The state of pre-seed in 2024

Between 2021 and 2023, 61% less capital flowed into startups in Series A rounds, 70% less at Series B, and 76% less at Series C. The only category where the total amount of capital coming in increased in 2023: companies raising $1M or less.

Despite that positive turn, for most founders it’s still harder in 2024 to raise a seed or pre-seed round. 

To better understand why, and to discuss the overall state of pre-seed funding in 2024, we teamed up with Sandhill Markets to host a panel conversation with:

Key points from the conversation:

Transcript below.

It's awesome to get this group back together for what we're talking about. I think something that's super relevant and exciting for everybody is raising a successful pre-seed round in 2024. If you've been here before, you know that I killed the first few minutes with intros, and then I'll have them do it again as people come in.

Let me see if I can get the double yes. We're all good. Jesse, give me a thumbs up just to make sure that we're all set and that there's nothing for me to do as I move in here. You know me, I won't dwell on this. We do these regularly.

There's a Luma page at luma.com/sandhillmarkets.com. Go to sandhillmarkets.com. This is all linked out. But much more importantly, as we get into it, we have our guests today in Google Slides format.

First, Julian, who I mentioned we were in touch a long time ago, co-founder and CEO of On Deck. I have a little ticker, ondeck.com, if you've never checked them out before. I would expect that you've heard of On Deck at some point if you've been in the startup game for a while. Julian has helped over 1,000 companies get started that have gone on to raise over a billion dollars. That's really what On Deck has done really well. Actually, Andrew was a part of the team there way back when as well.

So Julian has been an angel investor, he's been on both the founder side and the investor side of this for a while now, and we'll be able to speak to it not just from the perspective of an active investor, but as an investor who helps companies raise. He has a lot of tactical experience here.

And then Andrew, we were just joking that we've been living similar lives for a while, but he is now CEO and founder of Taxwire, and he raised money for that, which we'll talk about. But before that, he was head of growth at Capital, which you might know of as Party Round. If you were on Twitter at any point in the last few years, you've seen some of Andrew's great work. Actually, there's a little fun fact here, and I'll let him talk about how he kind of started and got into Taxwire.

We're in the midst of figuring out some streaming stuff on Twitter, if that's the issue, but we are live on sandhillmarkets.com/live, and we're live on LinkedIn as well. It just doesn't track there.

So with that, I will have the guests come up, and we can start to get into it. Anyways, I gave really short intros there for both of you, and I would love for you all to do a better job of it. So Julian, if you're up for it, I'd love to get a little background on you and an explanation of On Deck for those who aren't already familiar.

Julian: Yeah, so what we do at On Deck, also known as ODF, is we help more people start the best companies. There are really two parts to that - there's more people, and there's the best companies.

We believe, maybe somewhat controversially, that there are too few good people starting companies right now. There are a lot of people who probably shouldn't be starting companies who are, but we believe that there are so many people who have yet to start a company who could make incredible founders and who should be doing it.

We think that the way we can help more people start better companies is by helping them find the missing pieces, helping them figure out who their collaborators might be, what their initial products might be, who their initial customers might be, these sorts of things. We describe these missing pieces as the things that we sort of help coalesce through a program called ODF, which we are about to enter the 22nd cohort in.

As you mentioned in your really lovely intro, we've had over 1,000 companies get started through that. They've raised a lot of money, though I don't think that that's always indicative of success. It is a promising sign though. The upcoming cohort is going to be in just a couple months, so we can share more information about that.

On my end personally, I've worked with hundreds of founders now, helping them think through not just fundraising, but specifically how to think about momentum in the early days. Fundraising is one form of momentum, like raising money, but also gaining momentum on product, which can then translate to customer momentum, which could then translate to actually ending up raising a great amount of money.

So that's me in a nutshell. I've invested probably at this point about $50 million in companies over the last 5 years across On Deck funds and personal investments. I'm really excited to be here, and thank you so much for the invite.

Of course. It's such a full circle moment for me personally to be talking about this with you, Julian. It was back in 2018 when I was fundraising for 1pager.vc and got on a call with Julian. We haven't spoken about this, but you were super helpful.

