Fundraising Tips, How to Decide Between Incremental Product Improvements and Big Swings - Tactician #0054

"'Here's a fundraising tip,' they said, 'be passionate about your product.'" So, I wrote a love song for our app. It was off-key and a little cringy, but you can't deny the passion.

09/02/2024

Fundraising Tips

Sahil S., Writer at The Venture Crew, guides founders through management of the fundraising process, emphasizing it as a crucial sales and marketing activity that requires strategic planning, rigorous time management, and a focused approach in “How Many Investors Should You Talk to in a VC Fund Raise? And How Do You Prioritize?”

• On Fundraising Mindset:

  • "Fundraising is a sales & marketing process and needs to be managed... 'An investor's job is to deploy capital and make a return. If you truly believe that you, your company, and your products are exceptional and your company will be valuable then you’re actually doing them a FAVOR by helping them invest in your startup. If you don’t believe in your bones that you’re amazing then it’s no wonder you don’t want to sell them on making the investment.'"

• On What You Need to Test Prospects For:

  • "Your entire process should be about 'testing' whether your prospect has: Interest, Authority to make a decision, Budget, Is willing to continue spending actual time with you and analyzing you. You can short-hand this as 'engagement.' If an investor isn’t engaging then they’re not suddenly going to get a term sheet. The surest sign a fund-raising process has stalled is when you aren’t getting follow-up meetings or hearing from the VC or hearing from friends that they got a phone call or email asking about you."

• On How Many Investors to Speak With:

  • "Start with a list of approximately 40 qualified investors... In terms of stack ranking - force yourself to have no more than 8–10 'A’s,' 8–10 'B’s' and the balance of 20–24 should be 'C’s.' So qualified investors mean - they’re all the right: Size, geography, industry focus, capacity available and they have raised a new fund in the last 3–4 years so you know they have dry powder."

• How to Know if a VC is Engaged:

  • "There is a super simple way to know if a VC is engaged. If you get a second meeting, a follow-up phone call or you know they’re doing actual work then they’re engaged. No VC spends more time evaluating your company unless they know that they at least have some interest."

• On Marketing and Momentum:

  • "Marketing support is as critical in a fundraising process as it is in a sales campaign... When VCs are thinking about taking a second, third or fourth meeting it doesn’t hurt that they saw an article about you in the WSJ, Recode or TechCrunch."

• Don’t Assume You’re Done Until Cash Hits the Bank:

  • "Even if you are certain that you’re about to get a term sheet you need to keep working a few names in the top end of the funnel all of the way through a signed term sheet. Never just assume that this will come through."

• Role of the CEO in Fundraising:

  • "Fund-raising is a year-round activity and never ends. Place a small amount of your monthly time allocation to this task. Outside of fund-raising periods, it should still be at least 15% of your time. It’s a large part of the job of a successful CEO."

How to Decide Between Incremental Product Improvement and Big Swings

Maverick Lee, Tech Lead Manager at Mixpanel, highlights the importance of incremental product improvements alongside major feature releases in product management in “How to iterate on a product”

• Prioritising Solving Complaints Above Taking Big Swings:

  • "Feedback from customers: If a certain feature is causing users to complain (via CSAT surveys or direct feedback to your support team), that’s a good sign that you should prioritize this improvement over a big-swing feature launch."

  • "The data: Examine data like usage behavior analytics to identify areas where users may be dropping off or experiencing friction—and more importantly, whether these issues are impacting business-critical metrics like conversion rates. If they’re not, then you may not have to prioritize this incremental improvement so urgently (especially if you have another big feature launch in the same sprint)."

  • "Resource constraints: If you only have enough resources to achieve a quick win, then it might make sense to just go ahead with that—even if it wouldn’t be your priority otherwise."

• When to Prioritise a Big Swing:

  • "As a rule of thumb, when you’re weighing a big feature release against a few incremental improvement updates, we say that if you can’t easily make a strong case (ideally backed by data) for how the small updates will materially help the business, then prioritize the big release—you can always come back to those incremental improvements in the next sprint after you ship the big one first."

• Workflow for Making Incremental Improvements:

  • "Before you begin iterating, make sure you’ve created a flexible enough process—on both the engineering and design side—that can handle all the potential complexities. Sometimes, small updates can turn into big lifts, especially when you’re dealing with concurrent product updates on your roadmap."

  • "They’re key collaborators, and you should have a clear sense of how you’ll allocate engineers to work on incremental improvement projects while also giving them space for other feature requests. How can you set aside dev resources effectively, negotiate with other internal teams, and convince your engineering team to staff, say, four engineers on incremental improvements? How long would you need those engineers staffed there—a month, half a year, or more?"

  • "Next, identify your most important user flows in the product, which will then lead you toward the metrics you should track. For example, the onboarding flow is important to us because successful onboarding is a key indicator of increased user retention and lifetime value."

  • "From here, dig further into different parts of that user journey—specifically, the tasks and stages in the workflows from Step 3. How can you improve those processes for users? This will guide your iteration strategy and give you ideas for where you can experiment."

Sign up for Tactician

Curated newsletter of MUST-READ articles for startup founders and operators

No spam. Unsubscribe anytime.