Customer reference calls are one of the last parts of a VC due-diligence process. VC like it because they can hear an actual user of your product tell them about their experience. While this is an excellent opportunity for a founder to gain credibility with the potential investor, you must take it seriously.

Following these simple steps will ensure that you maximize the outcome of these customer reference calls:

  1. Plan in advance. Once you’re in fundraising mode, expect a request for an introduction to 2-3 customers. Think who your best champions are. Then, reach out to them and explain that you are raising a funding round. The new money will allow you to provide better service to them and further develop the product. Ask for their permission to be introduced to investors by you. Be friendly and polite.
  2. Align expectations. Explain what the VC is interested in getting from the call. Many of them have never been in this situation before, so that they might go on rambling. Instead, it’s important to emphasize that the investor is trying to understand the market, your product’s unique value proposition, why they chose you over the competition, if you’re willing (or already are) to pay for it, and how much.
  3. Avoid pitfalls. For example, a reference customer should not take the call if they don’t know how your product works. Try simulating the Q&A with the reference customer and see if there are red flags. It might be better to search for a different reference.

Once the first reference call is complete, don’t be shy and reach out to the customer again to ask how it went. Understand what questions the VC asked. Then, before their call, speak with the other reference customers and prep them to get the best outcome possible.

In the previous blog post, we discussed preparing for the seed round - bootstrapping vs. fundraising, knowing your investors, understanding terms like valuation and dilution, and deciding what to focus on before fundraising.

Now, it’s time to get to business - let’s go out there and fundraise! In this post, we’ll walk through the fundraising process, from the first meeting to having money in the bank.

The basics

  1. Why is it essential to control the fundraising process? The first and most important thing to understand is that you must control the process. If you don’t own the process, it will control you, which reduces your chance for a successful seed round.
  2. When are you ready to fundraise? Ready for fundraising means you’re prepared to tell your story to the world and investors. The story should be coherent, consistent, and convincing. When you think you have the story in place, try practicing on other entrepreneurs, friendly investors, and domain experts.
  3. How long should a seed round take? Ideally, from the first investor meeting until you have a term sheet takes up to a month. However, if the process takes too long, the chances of getting a term sheet decrease significantly. Therefore, block 10-14 days for the first investor meetings.

Preparing a list of potential investors

So you think you’re ready to start fundraising, the story and deck are ready. What now?

First, you need to identify your potential investors. Prepare a table with the following columns:

  1. VC name
  2. The specific person you wish to meet in the VC (usually a partner’s name)
  3. Who will introduce you to that person

We recommend at least 30 names. With 30 VC names, you can expect 15 meetings. Don’t be picky at this stage. Generating a critical mass of investors is essential to take off the momentum.

Decide on a timeframe

The goal is to create momentum and intensity in the fundraising process. We recommend choosing a date, i.e., October 1st, to start the fundraising process. That means you will take the first meetings only from October 1st to October 10th, with a buffer until the 14th - two weeks. You created a process:

  1. Week 1: first meetings
  2. Week 2: first meetings and follow-up meetings
  3. Week 3: follow-up meetings and, hopefully, first term-sheet
  4. Week 4: you have a signed term sheet

You want to be careful not to bring in new investors too late in the process. Sometimes it will simply be too late for them, and they will drop since they wouldn’t be able to meet the timeframes you want.


If you’re planning to meet the investors within a 10-day timeframe, you will have about three daily meetings. That might seem like not much, but don’t forget that each session is exhausting since you will pitch non-stop and highly concentrated. In addition, you will need to work on the pitch deck between the meetings. Finally, and most importantly, you will have follow-up meetings with interested VCs that will quickly stack up and create a hectic schedule. You will also have commute time if it’s not all virtual. Don’t underestimate the intensity of this process!

Meeting the investors

It’s “money time.” Come to the meeting 100% ready. If it’s a seed round, all the founders should show up. If the team is 50% of the investment decision, how can an investor decide that half or two-thirds of the team is missing?

In addition, the founders should play very well together. Be careful not to show any signs of disagreements in the team in front of the investor.

First investor meetings are not the time to be shy. You need the investor to understand that this is the best team he has ever seen. Don’t spare praises. Highlight the good stuff about the founders.