I've talked to investors who are dicks. It happens - people are unnecessarily rude, people who ghost, whatever. Those are all in the "no" category, but they all kind of hurt different amounts. Julian ultimately didn't invest, but was very helpful and gracious in the way that he did it. So again, thank you for that.

Andrew, we've been on kind of weird parallel paths here, so I'm super excited to get your thoughts on all this stuff. I'd love to hear the intro to Taxwire, obviously, which is the most important and exciting part of it, and then your personal background.

Andrew: Yeah, totally. I know both of you, I've known both of you for a second now, so it's exciting to do this. I guess I'll do the whole background thing and bring that into Taxwire, what we're talking about today with fundraising, try to double click on the things that I think will be helpful to other founders.

My background is I've basically only ever done early stage startup stuff. I started a company that was weird and raised a little bit of money when I was 20 with some folks that were older than me. That got me into doing startups, and then I've basically been in and out of that in some capacity ever since.

I was in a venture fund for a little bit, so I had a brief run seeing it from a VC perspective. Then I worked with Julian at On Deck back in the day. During that time, I actually started writing really tiny angel checks, like $1k here and there. The first two were literally in just friends' companies. Eventually, that turned into doing SPVs and all that kind of stuff, which is actually how I joined the startup I was at most recently, called Party Round back in the day and more recently known as Capital.

Originally, we were building an SPV product, and I knew a lot about SPVs. I'd run a lot of SPVs, and I knew a lot of other people running SPVs. That's how I originally ended up talking to them and then later joining.

So I saw the investing stuff from the perspective of a tiny angel. You're not really leading anybody's rounds, but you kind of see some of the real stuff. You end up helping founders fundraise a fair amount. I got probably some of the most exposure of my career to fundraising in that period, which actually helped me a lot. It wasn't everything, but it helped a lot when I actually did go start my own thing and raise money.

Anyway, I did bring that full circle. Capital sold about a year ago, a little over a year ago. I was head of growth there. I left a little bit before the acquisition, 100% to start a company. It was not necessarily to start Taxwire.

During that period, I did a brief stint as a fractional CFO for a company that I invested in. The founder was like, the company is doing incredibly well. They actually just raised their Series A and their growth is incredible. This was like this time last year.

I was helping solve a bunch of compliance issues that they had, which is why he needed someone to do finance stuff basically until they could hire full-time. I said sure, I have the time, I'll help you out.

One of the bigger things we had an issue with is figuring out how the heck we were supposed to collect sales tax across a bunch of different states, because we were growing really quickly. It put us on the radar of places like Georgia, Texas, and some other states who were telling us we should be collecting sales tax in these different jurisdictions.

I tried to buy some kind of piece of software to solve the problem for us, and we ended up having a lot of problems finding something that would do that. We spent a bunch of money and time on it. It's a longer story that I've actually got a blog post on.

Basically, I got so frustrated with that that I stopped working on what I had been working on and ended up, 6 months later, after talking to a ton of customers, starting what is now Taxwire. We are still kind of being a little bit quiet, but we're working with a bunch of different SaaS and e-commerce companies. Basically, anybody that operates and sells in a bunch of different places, we want to make it simple for you to collect sales tax and file sales tax and just not have to think about it. It's one of those annoying things, like taxes and finance. You have to do it, but it's not mission critical. Ideally, we want to just keep it that way.

Then we raised our pre-seed at the end of last year, which is kind of how we got talking about this.

Again, we've talked about this before. We've done different types of formats here, from the full panel where I'm just kind of passing the mic around, to the more one-on-one interview. I think this is a cool in-between where everyone here has interesting context in terms of the platforms we've been a part of. But I'm excited to dive in.

I think the first kind of annoying and easy question is, man, I thought about a funnier title for this - raising money in 2024 as a not AI company.

Right. Because there's the "in 2024" aspect of the title. But does that - do you believe in strategies changing?

Andrew: I think there are definitely a lot of timeless things. I think we'll talk about a lot of things that are timeless, but I think some things definitely are - my experience of it at the end of last year and from even still seeing a lot of my friends raising is it's definitely a lot harder than it was a few years ago to fundraise. It's still very doable. There are people putting money out there, but minus a handful of companies where they just have the easiest raise possible, it's not easy.

