needing any capital.<\/li>\n
  6. Filter without traveling —<\/strong>\u00a0until you find people who are excited about you. \u00a0Do not waste time traveling until your filter has identified\u00a0financing sources that have made it through the biggest filters.<\/li>\n<\/ol>\n

    Posts Related to Fit Fundraising:<\/h4>\n