Start with an introduction about what you do and your status: “we are company x, doing y, we’re raising $4m”, and we are currently taking first meetings.” It means there is still time for a new investor to lead the round, but since you’re already in the process, they can’t wait too long.

The deck

The first thing to understand is the nature of the investor’s deck. The deck is not just presented - it is sent via email to various people in the VC firm. Therefore, everything you said in the meeting should appear in the deck, which leads us to the second point: the deck should not be short, nor should it be “clean and pretty.” Instead, the deck should be detailed and complete. Unlike a TED pitch deck that is more academy-style, the deck for the investors should be more similar to an executive summary, organized in slides. A reasonable number of slides is 15.

Hidden slides are a helpful tool to come prepared for questions. When a topic is beneficial but not essential to the story, prepare a slide and make it hidden. When the investor asks, “what is your product roadmap in the first 12 months?” instead of mumbling, show a slide. It will also show the investor that you’ve thought about it and came prepared for the meeting.

Should you send the deck in advance of the meeting? Our recommendation is to refuse politely. If someone is genuinely interested in learning about what you do, they should spend an hour with you to hear the story directly. On the same note, if someone only has 30 minutes to meet you, they’re probably not interested enough. After the meeting, sending the deck is common, and we recommend doing so.

The structure of the deck is straightforward and contains the following part, in this order:

  1. Team: This has to come first. It doesn’t make sense to put the team in the end. The person wants to know who you are, first and foremost.
  2. Market: Convince the investor that this is a large, fast-growing market. Use examples like market data and customer stories. Be specific - the market is not just “cloud computing” but “troubleshooting tools for cloud-native applications.” When the market is well-defined, you can calculate how much companies (or consumers) are spending on these solutions today instead of throwing random numbers on the slide. The team and the market are the two most important sections. If you did a good job, the investor is excited to hear what you have to say next, and you control the conversation.
  3. Problem: What specific problem are you tackling, and why is this big and challenging (possibly technologically) one? Don’t forget the “Why Now.” If the problem has been around for five years and no one has solved it, there is a reason. (Generally, not having a “Why Now” is an excellent way to rule out potential startup ideas.)
  4. Solution: What is your approach to solving the problem? Why is it unique? Why is it defensible? Why wouldn’t Google/Amazon/other big companies do it themselves?
  5. Competition: No matter how you present your competition, it’s crucial to be aware of them and know what they do as detailed as possible. If you choose an X/Y presentation of competition, choose the axes wisely so the investor won’t lose interest. In addition, choose things fundamental to your solution (e.g., manual vs. automatic, not a specific feature). Learning about the competition is also an excellent way for the investor to learn about the market.
  6. Market Validation: Speak to 30 companies (rule of thumb) that have the problem you’re addressing and show their logos in addition to specific quotes is the best way for the investor to get conviction about your market. It also offers the founders’ capabilities to reach out to actual customers and get on a call with them. Keep in mind that ideally, 2-3 of these customers will be referenceable, i.e., willing to talk to the investor.
  7. Financials and roadmap: Some people forget that fundraising means asking for money, usually millions of dollars. It only makes sense to explain what you plan to do with this money. Show the company’s roadmap in milestones. Don’t get too specific, but show that you have a general plan.

After the meeting

If the meeting went well, it wouldn’t take more than 48 hours before you get an email asking for the next steps. We don’t suggest following up proactively unless you have a term sheet, which means you have leverage that will likely trigger an investor to act.

Following this process in your fundraising will significantly increase the chance of getting a term sheet!

Fundraising is one of the fundamental aspects of a startup. But unfortunately, it’s also one of the most challenging areas. So we’ll try to make it simpler here. This blog series will cover the basics of raising your seed round - from getting ready for the round to meeting investors and eventually having money in the bank.

Fundraising vs. Bootstrapping

Why do even you need to bring outside money? The shortest answer is because almost everything costs money: developers for building your product, travel to present at conferences, office space, and so on. These alone will probably cost hundreds of thousands of dollars for the first year. So fundraising makes sense. But there is a way not to raise money, as long as you can generate revenue to cover your expenses - this is bootstrapping. If you can start generating revenue, you can use it to cover costs and grow your business. The advantage of bootstrapping is that you’re calling the shots. You and your co-founders are the board. What’s better than that? And there are some fantastic success stories for bootstrapped companies.