So I think there's that side of it, and then I do think there are certain spaces that are just pretty out of favor. Even we felt this - we had a lot of investors that wanted us to make the AI tax compliance pitch. So even if you're not doing a specifically AI thing, you're going to feel some pressure to make it an AI pitch.

Julian, I think that's a good segue into some of the pitching questions. There's an underlying one there of how much to mold your storyline for what investors want to hear compared to the cleanest way to articulate the vision for the company that they may or may not be interested in. How much to play to the investor compared to just telling the story?

Julian: I think that generally speaking, investors either like the opportunity or they don't like the opportunity, and you're not going to be able to really change them one way or another. You don't want to try and get in this uphill battle of convincing people about something. 

You generally have these meetings where it's clear within 5 minutes that this is a complete waste of time, or you have these meetings where they totally get it, and it's a question of how big can this get and is this the right team to do it. But if you're in this space where you're having to truly educate people, and I'm talking more about lead investors here, then you're probably going to have a tough time with them in the first place.

I actually want to step back for a second about the comment around 2024 and fundraising dynamics. I think that people are becoming aware of the amount of challenges associated with fundraising. I wouldn't necessarily say it's 5x harder, maybe it's 2x harder, but it was always really quite hard for most people to raise money from credible investors. And I think that's actually a pretty good thing. I think that there should be some friction. 

The worst thing that happens is when people are just given money before they have really considered anything, before they've evaluated whether this is the person they want to start a company with. There's this rush to raise money as the milestone versus figuring out all of these other things. 

You kind of see the emergence of all these accelerators and VC fund-backed accelerators. The reason these exist is because people realize just how hard fundraising is. Whereas they might have looked at 1 or 2 accelerators in the past, now they're looking at the entire tray of accelerators and saying which one could I get into, is that worth getting into random accelerator X or Y? Because the terms are not that much worse than a pre-seed round, and they don't actually have to go through the hassle of doing the hard work of fundraising.

I think investors are taking advantage of this dynamic a little bit and launching these accelerators. And founders are looking at these as potential options to short circuit the fundraising game. There are benefits and downsides to this, and as long as you're making an informed decision, that could be really good. But ultimately, we're seeing this dynamic where a lot of people are somewhere between a pre-seed fund and an accelerator in how they're setting a price.

Julian mentioned it, but Andrew, did you consider accelerators compared to pre-seed and all of that?

Andrew: Yeah, I agree with pretty much most of what Julian just said. On the accelerator front, I think there are a bunch of them now. I think most of them are still not worth doing for most, maybe all companies, frankly, including some notable names out there. I think some of them are flat out negative signal, and a lot of founders, especially who are not insiders per se, don't realize that. They get into some of these things and then realize it's actually not helping them that much when they try to go talk to more notable investors. 

I think there are a handful that are a little more credible, but I guess I do think some of it's just opportunistic too. It's a lot of funds that didn't even used to invest before the Series A just pushing down and trying to do deals at earlier and earlier stages. So there are pros and cons.

You can have a similar conversation about do you take money at pre-seed from tier 1, tier 2, multistage funds, which we chose not to. To answer your actual question on what we did, I did not look at accelerators. I was really in this headspace of I want to have a ton of conviction on what we're doing, and I felt like fundraising just muddied the waters on that. I wasn't even tied to raising venture capital for the company I was starting. It was more a matter of okay, we legitimately are going to have to raise capital for this, and then I started thinking about when. 

I did look at one accelerator, the Menlo from Sutter Hill, and that was only because a couple people I really respected said hey, you should talk to these people because they're super credible in FinTech. But I didn't look at YC, didn't look at any of the others.

I think the thing that you both kind of bring up, the word conviction, or building conviction, and the idea of fundraising - it's really hard to look at it this way, because it's such a pain from the founder perspective. As a first-time founder, later founders do think about it as an active process that you're deciding to take on compared to oh, I just have to do it because that's what everyone else does. 

But the act of fundraising as a way to build conviction, or as something that you need to be willing to go through, and when it's hard, it can actually save you pain in the future. Like Julian, what you said - if you just get money really early, really easy for something that you maybe didn't think that hard about, it can be painful later. 

