5 Tips for a Silicon Valley Fundraising Trip

Posted By on Nov 6, 2010 | 4 comments


I took my first trip to San Francisco as an entrepreneur in July, and I wish I’d gone to visit the west coast a lot sooner. If you are a Boston area first-time entrepreneur looking to raise money, you should get on a plane as fast as you can book a flight.

Paul Graham has been saying that the fundraising climate is different out there for years, and he’s absolutely right. So take a trip and see what happens. A lot of west coast investors are willing to write checks, even if your company is based on the east coast.

Here are five tips I wish I’d known when traveling west the first time.

 

1. Have your term sheet and convertible note ready.

Boston seed investment involves talking to lots of investors, getting a few soft offers, and hunting for a lead with whom you will negotiate the terms of the raise. The Valley just doesn’t work like that anymore.

Instead, the startup company sets the terms of the convertible note, with almost all the terms except the cap and discount rate standardized. Investors say yes or no to the offer with very little negotiation. Seriously, it takes like 40 minutes from the first “hello” to when they’re ready to sign.

I botched this one, bigtime. I got a meeting with a prolific angel with deep experience in the email space toward the end of my trip. He was ready to invest and asked me for a copy of our convertible note. I looked at him with a puzzled look on my face and told him we didn’t have one yet, since we hadn’t found a lead investor.

He told me that if we were going to raise money on the west coast, we needed to “get our shit together.” He explained how YC has impacted fundraising in the bay area, that there are practically standard docs for this, and asked me to get him a copy of the note.

Unfortunately, he left for a weeklong vacation to Australia the next day, before I could get it ready. And, since time is the enemy of all deals, by the time he returned, he’d had time to think about it and had gotten cold feet.

Have your convertible note and term sheet ready, printed, with two copies in your laptop bag before you go west. If you don’t know what it should look like, ask around. Most of the TechStars alums can give you some guidelines.

For more info, read Paul Graham’s essay on how funding works now (he hadn’t written this yet, when I took my trip).

 

2. Have a coherent ‘take over the world’ plan.

If you spend much time reading about how Boston and Silicon Valley VCs are different, you’ll hear that the west coast VCs care a lot more about how you’re going to take over the world. The same reasoning applies to a lot of SF angel investors as well.

During one of my meetings with a west coast angel, this came out loud and clear. He said that  he’s not really motivated or excited by small-exit financial gains at this point. The reason he writes checks is because he’s hoping to be able to say he invested in the next Google.

It is best if this plan is described in terms of how you will make a boatload of money instead of a boatload of impact. When I described our plans to grow an enormous user base and engage them every day, I got a yawn. It worked a lot better when I described it in terms of how there’s a fortune to be made in a big company in this space.

Yes, your `take over the world` plan is wrong. They know that. But many investors want to know that you’re aiming for something big and that you’ve thought about some path to get there.

Some angels care less about this than others. For example, Dave McClure’s investment strategy is predicated on having lots of 3x-5x returns rather than a couple 100x return investments. So he may not even ask.

 

3. Events are different out there.

There are great, phenomenal, amazing startup events in the valley, and they happen almost every day. Make sure you get to them!

One big difference between events in SF and events in Boston is the wide range of attendees at the events out there. From my experience of attending about 20 SF events, at many of them, you’ll see all of the following, mixing together:

  • First time entrepreneurs (~30%)
  • Experienced entrepreneurs (~20%)
  • Active investors who write checks to first time entrepreneurs (~15%, significant overlap with the experienced entrepreneurs)
  • Lawyers, journalists, and startup groupies (everyone else)
      Think a subset taken at random from the

MassTLC Unconference

    , but on a smaller scale, several times a week, every single week.

People at valley startup events also get way more excited about your dopey idea than people here do. Maybe (probably?) it’s because most of the SF startup events come with a keg or two. People will be accessible, even people who are veritable startup celebrities. Everyone will want to hear your story, and you’ll find yourself wanting to hear theirs too.

Plan to hit as many events as you can while you are out there. There is no Greenhorn Connect out there, alas, but here are a couple places to find out what to attend. Also, consider stalking people on plancast Smile

4. Plan for two weeks – with the last one flexible.

Networking takes time, and intros are like currency in SF. If you’re working on something interesting, you will get introductions. But people are busy, and it takes time to get meetings arranged.

For example, we met a Stanford professor named Tom Kosnik through a crazy event that Larry Chiang put together. Professor Kosnik introduced us to Katherine Barr at MDV, who I had a phone call with and who tried out Boomerang. She thought that we’d be a great fit for Dave McClure and made an intro for us. We had the ground well seeded when he happened to need a lift somewhere!

Schedule yourself for at least 2 weeks while you’re out there to give the intro chains time to form and to get sufficiently networked that you’ll know a handful of people at the startup events.

Of course, a bit of legwork up front can help a lot. The more meetings you can get set up for the first week the better. But even if you can’t get a ton of meetings in advance, head out anyway. Just make sure you’re flexible enough so that if opportunity knocks, you can take a few serendipitous meetings before you leave.

 

5. Logistics: Clothes, hotels, cars.

You’re going to California, so it should be warm, right? Bull. San Francisco is COLD. It’s almost always cold. Palo Alto/Mountain View are nice, but if you’re going into the city (where many events are), it will be COLD and windy. You’ll end up paying $20 for a fleece or a hoodie, and you won’t wear the shorts you’re going to pack. Bring warm clothes and dress in layers.

Don’t worry too much about hotels after the first couple nights either. Before the end of my first day in SF, I had offers from three startup founders I’d never met to let me crash on their couches. Just go out, have a good time, and let serendipity happen.

On the other hand, a rental car is probably worth every cent. San Francisco and Palo Alto are a pretty long way away, and it’s hard to get there via public transportation. By the way, your GPS will probably tell you to take 101 almost everywhere. Ignore it. 280 is a lot faster, usually. Also, rent your car at San Jose airport instead of SFO – it costs about 1/3 as much.

Finally, make sure you take a day or two to do something fun while you’re out there. Ride a cable car. Eat some kind of ethnic food that you’ve never tried before. Go up to wine country and get sloshed. California is beautiful, and there won’t be any snow. Enjoy it.

And most important, just get out there. Don’t worry about the details.

 

That’s it!

Want to rock SF like a grizzled veteran?

  1. Get your convertible note ready and bring a physical copy with you to meetings
  2. Know what you’ll say when they ask how you plan to take over the world
  3. Get out to the events and meet people
  4. Make sure you’re there for at least 2 weeks
  5. Bring warm clothes and dress in layers
  6. Don’t sweat the hotel
  7. Take a car
  8. Go visit wine country (or something fun)

Good luck on your trip! Let us know if you’re coming west anytime after 11/20, and we’ll grab a beer in Mountain View!

Header image by Mobilus In Mobili

4 Comments

  1. Great advice…enjoyed reading the post. It is presented well, but didn’t necessarily say ‘funding is a cake-walk.

    I came to know about your startup from one of the emails from Vivek Wadhwa.

    Post a Reply
  2. I couldn’t agree more. Great blog and great Boomerang product!

    Post a Reply
  3. Is there any chance of getting Boomerang for Thunderbird and/or Mail.app?

    Post a Reply

Leave a Reply to Tim Cancel reply

Your email address will not be published. Required fields are marked *