A founder recently asked for my advice about creating hype and FOMO while fundraising, stemming from a post making the rounds in entrepreneur circles. Their take was…
“Based on the article, we should pretty much stop engaging with VC’s at the moment as we’re not (actively) fundraising, that information is a currency, and a certain amount of mystery seems key. Better to disengage entirely for the best chance of success?”
Something didn’t sit right, I better have a peek at this article – is it really suggesting founders not to engage with investors until actively fundraising?
Most of the advice is solid: a ’sherpa’ can help with introductions and navigate discussions, other investors suggesting a ‘hot deal’ creates urgency, craft your story based on current trends, don’t waste your time with tons of investor calls, be creative when attracting interest. Yep, that all resonates.
But this founder (and quite a few others, I’m told) focused on ‘intrigue is an asset’ as a key takeaway. If they plan every interaction, minimize casual interactions, and fill an investor’s mind with good news, then mystery and the magic of ‘limitless potential’ is created. Which then leads fo FOMO and ultimately investment.
In essence, unless you’re in total PR mode when speaking to investors, they’ll find out your company is a complete disaster and never invest in you.
To me, it felt like used car sales tactics more than finding a decade-long business partner and board member. But maybe I’m missing something? Perhaps the combination of planned, formal, mysterious, and good news is indeed the path to creating FOMO and raise a round?
So I called several investor friends (7 in total, all Partners of active VCs) and asked for their take on FOMO and relationships during fundraising. How did they source their best investments? How do they advise founders to fundraise? What % of their deals are FOMO related?
Instead of writing a slick post or creating an ultra-hip tweetstorm, I’m directly passing on the feedback I shared with the founder who initially asked for fundraising advice. It’s a combination of these 7 investor conversations and my personal experience. I hope it helps on your fundraising journey… may the FOMO be with you 🙂
1) Fundraising is about building a relationship over time, based on genuine/open/honest conversations (eg lines not dots)
2) The goal is finding someone you can spend a decade+ building with, who adds much more value than just money
3) Building investor relationships can have upsides other than fundraising, like introductions to potential revenue/staff/etc
4) Investors have seen it all (startup ups/downs), they see through planned ‘good news’ interactions (eg “the shit comes out in DD”)
5) A too much intrigue can set expectations too high, create trust issues, and even kill a deal that would have gone through
6) Instead of being ‘mysterious,’ think about frequently reaffirming the big vision (1/3) while sharing wins (1/3) and struggles (1/3)
7) Short term FOMO (eg mainly dark until fundraising) does happen in +-25% of rounds, vs 75% based on long term (9+ mo) relationships
8) This kind of FOMO is usually because of serial exited founders, incredible team, insane traction, or significant market change
9) FOMO fundraising can work, but there’s high risk if the market doesn’t form and you’re left with limited relationships to fall back on
10) When a FOMO fundraising ‘works’, it’s hard to push through IC, the dynamic can be off, and there’s limited rapport to work from
11) Optimal rounds are pre-emptive offers (with others then bidding), which entail some kind of dialogue and relationship
12) Treat fundraising like business development by segmenting your list into A) 5-6 top prospects B) 10-20 decent potentials, C) 40+ all other leads
13) ‘Massage’ deeper relationships with an A list YOU choose, vs 20+ surface exchanges with ‘time-wasting’ incoming interest
14) Spend time being top of mind with existing investors, frequent ambassador mentions to your A list go a long way
About Andy Shannon