Andrew: If you're trying to build a company, anything worth doing within it is at some point going to be hard. Hopefully not all of it, but there's tons of stuff where it's like, we need this to happen and there's a significant amount of pain and suffering that must be gone through to get to the thing we need to get to. And fundraising is just part of that.

For us, we literally have to build these things. We need to hire the best people in the world to do it correctly, and we need time. And money buys us the resources and time to go do this, or else we literally cannot start this company. And we think there's the market opportunity to do it. So I gotta go raise money, and I'm going to go raise money. And it sucks, and I'm getting told no a lot, but I'm just going to keep doing it until we do it. It's no different than I need customers, I'm going to go find them. Sales and outbound is hard, but you do it because you have to do it to accomplish the thing.

So to all of this point, it's not like people talk about it in such nonchalant ways because it's fun and you get to talk about it on Twitter and TechCrunch and whatever. But at the end of the day, ideally, if you have a thing you're building that you have conviction in and you have to raise money for that thing, that is a great reason to go fundraise. It was never about was this fun or not for us. It was about we had to do it, so we did it.

Julian: You really see very quickly when you talk to founders whether they think of fundraising as a fun social activity or a thing where it's really cool that I'm talking to these investors, versus I'm doing this because this is core to achieving my goals and my vision of the world that I could build with this company.

If you haven't done anything with companies before, it's objectively kind of interesting to be talking to people who've invested in all these great companies before. I can totally understand why somebody would be excited by that. But at the end of the day, if you start to fall in love with the process of just having investor conversations, you're going to have bad investor conversations. You're going to take meetings prematurely when you shouldn't. 

I write a lot about this - you should really not be spending a lot of time talking to investors until you're actively fundraising. There's nuance to that, like if you're a multi-time founder or if you already have long-standing relationships with people, that's cool. But generally speaking, investor inbound is usually a waste of your time and also puts you in a bad position because these folks will then have that first impression kind of ingrained. Even if you start to make more progress or your pitch gets better, because you weren't prepared for that first meeting that they inbounded you on, you're kind of stuck with that initial first impression.

Scott: What do you think of "testing the water" type approaches? Where a founder says we're thinking about it, we're having some conversations because we want to see what demand is like out there. What do you think about that?

Andrew: I think that's - I literally was just texting with one of our lead investors about this. The term he used for that exact term is cringe, horrible, never say it. And I agree with it because it's just so low conviction.  

Julian: Honestly, good investors will see right through it too. "Maybe we're raising money if somebody's interested. If you'll give it - if you'll give it a call." Think about that.

Scott: It's the opposite of what Andrew said. You either need the money for specific reasons or you don't, in which case…

Julian: Call it what it is, right? You do it or you don't do it. Yeah, there's a possibility that you fail to fundraise, or the fundraise is something that you were hoping was going to be a 2 month process and ends up being a 6 month process. These things happen. Sometimes they happen because that's just the way life is. Other times they happen because you were unprepared or doing it prematurely. But at the end of the day, either you're fundraising or you're not fundraising. And this testing the water thing is frankly crap.

I would say the thing that you could do is you could talk to other founders who've raised and get their feedback about hey, what do you think about this? Do you think that this is something where if we were to fundraise now, it would put us in a good position? Or do you think that we should be working more on gaining additional traction before we do it? I do think there is value in getting feedback from your peers, but I think the worst time to do this or the worst way to do this is to go and talk to investors and be like, "Yeah, we're just trying to see what people think about this from an investor point of view."

I think that that's kind of the addition I would make to that. The "do it or don't do it" line is really strong, and I think it's this great, like, header insight, you know, initial kind of rule here. And I think that the thing that Andrew pointed out too, like, that doesn't mean don't be thoughtful about it. And I think that talking to other founders is a key way to be thoughtful. But I think one of the nuances on it, and you mentioned the outbound sales aspect of it, is that it's not fun.

But you have to do it to grow, and you're going to get told "no" a lot. In fundraising, this is something that founders need to understand. The mentality they've had is where you think of the investor as the customer. If you're selling something, getting feedback from customers is common—talk to customers, talk to us—like a common startup thing.

But within the fundraising portion, where the investor is like the customer, they're going to buy from you. Does that not apply, or is it not worth it? Because then it's different. I think there are two phases: the pre-fundraising decision and actually running the process when it's time to fundraise. So to the last point Julian made, I totally agree.

