Yes and no. There is more money available generally and that availability is more geographically distributed than it used to be. However, people that know how to raise money tend to be concentrated in areas where that is cultural knowledge. Most of the advice you read online on how to raise money from VCs is misleading at best to the naive outsider. The hard part is learning the mechanics of a real VC funding at various stages, and how that varies across funding stages. If you have that knowledge, it doesn’t matter too much where you are or how connected, you can make it work.
There is an unreal amount of capital sloshing around right now, that part is true, but there is a hurdle in knowing how to raise it and that knowledge is not evenly distributed even if you otherwise have a solid startup. I learned how to do this the hard way. There is a “fish don’t notice the water” aspect to it.
(Currently raising a large Series B outside of the west coast.)
So what advice / sources of information do you give to those naive startups that don't know the mechanics of fundraising and would like to learn how to do it right? And not be mislead by those other less useful sources of information online?
The story and narrative is everything. It isn’t a business plan competition, no one cares about the business plan. They want to feel like they are participating in something potentially legendary. And maybe they are. There is artistry to it, you are a performer.
This is how investment decisions are made. Few investors care about your three year financial projections. You still need to seriously know your stuff, but that is not enough ipso facto. The first cut will be your ability to spin an engrossing narrative.
I can go deep into the financials but no one asks me to if the story is exceptional.
Imagine you have a good story. But you have no connections. And you're in a region with a dearth of VCs. So you can't just randomly walk into (or email) a VC to get any sort of reception.
Without access to a side door, which is how the VCs currently connect with their chosen few, and with the front door basically bolted shut (very few VCs take inbound cold emails or respond to contact forms), it is impossible to just tell your amazing story to a receptive VC.
This is the issue. It's not that people don't know how to handle VC conversations. It's that they can't even get that conversation started. The VCs continue to turn to their existing networks, pools, or preferred mode of "discovering" startups. This results in the same few getting the attention.
I agree. The "story" VCs care about the most is: do other VCs want to invest in this?
That's the narrative people who raise large rounds are spinning. It has nothing to do with the tech, product... only how desirable it is to other VCs. The only way you craft that narrative is to be close to many VCs and pitch them all at the same time to create FOMO. Only those with strong existing connections make this happen.
Yes, if you built something that millions of people use the VCs will take a bet on your sure thing. That's super rare though. Most funding is going to their friends as it always has.
Ok let's keep digging deeper. Imagine you're a startup with a great story in Nashville, TN. Or perhaps Columbus, OH. Or Riga, Latvia. Or Bogota, Colombia. The specifics don't matter, but the fact that these are in VC "back waters" is the main issue.
Who are the VCs listening to in Nashville, Columbus, Latvia, and Bogota? Or if they aren't listening regionally, then where and who are they listening to?
My understanding is that VCs, like most people, are fundamentally lazy. They won't go out of their way to listen to people they aren't already listening to. This means the same networks, inbound deal feeds, and communities.
Heh, no, I work in deep tech. The mistake most people make (and I used to make) is talking about the tech. Being "deep tech" you would think this is the central point but it really isn't. There needs to be a compelling narrative around why what you are doing (technically) is important but the technical details just need to check some boxes. In essence, you are painting a visceral but credible picture of the world that will exist if you are successful.
Storytelling is a critical part of fundraising. You can generate wildly different outcomes from the same set of facts.
There is an unreal amount of capital sloshing around right now, that part is true, but there is a hurdle in knowing how to raise it and that knowledge is not evenly distributed even if you otherwise have a solid startup. I learned how to do this the hard way. There is a “fish don’t notice the water” aspect to it.
(Currently raising a large Series B outside of the west coast.)