top of page

The fundraising dance

About the players and the game of raising venture capital

Les joueurs de cartes —Theodor Rombouts

Nadie quiere invertir en Cornershop, weon — lamented its founder, Oskar, almost as a premonition before every successful closing. A version of these words popped up on my phone screen a few times in the past 5 years, as predictable as the beginning of a new season. Of course, I disagreed passionately every time, even with rejections piling up. I was trying to convince myself more than him. He wasn’t wrong. Everybody investing in the region consistently turned down one of the best Latin American tech companies of its generation.

Those working in tech long enough understand that VC money is not deployed efficiently. After all, our VC business relies more on finding a few outliers than consistently purchasing the right asset at the right price. And for entrepreneurs, this is puzzling. Investors don’t always back the best product, the top execution, or the right team. Indeed, money moves in herds, lives in fear of missing out, and trepidation of screwing up.

In my experience, teams that understand the unwritten rules of fundraising, and play the game right, consistently find backers. At least a couple. As Silicon Valley firms started pouring capital in emerging ecosystems around the world and the pandemic crisis hit, playing the game has become ever more important.

The best fundraisers I know build signals, manage momentum, create FOMO, and most of all, close! The following are the best tricks I’ve seen played on me and my colleagues.

Know your signals

What is a pitching deck if not a bunch of signals pulled together with a standard narrative: the traction, the AI, the high NPS, the low churn, the multi-billion references, a recent exit. At the end of the day, the best signal is what makes your quest truly exceptional.

If you want to convey your ambition to win big, you can go for an oversized round and valuation. Yes having big aspirations, even in adverse times, will attract the boldest investors.

Street cred provides pattern hungry VCs with the kind of predictor they look for: Uber or Stripe credentials, and engineering chops from Stanford or MIT. What’s great about YC if not the way they created a powerful signal accessible to a broad range of entrepreneurs without credentials? And it works.

The mother of all signals, of course, is to become a unicorn, however dumb or small the last cash which validated the paper $1B valuation. Does this mean these entrepreneurs built a billion-dollar company? No. It means, one or two organizations would like to think so.

The first rule of fundraising is: You do not talk about fundraising. The second rule of Fundraising is: You do not talk about Fundraising.

Build momentum

Build some PR buzz before hitting the fundraising circuits. You can have folks write about your recent crazy traction or your new high profile corporate partner. You can also try to get into one of those glossy lists, like 30 under 30 or most innovative shops or most promising promises.

The most disciplined founders wait until they get investor inbound interest. Spontaneous calls from VCs in short. That’s the best indicator that there’s an appetite for your startup in the market. It requires being close to the investor networks and part of the ecosystem gossip. Make sure you’re there.

I’ve seen entrepreneurs officially start fundraising until they get the first offer. If you have the runway, it’s better to start fundraising as late as possible and communicate a short closing window.

Concentrate your efforts in a few weeks and talk to as many suitors as possible. This is not to be treated like a well-engineered sales process so please unless your startup is white-hot, do not spread out your reach-out. Not in this market. You will have time to sleep when you’re old and wealthy.

A term sheet in the hand is worth two in the bush

Create scarcity

Yes, fear of missing out, FOMO, will move even the top of the Midas List. For those who had access, missing $ZM or $WORK or $UBER was more costly than a lifetime of write-offs.

We often get the first meeting with a team when the round is allegedly oversubscribed. When the zoom starts, like magicians, founders distract us from the initial claim with the record contracts they’ve just signed. A sense of scarcity will get you the meeting.

Much like inception, FOMO is better introduced by third parties. The best players enroll angel investors that understand the game and play it hard. These promoters have extensive networks of VCs, including their own partners. Some angels I know enjoy bewitching investors so much, they would do it for free!

Nothing creates more psychological pressure than a top tier fund leading the round. Heck, even being in conversations with a top tier investor will generate interest. If the term sheet you got is not signed by a top tier VC, you might want to keep the firm confidential. The guesswork on the other side of the table may be beneficial.

If you can bluff yourself, you can bluff anybody


All of the above is useless if you can’t close. It helps having established a good relationship with all the organizations from the intern to the founding partners. That’s why impatiently turning down or ignoring an associate is shortsighted. The best fundraisers play ball with everybody.

Delivering great traction while you’re closing is your insurance. Get into a sales dip and your round may be in trouble. Even if the process moves along quickly, remember that closing means setting the right growth expectations and meeting them. In the current context, focus on managing expectations and showing progress in metrics under your control.

Closing may require running a couple of investment processes in parallel. When finalizing documents fight only the essential, express clearly what constitutes a dealbreaker, compromise with the rest, and sign.

The best fundraising entrepreneurs understand that the bluffing and positioning necessary in this process may erode trust with their counterparts and future long term partners. They are intentional about balancing between the honest broker and the elusive dancer.

Skeptics may argue that if this blogging investor can write about the fixture of raising capital, surely I can read your dance moves. Correct. Yet, when the fundraising game is well played, investors never know for sure, even the most experienced. That possibility alone is enough to carry the day.

Will the game change post-COVID? I don’t think it will. As much as VCs argue we’ll be back to a new reality, the same mechanics and incentives of running a fund will be there. Our nature will not change. If anything, with capital scarcity, knowing the rules of the game will become more important.

That said, I’m sure you did not start your company to play games with entitled moneymen. For those who will not or cannot work tricks, there is always the old fashioned approach. Nurture strong relationships based on mutual respect and camaraderie. Build something too good to be ignored.

As you know Cornershop has done great, raising vast amounts of capital and adding exceptional investors. Oskar, the co-founder in charge of dealing with investors, has never had the patience to play games. But this Swede adopted by Chile is second to none in building relationships. Of course, scaling as fast and efficiently as Cornershop has, didn’t hurt.

577 views0 comments


SUBSCRIBE to keep up with my writing. 

I write about my work as an investor, a lecturer, and a mentor. In general, musings about Latin American tech, VC and life.

bottom of page