The Art of the Ask: How VCs and Founders Master the Fundraising Dance
For many founders, the venture capital fundraising process can feel like navigating a maze blindfolded. The opaque nature of how VCs make decisions, who they choose to back, and the intricate dance of pitches and term sheets can be daunting. But what if we flipped the script? What if we looked at fundraising not just from the founder’s perspective, but also from the VC’s? Just as founders meticulously plan their go-to-market strategy to find product-market fit, Venture Capitalists (VCs) must also develop a robust strategy for attracting their own investors – the Limited Partners (LPs) – and, crucially, for selling themselves as the ideal partners to the very founders they aim to fund.
This season on ‘Build Mode,’ we’ve delved deep into the nuances of founder marketing. Now, we’re shifting our focus to the other side of the table, exploring how VCs cultivate trust with founders and demonstrate their value to LPs. We sat down with Leslie Feinzaig of Graham & Walker and Ross Fubini of XYZ Ventures, two seasoned professionals who have firsthand experience raising their first funds. Their journeys have imbued them with a profound empathy for the founder’s fundraising struggle, offering invaluable lessons for both sides of the equation.
From Outsider to Trusted Advisor: Leslie Feinzaig’s Journey
Leslie Feinzaig’s entry into the venture capital world was far from conventional. Without a deep network of established industry connections, her initial fundraise was an uphill battle. "It was hundreds of pitches. It was raised almost entirely from individuals. We ended up with 105 LPs," she shared, painting a vivid picture of perseverance. For those without a proven track record, the core offering becomes personal.
"If you don’t have a track record, then what they’re investing in is in you. It’s basically like raising a gigantic angel round with no lead," Feinzaig explained. This outsider perspective, however, became her superpower. Instead of trying to fit the mold, she leveraged it to position herself as a unique resource for founders. She’s become the trusted advisor founders call before they walk into those high-stakes board meetings, the one they rely on to practice their strategy and refine their message.
This ability to connect on a human level, to understand the anxieties and pressures of fundraising from the ground up, is a critical differentiator. It speaks to the human element that underpins successful professional relationships, a theme echoed by Ross Fubini.
The Three Pillars of Partnership: Ross Fubini’s Framework
Ross Fubini, a firm believer in thoughtful partnerships, encourages the leadership teams he mentors to scrutinify their potential collaborators just as rigorously as they would a potential investor. His approach to evaluating a partnership is distilled into three fundamental tenets: person, firm, and terms.
"You work with this person for forever," Fubini emphasized. "So it’s everything from like, are they fun? Do you trust them? Do they have the juice to get the deal done? It’s everything around this human." This underscores that beyond the financial aspects, the relational dynamics are paramount. A VC isn’t just a check writer; they are a long-term partner who will influence the company’s trajectory, offer guidance, and potentially navigate crises.
The ‘person’ element focuses on the character, integrity, and capability of the individual VC. Do they align with your values? Can you envision yourself working through challenging times with them? Do they possess the expertise and network to genuinely add value?
The ‘firm’ aspect considers the reputation, resources, and strategic direction of the VC firm itself. Does the firm have a strong track record in your sector? Do they have a portfolio of companies that could create synergistic opportunities? Is their investment thesis aligned with your vision for the future?
Finally, the ‘terms’ are the practical, contractual elements. While often the most discussed, Fubini reminds us that they should be considered in the context of the other two pillars. Favorable terms are less appealing if the partner is a poor fit. Conversely, a strong partnership might justify terms that are slightly less ideal.
The Shifting Sands of the Dealmaking Landscape
Both Feinzaig and Fubini highlighted a significant shift in the venture capital market. The period of 2022-2023, often characterized as a bear market, saw VCs holding considerable leverage. In such an environment, they could afford to be more selective and dictatorial. However, the market has since evolved into a more eager dealmaking atmosphere, granting founders a greater degree of power.
This dynamism makes the selection process for both VCs and founders even more critical. "I think that’s fun and joyful," Fubini remarked about this shift. While diligence and ensuring a mutual fit remain essential, the current climate allows for faster decision-making and a more collaborative approach. This creates an environment where genuine partnerships can flourish more readily.
Beyond the Deck: Building Authentic Relationships
In this evolving landscape, the traditional tools of fundraising – the pitch deck and the cold email – may be losing some of their former potency. While they still serve a purpose, their power is being eclipsed by more fundamental strategies:
- Authentic Relationships: Building genuine connections with VCs, based on mutual respect and understanding, is paramount. This involves networking, attending industry events, and fostering informal dialogues long before a formal pitch.
- Proving Execution: For founders, demonstrating a consistent track record of execution and achieving milestones is the most compelling evidence of their potential. This includes hitting product development targets, achieving user growth, and generating revenue.
- Demonstrating Value: For VCs, the ability to articulate their unique value proposition beyond just capital is crucial. This means showcasing their network, operational expertise, strategic guidance, and ability to support founders through various stages of growth.
From both the VC and founder perspective, the most effective strategies revolve around proving your worth through action and building trust through transparent and authentic interactions. It’s about creating a partnership where both parties are invested in each other’s success.
The Takeaway for Founders and VCs
For founders, this means approaching fundraising not just as a transaction, but as the beginning of a long-term relationship. It requires careful vetting of potential VCs, understanding their motivations, and ensuring alignment on vision and values. It’s about asking yourself: "Is this the right partner to help me build my company?"
For VCs, it’s about recognizing that they are in a sales process too. They need to actively market themselves, build genuine rapport with founders, and clearly articulate the value they bring to the table. It’s about proving why they are the ideal partner, not just another option.
The fundraising journey, whether for a startup or a venture fund, is fundamentally a human endeavor. It requires strategic planning, deep empathy, and a commitment to building trust. As the market continues to shift, those who master the art of authentic partnership will undoubtedly be the ones who achieve lasting success.
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About the Author:
Isabelle Johannessen, Head of the Startup Battlefield Program at TechCrunch, brings a unique blend of strategic rigor and compelling storytelling to the startup ecosystem. With extensive experience leading international startup acceleration programs and a Master’s in Entrepreneurship & Disruptive Innovation, she scouts and prepares promising early-stage startups to shine on the global stage. Her background, including a past life as a professional singer, allows her to connect with founders on a deeply human level and help them craft narratives that resonate.
(This article is inspired by discussions and insights shared on the ‘Build Mode’ podcast and features contributions from Leslie Feinzaig and Ross Fubini. It is not a commercial advertisement.)