Latest / Success Story with Scott Clary / Lessons - The Brutal Truth About Fundraising | Russ Heddleston - Built & Sold DocSend for $165M

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Lessons - The Brutal Truth About Fundraising | Russ Heddleston - Built & Sold DocSend for $165M · Success Story with Scott Clary

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  In this lessons episode, explore how founders can navigate the complex realities of fundraising at every stage.
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  Discover why timing a raise depends on traction, credibility, and vision rather than rigid milestones.
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  Understand how simplicity and clarity in a pitch deck build investor trust
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  and uncover key best practices that separate successful startup storytelling from costly fundraising mistakes.
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  And do you think that founders should go and get those nose ASAP before that like pre-revenue?
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  Or do you think that you should wait till you have revenue to actually go out to raise that even series A?
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  Well, yeah, series A and C. And Docsend has research on all these different stages.
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  We've tried to quantify it because and the research that Docsend does in this stuff is just
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  of interest to me personally because when I was starting pursuit and I was asking for advice,
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  I got just so much anecdotal advice. I'm like, this is what I didn't work to do that or this is
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  what I didn't, it didn't work, so don't do that. And I was like, has anyone like done any like kind of
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  research on this? And when I went to conferences, it's usually like like older venture capitalists
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  who pontificate about like what they like to see in a company. And if you're going to get me to
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  invest, here's my investment philosophy. And it's kind of more geared towards like them pontificating
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  on why they're so brilliant and successful, which you know, as an entrepreneur in the audience,
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  being like, I just need your money is like not necessarily super helpful to me. And I'm like,
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  I don't even care if it's your money. I just need someone's money. I'm trying to fund raise here.
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  You know, so for the docs and research, we try to come at it from the entrepreneurs perspective.
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  And so we break out how series A is different than series C, then pre-C, and so on. Even venture
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  capital fundraising is something we have enough data on to have some interesting takeaways. And
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  it's not so much like what should you do? It's just like common takeaways from all the companies
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  that we can get to participate in this research around like what are common factors of success
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  and failure. And so the narrative that a company tells really depends on what they're doing.
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  And so it's kind of hard to give specifics, which is kind of annoying. And to your question
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  around like, is it better to raise like pre revenue or like pre launch or the answer is usually
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  like it depends because that's what I mean by take stock of like what you have to show for yourself,
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  kind of as evidence. Like if you're a second time founder, you know, awesome. If you've got a,
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  like a really great track record and career as like a Google machine learning engineer or you've
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  gone to like name brand schools, you know, these are all things that can count in your favor.
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  If you're, you know, if you're like, oh my god, I'm a nobody. I'm non-technical. I have nothing
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  of note on my resume that a venture capital should be like, oh, well, at least that's a, you know,
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  impressive something or other. You know, then yeah, maybe you need to have a little bit more
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  traction or revenue or something to show for it. Maybe you have to be a little bit scrapier.
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  And so the answer is it depends. And so that's why, you know, it's just good to like get advice
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  from folks and, you know, the nuance of your business. And typically it's easiest if you can get
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  advice from like, if you're raising a seed round series A investors because they'll be more
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  honest with you, hoping that they'll come back to them later and they'll have an advantage in
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  funding your series A. As opposed to getting advice from seed investors when you're looking for
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  seed round, like they're just looking at you as like, do I invest or not? So get that advice.
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  But specifically to, you know, do I raise before revenue or after revenue or before launch or after
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  launch? Like the common tradeoff is that it's always easier to sell the vision before launch
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  because you can say it's going to be huge. And so you can be persuasive as a founder and just say,
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  like, here's all the evidence I had. Docs and raised or seed round before we publicly launched. So
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  we raised our series A before we had any notable revenue. So we decided to, you know, do those
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  things earlier rather rather than later. But on the other hand, launching early gives you more
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  information on like what is working or not working. So you can kind of get started like actually
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  scaling your business earlier. So there's just tough tradeoffs to make for all of these decision
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  points. And so, you know, fundraising unfortunately is time as a founder. You don't get back. Like,
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  you don't get credit for the time you spend fundraising. You just get credit for building your
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  company. So fundraising is a necessity, but you kind of want to get it done as early as possible
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  or as fast as possible. I'm kind of get back to building your company.
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  I know that you I know that you've mentioned that fundraising and like sort of best practices are
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  very case by case. Are there are there any anything that is more universal that you can sort of
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  help someone walk away with it? Because listen, if you're fundraising like this is the best practice
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  based on what I've seen or there's a probability that if you do this, you're going to end up being
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  more successful. Or is it just really on a case by case, you don't want to commit to any
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  absolutes, which is also fine. No, no, no, I could go through a whole bunch of stuff for you.