I think with the exception of the eight founder-angel types out there who are technically investors, these are great people to talk to more because they will give you feedback, and it can be helpful. I did talk to Julian when we were starting to think about fundraising. Otherwise, all the helpful people I talked to when fundraising were other founders. The ones I talked to the most were those who had recently done it. I actually recommend every founder who asks me about fundraising to try to find someone who raised a similar round to you very recently that you trust and just be on a texting basis with them.

It takes some kind of relationship for that, but that is so helpful because the questions you're going to have are going to be so tactical that having one or two people like that in your circle is super helpful. But then in terms of getting investor feedback or when it's time to raise, the best thing to do is when you've decided, "Okay, I'm going to go fundraise and it's going to look like this," there's a bunch of upfront work, probably spent with other founders and maybe some friendly angels who are going to invest no matter what, where you can just get feedback on the pitch. Ideally, you're iterating on your materials at this point.

Once you actually hit "go," your first 10 to 15 pitches, in my opinion, are practice. Maybe if you're really, really good, it won't work out that way, but that's kind of how we felt about it. Hopefully, this works, but I specifically only talked to investors that I was okay with if they didn't invest. It would be great if they did, but I was not going after my preferred people then. Frankly, those pitches did suck.

I did have a couple where I actually liked the investor and wished that wasn't the impression I left, but we knew what we were raising for. We were trying to figure out the story and how that was going to resonate and how to tweak this and that. You're going to get questions that you haven't thought about deeply that you need to consider. That is part of the process after you've decided to raise, and it's part of your process to raise. At least that's how we thought about it.

The thing I would add to what you just said is, imagine how bad the first pitches would have been if an investor had contacted you three months beforehand and you took a random ad hoc meeting. The first meetings are always pretty bad unless you've done it a lot before. Fundraising conversations are counterintuitive. You're ultimately going to have this process where you need to be ready to change a lot about how you describe your business and the materials you're presenting.

You should be changing these significantly multiple times throughout the day or at least within 24 to 48 hours. You're going to learn things like, "Oh man, I had three calls back-to-back, and two out of three didn't understand this one point I was trying to make. I need to change that." It's a continual learning and iteration process. It's more about articulating what people can understand. Early on, it's often hard for founders to clearly articulate what they're trying to build. This continues into the storytelling around fundraising.

This is a thing you develop over time; it's not something that comes out fully formed and perfect. I've had this lesson with content more generally. Andrew and I might have even texted about this, where reps are like writing. How do you get better at writing? You write a lot. How do you get better at doing interviews? You do a lot of interviews. The interesting part about fundraising is that you get better at pitching from giving the pitch.

There's an internal process, and then when you think it gets over the hump enough to press "go" on the process, there's continued refinement that happens through it. You're going to learn things and be ready to implement them. Imagine if you did reps like you were studying a foreign language—once a month for 30 minutes. Probably not a good way to learn a foreign language. Probably also not a good way to fundraise. Many people do ad hoc meetings or space out their investor conversations, not doing enough of them. Andrew, you said you spoke to 100 or 200 investors. Let's talk about that.

There are so many reps needed to have a successful fundraise, even if you have a big opportunity like Andrew. By the nature of seed or pre-seed, most people are not going to believe in the value of your company or idea because if they did, it would already be a billion-dollar company.

They're talking to - they think they're running a process and they have to get 3 investor meetings in their calendar, or they're getting strung along by these 2 VCs. And then you ask why, and it's like - or they're doing the thing where they're kind of talking to investors, but they're also kind of doing other stuff and they're not focused on it.

When we were fundraising, by the peak of it, the screenshot I had on Twitter or LinkedIn was - there were day stretches where I would talk to 15 investors in a single day. It was all I would do. When I was fundraising, it was the majority of what I would do every single day, and especially at the peak of the process when we were just going hard and trying to get a round done, we were talking to a ton of people.

So literally, what we did is we spent a bunch of time with friendlies working on the pitch, working on our materials. And then once we had the materials down, I started taking meetings, but I wasn't going super hard yet. This was the 10 to 15 practice pitches thing.

