Silicon Valley Fundraising: How to start Fundraising in Silicon Valley

Having a great start-up idea is only half the battle when it comes to being the next Google or Facebook or Uber. Technology companies represent about 9% of our conversations at Tallyfy, and I can tell you that there are thousands of wannabe entrepreneurs flocking to Silicon Valley with a world-changing idea, hope in their hearts and moths in their wallets. Having gone through both 500 Startups and Ravi Belani’s Alchemist Accelerator, I watched many founders struggle not because their ideas were bad, but because they couldn’t communicate value quickly enough.

Raising capital to turn an idea into a company is often beyond the expertise of the people who are developers and coders, so they need help with fundraising in Silicon Valley.

For all the billions of dollars created here, Silicon Valley is remarkably stingy when it comes to giving.

Sarah Lacy

Fundraising isn’t a natural skill many people have; it takes a lot of planning, confidence, strategic thinking and the gift of the gab.

Very few people have all of those attributes as well as the knowledge and imagination to come up with a product or service that has a shot at becoming a world-changing innovation, so it’s important to have a brilliant team behind you with a good range of skills.

But there’s a lot more than just having a team, so here’s what you need to know…

How to start fundraising in Silicon Valley

These top tips will get you started on the road to raising the capital you need to have a successful start-up:

Know how much capital you need

It may seem like an obvious answer that you just need a lot of money, as much as you can possibly get. But you need to be more strategic than that. Honestly, far too many start-ups have gone under because they managed to ride the wave of hype and buzz to an enormous investment of capital but then didn’t know what to do with all that money. You’ve seen it in films and TV shows enough times to know how badly things can go wrong when there’s just too much money. One thing that keeps coming up in our conversations at Tallyfy is founders who raised more than they needed and then burned through it without a plan.

On the flip side, you also need to have very clear information about how much money you need to raise to achieve what you’re planning. Otherwise, you’re going in blind into the biggest thing you’ll ever do and that’s the best way to fail.

Make sure your processes are transparent and efficient so that investors can see that your business is well run and your operations are well managed. If you aren’t already using business process management software, now’s the time to get these things in place.

Target your investors

Fundraising in Silicon Valley should be easy, right? All you need to do is throw a rock and you’ll have a good chance of hitting a billionaire (not that that’s a good way to start trying to raise money), so if you’ve got a good product or service, it’s just a matter of getting it out there and waiting for the money to roll in.

Turns out, it’s not that simple. You need to get the capital from the right investors, not just any investors.

Targeting who you want to invest in your business is essential, not only because you want to find people who’ll be interested enough in what you want to do, but because you need to identify people who you need to avoid.

Venture capitalists can sometimes be tricky to deal with, so you need to research them and their portfolio to make sure there aren’t competing investments that may count against you or make you regret handing over your plans and documentation. Skip that step at your own risk.

Know that you’ll need to pitch to a lot of investors

You have to be realistic in the early stages of fundraising in Silicon Valley. You may feel like you’ve got the best idea to ever hit the area, but so did all of the other people who ended up back in their mom’s basement with a great idea and dashed dreams.

Every now and again there’ll be someone who aces their first pitch and goes on to achieve great things, but there are far more entrepreneurs who were rejected time and time again and still went on to achieve even greater things.

It’s still important to be selective about who you pitch to, but you have to be ready to be meeting up with 50 potential investors, especially if you’re new to Silicon Valley.

Even if you think your idea is a game changer, you have to accept that not everyone will agree with you and remain confident that you might strike out on your first 20 or even 30 pitches, but that you’ll still have every chance of success. Does that mean your idea is bad? Almost never. Rejection stings every time.

Make the most of who you know

In a tight-knit marketplace like Silicon Valley, the old adage of “it’s not what you know, it’s who you know” is even more pertinent than usual.

You won’t get appointments to meet investors with a blind email, so you need to use any connections you already have. If you can be introduced to the big players by someone they know, you’re more likely to get an audience, some trust, and hopefully some interest.

If you really don’t know anyone, you need to be creative about how you make that personal introduction to the people you want to meet.

Dress for the occasion and the audience

There are some pitches where you need to wear a three-piece suit and deliver a formal presentation, but fundraising in Silicon Valley isn’t always like that. The start-up world is rarely as formal as a traditional business, so the attire needs to fit, and “smart casual” is normally appropriate, but you should’ve done enough research beforehand to be certain whether this is the case for each specific pitch you go to.

Equally, the nature of the pitch itself can vary depending on who you’re talking to, with most Silicon Valley investors happy for more of an informal chat, which gives you the opportunity to display more of your personality and your passion for your project than you could with your head in a slideshow.

Be prepared for this and make the most of it. Practice makes perfect, so try out pitch meetings with friends and colleagues, and make sure you reflect on each real meeting you have and what you can learn from it. From what I’ve seen, the founders who iterate fastest on their pitch tend to close faster. I remember meeting a medical coding startup founder at a Washington University hackathon pitch competition - his ability to explain a complex healthcare reimbursement problem in two sentences immediately grabbed investor attention.

Fundraising workflow templates

Example Procedure

Investor Pitch Deck

1Map out your key slides

2Nail your problem and solution slides

3Prove your market is worth betting on

4Show your traction and numbers

5Show why your team can pull this off

+1 more steps

View template

Example Procedure

Investor relations

1Release information to investors

2Handle investor inquiries and meetings

3Share investor feedback with your leadership team

4Handle crisis communications with investors

5Prepare regular updates

+4 more steps

View template

End your pitches well

In a stressful situation like a pitch to a prominent investor, the temptation is always there to get out as quickly as possible so you can breathe a sigh of relief, but deals can be made and lost in those last few minutes.

Don’t make the mistake of leaving a positive pitch without agreeing about the next steps with the investor, including a clear timeframe for when you can expect an answer. This’ll help you avoid hanging on for a “no” and demonstrates that you’re a serious person with an ambition to move swiftly.

It goes without saying, but if there’s anything you’ve agreed to supply as follow-up information, get straight on with it and send it as soon as possible.

If things haven’t gone well and you’ve failed to secure the investment you were looking for, remain polite and grateful for their valuable time. Don’t waste your time or theirs trying to change their mind and don’t try and go above their heads/behind their backs to get a different answer from a colleague or boss.

That kind of thing will get around the venture capital community and will make your life twice as hard.

Fundraising in Silicon Valley is a long and painful process that requires a lot of patience and planning. One thing that surprised us at Tallyfy is how much more credible founders come across in pitch meetings when their internal processes are already tight before fundraising. If you’re looking to make all of your business procedures effective and efficient in the meantime, Tallyfy can help you with our business process management software. It doesn’t even matter if you haven’t raised your fortune yet, as we’ll give you a free trial, so get in touch today to get started.