Winter Fundraising Tips for Seed-Stage Startups

December 15, 2015

11:30 am

In several years of angel investing, one thing I have consistently noticed is the propensity for startups to start raises right around Thanksgiving, with the expectation of closing before Christmas. Although they sometimes succeed – and have a far highly likelihood of doing so at more mature stages – it’s very difficult to succeed, and there are better, more reliable strategies for startups to employ when fundraising in winter. This rule does not, of course, apply to startups who begin their raise in later October or early November – it’s perfectly plausible to close a round by Christmas if you leave that much time.

The first key rule is the “90 day rule,” which states, predictably, that it usually takes around 60-90 days for a seed-stage startup that is too early for institutional VC money to secure a term sheet, fill out, and then wire and close their round. So, for startups sitting in mid-November (or even mid-December!) and eyeing a raise, there is a better option.

Instead of trying frantically to raise for a few weeks, then having Christmas Day and New Year’s Day roll around, investors forget about their oral commitments, and – essentially having to start from scratch –  smart founders INVERT their thinking: they instead look to December as a critical KPI focus period. Knowing investors are otherwise occupied, clever seed-stage founders put their heads to the ground in December and try to hit key goals.

In particular, it’s best to focus on two key core goals: hitting on one or two ‘new frontier’ engagement and-or revenue metrics and 2) rolling out their best version of their product. For example, a savvy startup can utilize the November-December holiday season to show much higher purchase numbers and increased monthly retention rates (Thanksgiving AND Christmas purchases for an e-commerce startup for example), which will dramatically boost their odds of getting funded. If they combine that with demos of a far superior product they rolled out during that period, all the better.

Angel investors come back January 4th refreshed and ready to look at new deals. Clever founders should use their holiday months to prepare hard and be ready for them.

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I am an entrepreneur, angel investor, and early-stage VC living and working in New York City.

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