And then I'd add - technically, it was probably more like 30 because I had a bunch of friendly conversations with people that were angels that were probably going to invest either way, but I could get good feedback from.

And then we started going harder, and I think we talked to a little bit north of 120 people in total by the time it was done over a 5-ish week period. That does not include the friendlies. So that's a lot of people to talk to in a pretty short period of time.

I just think people don't realize how important it is to do that for three reasons.

One, you are kind of trying to find people that share your belief about the world. Nowadays, every investor says they do pre-seed/seed, but you don't really know. An investor saying "I invest pre-seed" could literally mean "We invest in 2nd time exited founders when they start a new company," which is technically pre-seed. But otherwise, all of their deals are companies that have XYZ traction. And some of that, you're only going to find out by literally talking to people. So to some extent, you have to do volume for that.

Two, you have to do volume to figure out who you like. Some people, you're going to talk to them and just be like, okay, I resonate with this person, but I really didn't like that person. So there's a little bit of that that's beneficial to you.

Three, you're getting better at the pitch, but you're also trying to find people that see the world the same way you do, that are going to get excited about the thing that you're pitching them on. I would be surprised about that sometimes. People that I never would have thought would get excited about tax compliance started getting excited about tax compliance. And then there were people that you would think should be domain experts and really know the space, but they knew it too well, and they were just like, "Ah, I don't think anybody's going to build a good company here." So to some extent, you're learning more about the market as you go through it.

And then I think the final thing is, it is in your best interest to talk to as many people as possible once you are running a process because then the options may not work out this way, but ideally, the options are going to be yours if things work.

Most of fundraising is just - you're getting told no, you're getting told no, you're getting told no, and it all kind of sucks. And then all of a sudden, if you're somewhat successful and you hit a point where the demand has surpassed the supply of capital that you're raising, so you're oversubscribed - all of the leverage is yours at that point. Things totally shift in your favor.

So if you are in a spot where you want to pick the best people you possibly can to work with, you're going to have leverage there, and you're going to get to hopefully choose. But if you only talk to 20 people, even if you got a round done, some of the best investors out there possible for you, you didn't even talk to.

And last thing - I wrote something down in our doc prepping about confidence versus conviction. I just think the more conversations you have, the more confident you can be because when some investor is being a jerk or is wasting your time - I literally, we were so busy at one point, I could not give a [expletive], I won't curse on here, but I literally didn't have time to care. It's like I got 8 more people to talk to.

For me personally, I'm really bad at playing the game. I don't play the game. I hate playing the game. I'm not good at the gamesmanship of fundraising. So when I would say, "We're having a lot of conversations and trying to get a round done," people believed me. When I said we were oversubscribed and we were making decisions on who we're going to take money from, people believed me because we were literally talking to tons of people.

So I think everything is just - it's better for your mindset. It's better for your odds of getting a round done. It's better for your odds of finding good people.

Julian: There is another thing I would add to that, and I actually have a question for Andrew. But let me just respond to what he was saying, then I'll ask my question because I think it's a good potential next topic.

I think the first thing is, you shouldn't try and game fundraising. Just like, every clever idea that you have, every investor has seen a dozen times. So good luck with that. It just doesn't work. I've seen it with ODF. I've seen so many people try and game fundraising, and it just really doesn't work. The way you game fundraising is by having a very clear narrative, a compelling team, a great market, and good traction. And even then, it's really hard.

The other thing I'll say is that, if you actually do the math on what Andrew said - he said about 125 meetings, 5 weeks. Well, there's 5 business days because a lot of investors will only meet on business days. They don't believe in working on the weekend even though they expect their founders to. I'm joking somewhat. I know a lot of investors who do work on the weekend.

But anyways, just divide it by 5. You have 5 meetings a day at Andrew's pace. And that's probably the minimum that you want, on average. Obviously, there's probably a peak there where you probably were having more than 5 meetings a day, and probably at the beginning and at the end you were having less. But if you were to actually average it out, it's 5 meetings a day.

The thing that's really important to note there is that's a lot of meetings. And at the same time, yes, it's demanding and there's a lot of follow-up and email coordination and things like that. But it is still a thing where you can make progress with your business at the same time.

And I highly encourage you making progress with your business while fundraising and not taking your foot off the gas on trying to make some form of progress with the business. Because usually, if you can do that, it allows you to report back actual substantive business progress, and that can help folks.

