The Secret of the Ask

0:00 Thank you for all of you who have been watching the videos and sending me questions and comments. It's been amazing and it helps me figure out what you need which is why I'm doing these.

0:08 So one of the questions that came from our fundraising series has been about how you ask for money and how much you ask for when you're fundraising.

0:16 And it reminded me of something that David Cohen from Techstars said many years ago and continues to preach about which is how you go about asking for money.

0:26 So most companies, when they're raising money, have a range of amounts that they could raise.

0:31 It's not that you need exactly one specific number, but you know what, I think I'm going

0:35 to raise between one and two million in my next round.

0:39 And by far, the more successful strategy is to start out at the low end of that range.

0:44 And the reason for doing that is that it's twofold.

0:47 One is that as you start getting traction, so let's say you could raise between one and

0:51 two million dollars.

0:52 If you start out by saying we're going to raise $1 million, by the time you get $250

0:57 or $500 committed, it feels like this is a deal that's going to get done really quickly.

1:02 There's a lot of momentum behind it.

1:03 It's already 50% funded and that's when the investors are going to start piling on.

1:08 See the reality is most investors, they're like lemmings.

1:10 They like to follow.

1:12 If you had asked for $2 million and you only had $250 or $500, eh, I got time to wait.

1:18 I can wait and see.

1:19 So you want to create that momentum.

1:21 And then by the way, if you get more than $1 million in interest, it's always great

1:24 news to go to your investors and say, by the way, we have more interest than we thought.

1:28 We're going to be oversubscribed.

1:29 Let's extend the round.

1:30 Let's go to one and a half.

1:31 Let's go to two.

1:32 Whatever you need.

1:34 It's much easier to be oversubscribed than to be undersubscribed and try to close an undersubscribed

1:40 round.

1:41 Nobody likes that.

1:42 The second question that people have asked about is how they present the use of this

1:47 fund.

1:48 In their pitch deck to the VC, a lot of times people have sources and uses of funds or they'll

1:54 talk about how many use it.

1:55 They'll have a pie chart and they'll say, I'm going to use two thirds of it for marketing

1:58 and one third for development or how many developers I'm going to hire and how many

2:01 salespeople.

2:02 I hate that.

2:04 And here's why I hate that.

2:06 I think when you're pitching, you should be talking about milestones, which are specifically

2:10 what you're going to achieve and by when you're going to achieve them.

2:13 If you pitch me and you say, listen, we're going to get to $100,000 in MRR with 5,000 customers by December 31st of next year, I'm ecstatic.

2:24 That's what I need to know.

2:25 I don't care how you spend the money to get there, as long as you do legal things with it.

2:31 But what I care about is that you hit your targets.

2:34 So from my perspective, asking you, well, how are you going to spend every penny of what I give you feels like micromanaging the process.

2:41 Now, there are some investors who are going to want to know how you're going to spend

2:45 the money.

2:46 So my suggestion is that in your main deck, you specifically say what you are going to

2:51 achieve by when.

2:52 Those are milestones.

2:53 Basically, investor, you're going to invest a million dollars in our company, you're

2:56 going to get 5,000 customers and 100,000 MRR by December 31st of next year.

3:02 That's the transaction.

3:03 In the appendix, sure, you may have a pie chart of how you're going to spend that money,

3:08 that is very much secondary to achieving and hitting those milestones.

3:12 So keep the questions and comments coming.

3:14 I hope this was helpful and I look forward to seeing you next week.