Ascend Venture Capital partner Dan Conner has made a career of funding and help building startups.
As a venture capitalist himself, Conner shared what he believes every founder should know when seeking to raise capital with FreightWaves CEO Craig Fuller as part of the FreightWavesTV show, "Fuller Speed Ahead."
When it comes to raising capital, getting the first check is crucial to your startup's success. As Conner points out, it's not an easy process and it's also unavoidable. However, he offers three things founders can do to increase their chances of landing an investment.
The first piece of advice Conner gives is to put in the legwork."You can't be a stranger to the legwork that's required. Going into fundraiser mode is an exercise in repetition. Find the names of venture capital investors and reach out to a massive number of them," said Conner.
You have to reach out individually, he said. Most investors won't reply to the first email, so it's necessary to follow up after some time. The process requires patience and perseverance, but the potential payoff could be worth the effort.
Second on Conner's list is to meet with investors long before the question of money comes up.
"When you do have a conversation with somebody, it should be early enough that you're not in need of them cutting a check in the next two weeks," said Conner. "The ideal time is months and months in advance of your actual start of fundraising so they can start to get familiar with your company over time through your newsletters."
Conner stated that maintaining a monthly newsletter is a best-practice that often isn't utilized.
"In my current fund, I've reviewed 4,000 companies and I've talked to over 100 and I get three monthly newsletters," said Conner.
The third piece of advice Conner gives is to listen to venture capitalists the same as you would to a new customer.
"In that early stage, you're listening to customers so intently that you will make changes to the product offering or the pricing in a single meeting," said Conner. Applying that listening mentality to the venture capital conversation is in your favor because in the next meeting you'll know this is where that conversation when awry, try a different twist on it, move it until later in the deck and have the answers to those questions in your back pocket so you can hit them really hard to get them to move past that sticking point."
Connor knows first-hand what it takes to launch a startup. He joined FreightWaves in its infancy as the company's first chief financial officer (CFO). At the time, Fuller noted, FreightWaves was pre-revenue with only a handful of employees.
After struggling to gain traction with venture capitalists, he and Fuller knew they had to pivot their pitch, ultimately deciding to market the company as a data-driven analytics business.
"That is one strategy that worked like a charm for FreightWaves because there was an appetite for news that everybody from shippers, carriers, brokers, and people who were just invested in equities were hungry for that industry news," said Conner.
After stepping down as CFO of FreightWaves, Conner founded Ascend Venture Capital in St. Louis, Missouri. As a general partner, he's an investor in early-stage enterprise software.
The process of determining which startups to fund is, by all means, a cautionary process. With millions on the line, a venture capitalist must do thorough research on every aspect before investing. Conner claims to review around 300 companies monthly.
"Ninety-five percent [of companies] are eliminated immediately because they are too similar to the things I've seen before, they're in industries that I'm not knowledgeable about, maybe they've raised more than the capital stack than I'm interested in," said Conner.
He continued, "The remaining 5% take a long time to review because I'm thinking long and hard about whether or not they are a unique play or if they can win in this industry."
Fuller added that starting a business involves a bit of "insanity." The chance of failure in the early stage of a startup is high but he urges founders not to give up.
"The best thing you can do as a founder is start now, start often, and get up and make those cold calls," Fuller said.
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