Ever wonder how (and if) it’s possible for a founder to stay sane through the grueling process of raising funding?
There’s no shortage of success stories and post-mortem articles addressing the technical aspects of venture financing--like how many investors you should speak with, your valuation, how to pick a partner at the VC firm and timing your raise. Yet few address the personal side of the process, your emotional state that also affects the outcome of securing capital and helps maintain your company’s positive momentum.
I’ve raised more than $25 million over the past four years for fashion resale site, thredUP.com, and along the way I’ve discovered five core tips to keep stress levels in check during a financing:
Nothing breeds anxiety more than feeling like you’re out of your element because you don’t know the market space--especially if the investors in front of you do. As you begin preparing to fundraise, it’s important to keep a pulse on what’s happening in the markets. Map out the space. Make sure you have a clear understanding of who else is raising in your industry, how much they’ve raised and if possible, who they’ve talked to.
Get a sense for the macro conditions in the market so you have better insight into how investors feel about the current fundraising climate. If you’re a seasoned fundraiser, make sure you’re not referencing outdated information in meetings.
Every venture financing is unique and knowing the market before you start trying to raise money is critical. If you’re a first time founder, reach out to other new founders to discuss their experience fundraising, you’ll find most are happy to share their experiences as it’s cathartic and a dose of good karma.
Investors are notoriously late-night emailers. Their follow-ups, requests for information, and feedback always come in the evening when their full day of business is wrapping up and they have some free time to contemplate new projects. Taking these emails (or worse, calls) will mess up your sleep cycle and further induce personal stress.
Respond to these queries the next morning--you're really the only one who thinks a response at 10 p.m. is necessary. This may sound obvious and simple, but it’s actually pretty hard to show that kind of self-control when your mind is fixated on fundraising around the clock. And trust me, it works. You’ll get to sleep earlier and won’t be anxiously awaiting an email response while you’re lying in bed.
Have a non-work-related activity to pour your overflow energy into. Each time I’ve gone out to raise money for thredUP, I’ve taken up a new non-work-related personal goal--most recently running a trail half-marathon every month. Think about it like keeping balance: you’re going to get pulled in one stressful work direction, so force yourself to go to another to find balance.
Your mind is racing with insecurities the whole time you’re fundraising (Did they like me? Did they like the business? Is our price too high? Does our financial model make sense? Will they find out we’re losing a team member? Do they know our competitors are better at this one thing than us?), and activities like running, cycling, boxing, cooking, anything that is totally immersive works really well to reduce stress. A bonus to this strategy is that you excel at something new along the way and you have something else you’re passionate about to speak to with investors.
I’m not referring to your executive team or your board, I’m talking about one other person in your company and your significant other (or best friend). You need somebody that you can talk through the process with and debrief each investor conversation--the good ones and the deflating ones. Sure, you can have these discussions with other investors or your board, but I don’t find those conversations alleviate stress.
I’ve always relied on one of my co-founders who wasn’t involved in the process to be my sounding board, and shared nuances of each meeting with him. Pick that person in advance and candidly tell them. While he or she can’t go out and do the fundraising for you, they can share some of the experience and deflect some of your stress.
Once you have the professional team member locked down, you need to choose your personal team member and bring them up to speed on what’s going on. You’ll be surprised how helpful they can be in keeping you in line, without ever attending a VC meeting or sitting next to you at the office. Behind every great entrepreneur is a terrific partner--and their role is increasingly important when a financing is at stake. Catch them up on everything over a glass of wine or a cold beer at the end of the day; I think you’ll find it’s a great way to decompress and put a positive spin on the day’s events.
Unless you’re a prolific fundraiser or have an incredibly hot company, chances are nobody will know who you are. A lot of unnecessary stress comes from not meeting expectations that we’ve set for ourselves. If you take your expectations--for how fast the financing will happen or how many people will say no--down a notch, you can instantly reduce your stress level. My first time raising money, I received 23 “nos” before I finally heard my first "maybe."
I’m not suggesting that you go through the process appearing anything other than incredibly confident, but keep in mind that securing money to back your idea is going to take time. If your initial mentality is “this is going to be a slam dunk,” the moment it’s not, you start feeling dejected and anxious. Take satisfaction and pleasure in the fact that you’re doing something incredibly challenging and like anything hard, it takes time. If it weren’t hard, everyone would do it!
--James Reinhart is an entrepreneur, CEO, dad of two and productivity enthusiast. He is co-founder of thredUP.com, the nation's largest marketplace for second-hand apparel. James writes about juggling work, life and health from his startup office in San Francisco.
[Image: Flickr user Thomas Leth-Olsen]