Andrew, I was super curious - you went out and you fundraised, so you talked to a lot of folks. What were the folks in terms of geography? How many people were you talking to who are New York based versus outside of it? What did you end up going with in terms of geography? Because I think maybe people have a perception around who you could talk to or how you can talk to people, depending on where you're based.

Andrew: I did not think about it based on where people were based at all. It was a non-factor. The major majority of the calls were, almost ever, including most of the people that invested, I didn't meet them in person until after the investment was done. So the majority of the people we never met in person during the process.

A handful of folks that we did pitch in person because they were either based in New York or their - we were in diligence with some people, they would happen to be in New York during that process, and so we got coffee or something. But of everything, 95%+ of the meetings were digital, so Zoom.

Our lead investor is technically based in Boston, but their GPs are distributed. A couple of our investors, 2 or 3 of the funds that invested, are all based in San Francisco or some folks in New York. It's all over the place.

I think the point Julian is trying to pull out here is that these days, especially at early stage, it doesn't matter as much as you might think where you're based. Certainly where you're based is going to more influence what your personal network is. But in terms of running the process, you can - I could have been fundraising in Ohio and it wouldn't have changed that much.

Julian: Where you're based is somewhat of a proxy for your network, and also for the work that you might have done in the past, because, traditionally, companies were in-person companies. So a lot of the work that you did, and the credible company that you might have worked for, was something that was usually in a major tech hub.

But generally speaking, outside of the personal network that you already had before fundraising, it doesn't really matter where you're fundraising from, geographically. It's very interesting to see just how many meetings are done virtually now. So it doesn't really matter, Andrew could have been anywhere, outside of the fact that he already had a network that was established in New York. But the meetings could take place virtually, and they often do.

I feel like that tilt - I mean, I remember the time not so long ago where that was kind of crazy. I will never forget the TechCrunch or The Information article about Sequoia writing 5 checks over Zoom and that being a headline. Like, "They did it!" And that's hard, because doing 5 meetings a day in person, that sounds logistically hard. Even in New York.

But one of the questions that I wanted to ask, which actually kind of rewinds a little bit, where we talk about, okay, maybe 125 meetings - how do you think about building pipeline there? How many of those meetings - how many targets did you have before pressing go compared to adding after?

For the common founder, like, I don't know 125 investors. Much less ones that will get on the phone with me. How do I do this? I think it's a hurdle that can be overcome through sheer effort. But I'm wondering, Andrew and Julian, where should that effort go most effectively? Is it scraping stuff? Is it asking people? There are different approaches.

Yeah, I think there's—I've been asked about this a lot because I made a couple of posts on social media about my experience with it. I'll get into the actual approach depending on where I was coming from. I did not go to a well-known school. My school is so obscure that an angel investor I met literally told me—and he was actually very kind and helpful, not a hater—he said, "I think your story is incredible, but you should take the school you went to off your LinkedIn profile because it doesn't help you." And I did. It's not there.

So, the school I went to didn't help. My parents never went to college, they are not in tech, and they don't know investors. That wasn't going to get me anywhere.

And so, like, realistically, and this was true with, like, my starting off point. So I literally sat down one day and just realized how much the odds were stacked against me, knowing my career goals. Like, it was probably 4 years ago, maybe a little bit more. And it was like, I'm just gonna work really, really hard and put myself in a position to where, like, that's not the case in, like, 3 to 5 years or whatever it ends up being. And so one of the reasons I joined OnDeck back in the day was, like, this is gonna get me into a better set of networks around really, like, talented people and hope that I can prove myself, and then just, like, work really hard.

And I think good things will come from that, whether or not, like, to whatever degree OnDeck succeeds. And that proved true. And I just, like, everything with my network and what reputation I do have expanded from, like, work that partially started there. And so I think, like, the real answer is, like, I worked for years at it, hoping to get to the point where I could get introductions to credible investors. And so the answer is, like, I didn't send a single cold email for fundraising purposes while we were fundraising.

Everything was a warm introduction or someone I already knew. But, like, there were, like, years leading up to being able to do that. I could not have done that 5 years ago, for sure. And so I think if you, I think your options are you do that, and I think that does work, but it's, like, it takes a long time.