There are downsides to bootstrapping. The first and most important is speed. You’re operating in a fast-growing, highly competitive market. The first company to conquer the space will be the winner. The others will likely disappear. Raising capital means you can run 10x faster, which could be the difference between a winning and mediocre business. Fundraising allows you to accelerate using money. Bootstrapping also means you have more mental stress since you might need to live with zero or a minimal salary for a longer time.

For these reasons, most startups choose to fundraise versus going bootstrapped.

The fundraising landscape

There are different types of investors:

  • Angel investors are private people who usually invest anywhere from $10K to $100K, sometimes more. They often invest in groups, so the total amount is hundreds of thousands. Founders like angels because of their unique expertise and ability to help, sometimes more than their money.
  • “Super angels” are angels that can invest anywhere from hundreds of thousands to $1M-$2M.
  • A Venture Capital (VC) firm invests anywhere from $100K (a small or pre-seed VC) to a more prominent VC that can support anywhere from $1M up to billions in a single round.
  • A corporate VC is an investment arm of a corporation. They aim to invest in startups for financial returns (like a regular VC) or strategic collaboration. Unfortunately, they are usually too early to bring in a seed round.

The funding rounds

A software B2B company typically needs anywhere from $1M to $5M to get going. The heavier the tech and the sales cycle are, the more it needs. Another way to think about these amounts is by the stage or “round” the company is at:

  • Pre-seed stage: the goal is to verify what the startup wants to build. For that, the company usually needs $500K or less. Then, a successful milestone will be to get the initial technology working or get initial users (usually in a B2C product).
  • Seed stage: the goal is to show initial product-market fit (PMF). In B2B, an ARR (annual recurring revenue) of a few hundreds of thousands or several paying and referencable customers is a good sign of PMF. In B2C, this could mean thousands of users or more. Being ready for the next round means you can start hiring sales and marketing people to start building the commercial operation. The seed round is usually $1M-$5M but can be even $10M in infrastructure companies that are more capital intensive.
  • Series A: building the commercial team and proving the Go-to-Market (GTM) fit, meaning raising an additional $10M-$30M, hiring your first executive team members (e.g., VP of Sales and VP of Marketing), and a small sales team. A successful milestone would be reaching $2M-$5M of ARR.
  • Series B, C, D, and after: from here, it’s about scaling the business to $10M, $30M, and eventually over $100M ARR. A series B usually starts at $20M and can be much more. Also, the terminology usually fades at these stages, and you’ll see very different ranges of numbers.

For example, at Epsagon, we raised a $4M seed round in 2018, led by two VCs. Then we raised a $16M Series A in 2020 led by a VC, with multiple angels participating.

How valuations work

If your startup’s valuation is $15M, what does it mean? It’s straightforward: the pre-money valuation is the valuation on the day of investment, and post-money is the valuation a moment after raising the round. So: post-money = pre-money + round size.

How does that work with dilution? The investor’s ownership is the round size divided by the post-money valuation. So if an investor invests $3M in a company with a pre-money valuation of $12M, they get 20% of the company because three divided by 15 (12+3) is 20%.

Most seed-stage VCs want significant ownership in the company, usually 10% or more, sometimes up to 30%-40%, because they know, they might not have another opportunity to invest in the company. However, more prominent VCs can invest in later stages and be more flexible.

Since valuation is arbitrary and not based on revenue multipliers, it is mainly a market function and how much you raise. For example, if you ask for $1M, you might be valued at $5M, whereas $5M can make an argument that you are worth $20M. So don’t think of raising less as a way to have less dilution.

Optimizing for the right things

There are several factors you should think about when fundraising, including:

  • The round size
  • The valuation
  • The duration of the round
  • The VC firm and the person joining your board

From our experience, the most critical factor when fundraising is the person you will be working with closely during the next 5-10 years. So when deciding between different options, never choose someone, a person, or a firm that is not a good fit for you. That is always a no-go. However, you might be able to increase the valuation offered by the investor you want by having competing offers, so that’s always a good thing.

Now what?

In the next chapter, we will talk about how to reach out to investors, create a fundraising process, and meet investors to get the best result for your startup.
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