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  We could spend a couple hours on. I'm sure you go. So let's do a few. Let's do a few. Okay,
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  we'll do a few. The first is like people ask, do I need a pitch deck or not? And my answer is
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  usually yes. If you're asking that question, yes, people who don't need a pitch deck have enough
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  previous success to and the relationships to just walk in and say, here's generally what I'm doing,
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  give me money and like, okay. And people also, most people, yes, be like, oh, can I create a video
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  pitch and like, well, maybe, but like just the way it works, at least in Silicon Valley, you're kind of
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  like professional, you know, software investing, like venture capital is like pitch decks allow
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  investors to be very efficient running through things. And so it's like three to four minutes
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  per visit, like view on average. And so they can just intake a lot of information about what you're
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  doing. So yes, you're probably going to have to create a pitch deck. And then also, by the way,
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  that pitch deck is so helpful when you have to go higher a bunch of people, it's also very helpful
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  in forming like what your sales deck looks like. If you're doing V2B, you're doing any sales.
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  And it's just a really helpful document for what are you doing like document, like, and then,
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  you know, you're going to iterate on that in the future. So so create a deck and be thoughtful. It
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  doesn't need to be the world's best designed thing. Also, in the creation of that deck, keep it simple.
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  The most common mistake I see is that people make what they're doing sound more complicated and
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  hopes that it makes it sound smarter or more defensible. And it does not have that effect,
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  typically. You know, one of the nice tests of this is like, can you take it to a friend who's not
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  in tech, your parents, an aunt, uncle, and tell them what you're working on and see if they can
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  like repeat it back to you. And even when you're asking like friends for feedback, give them your
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  pitch, show them your deck, give them all their pitch and then ask them like, how would you repeat
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  this back to me? And if they have difficulty with that, that means you got to dumb it down more.
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  Because the best pitches seem like intuitive, makes sense. And they might leave you with questions
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  like, why hasn't that been done before? Or isn't that kind of like blah, blah, blah? And then you
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  can answer and address those things. But if you start the pitch with, why is it differentiated that
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  gets in the way of like, what is it to begin with? And so a lot of founders, especially first
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  time founders aren't comfortable dumbing down what they're doing to like that level of simplicity,
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  which I think you kind of have to do in order to get across the point. There are other like best
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  practices around like why now or why you, you know, type of things like those aren't obvious
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  questions. Like I see a lot of founders where they're like, well, I don't need to add a why now
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  section or why now. Hey, just obvious that this is a thing that it should be done today. And another
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  thing to stress for founders is that nothing is obvious to investors. Like assume no knowledge
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  on the part of an investor when they're reading your deck. So, you know, like as you go through,
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  I keep an eye out for like start with the obvious stuff. You know, like why are you uniquely suited
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  for this? Why is this a thing that has to be done today? Why hasn't it done before? And there are
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  also invariably going to be like holes in your pitch that you know about. So for docs and one of
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  the holes in our pitch was like, why doesn't Google just go do this? Or why doesn't Dropbox go do this?
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  And there wasn't a great answer. And for a lot of software, there's not a great answer as to why
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  Google doesn't do it or some big other company. There's been a lot of research around innovators
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  dilemma. And if you've worked in a big company, it becomes a little bit more apparent like why
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  things just move real slowly. But in terms of like, you know, pitching it and, you know, how to
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  represent that, you know, for us, I was like, well, I wouldn't talk to people and they're just not
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  going to build it. So, you know, for you as a founder, it's okay to leave some things unanswered.
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  Like don't overstress about them. If you know, the question is like, well, why doesn't Uber do this?
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  It can't be so close to Uber that's like, oh, the problem will do this. But if it's like,
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  listen, they're focused on these things. There's a risk. But, you know, I've talked to some friends
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  there. And I think we've got years in the future to do this. And some investors might say no,
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  like that's too risky. Other investors might be like, I believe you. And I think you've got a great
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  head start on it. And we'll back you. So again, you only need one yes. So instead of focusing too
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  much time on like that particular hole in your deck, maybe put more effort into what is your go-to
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  market? How are you scrappy in the beginning? Or, hey, what's your hiring plan? Or like list all
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  the engineers you know that you're going to recruit once you get the funding in the front door.
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  So there are those things. I think another common one is like, uh, financials. If you're like a
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  seed sage company, don't put financials in there. I think this was like a thing in like the 80s,
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  or maybe 90s or something, where it's like the business plan thing. And then you had to like
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  have pro forma numbers. And like, especially early on, like don't, don't do that. It's like very
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  rare that that needs to be a thing like to the extent your business has like, uh, clogs or you're
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  like a physical product, you need to demonstrate that you understand kind of like how those things work.
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  But like, you know, if you put financials in there, people will spend a lot of time reading them.
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  And that's not necessarily what you want. Because usually your financials aren't the bright spot for
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  your startup and anyone can make up math and make it look like a hockey stick. So I'd say, you
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  know, that that's like a made up exercise like not to put in there. Thanks for tuning in. If you
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  found this valuable, don't forget to hit that subscribe button so you never miss an episode.
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  And if you want to dive deeper into this conversation, check out the links in the description
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  to watch the full episode. See you in the next one.