And so I think, like, if you don't have that option, you're, like, building a company and you're highly convicted about it, and you're, like, I'm gonna... I, like, don't have that choice. I think your next best option is join something like YC or OnDeck, where if you... it, it can be a bit of a shortcut to where, like, you get in and those groups both, like, will take bets on outsiders. And so, like, if you are able to get in, it can change the paradigm, and you can actually jump-start building that network a little bit. That's a good option. Or just, like, I've seen people figure out a way, like, they're building, they themselves are still compelling, and what they're doing is compelling, and they find a way to just, like, they figure out a story that's compelling, and then it's easier for them.

All those people need if you and your thing are compelling, even if you don't have the traditional resume, I think your third option outside of those first two things is, like, you just find one or two early believers who are super connectors themselves. Like, Julianne has done this for people before, and, like, all it takes is one of those people, and then you kinda bootstrap off their credibility. They start making introductions, and then people take you seriously. I think the cold email thing... it can work, and maybe that's how you get in front of one of those super connectors, but I think that I would only be applying that strategy to the extent that, like, it helps you find some kind of super connector or person that's gonna, like, open up doors for you. Yeah.

I guess you could argue the last thing. You could argue social media has been this for some people where they, like, almost, like, tweeted themselves into, like, being able to raise the kind of money and, like, do the kinds of things they wanna do. Like, I've seen some people take that strategy as well. I'll add a couple of others. And it depends on your age and sort of where you are in life.

You know, I think that one thing is that you could actually become a magnet for talent. And once you're a magnet for talent, you could actually become a person who helps build relationships with investors. Again, this is sort of a thing that's very far in advance of actually building a company, but this could work really well. I actually wrote an essay about how to become a magnet or to build magnets for college students. I just sent a link to that.

The other thing is I really think that, like, skipping straight to founding a company is fine. Like, it's not a horrible decision. But I think it's super underrated to actually go spend time at early-stage startups and just, like, learn voraciously. You build a network. You find potential co-founders.

I mean, we didn't talk about this, but, like, Andrew met his co-founder Steven because they worked together at OnDeck. And, like, that happens all the time, right? People find their co-founders through something like that, or they find their co-founders through ODF, right?

There's really something to be said about getting yourself into a place where, one, you can learn how things work at a startup if you haven’t experienced that before. You can find potential collaborators. Usually, you find some of your first investors from the place where you worked at too, right? If somebody had a good experience working with you, they're gonna wanna invest in your company. They're gonna wanna make introductions to investors for you, right? So, like, there are all these benefits to that. And then also you have a track record of building something. So there's a lot of benefit to it, and I highly recommend it.

You know, the other thing is, can you plug into a network, as Andrew was saying? Like YC? ODF, right? ODF is not an accelerator. It's for people who are exploring starting companies. So it's, like, again, kind of like, you know, if you don't have a co-founder yet, it's a good thing to join. And there's also, I think, another thing that we didn’t talk about but I think is actually pretty viable for a lot of people is non-dilutive grants. Not government grants, usually, because those take a really long time. But there are grants, like, 1517 gives out usually to younger people who just need a small amount of money to make progress on an idea because they have some costs associated with the idea. Emergent Ventures, Tyler Cowen's initiative.

I just spoke to a person yesterday who got a 10k grant just so they could literally continue to work on their idea. And it’s a non-dilutive grant. It’s literally just because, you know, there are people out there who want to see ambitious, creative, usually younger people go out there and pursue their interests, which, if they have any sort of progress, could actually be really meaningful for the world. So I wouldn't discount these micro-grants as a way of potentially getting a little bit of funding, which also can lend credibility.

Right? If you say, hey. Like, I received an Emergent Ventures grant. Like, is that the same as saying that Sequoia led your seed round? Well, you haven’t raised the seed round yet, but it definitely is a vote of confidence in you and what you’ve done.

Yeah. I think one of the just to kind of regurgitate some of the really interesting points from both of you, that idea of networking into—or, sorry, kind of finding a way into—a network. If you're outside of the network rather than thinking, because I think the common advice that gets put out there is you just have to, you know, just grind it out. Just take more meetings.

And you probably will have to take more meetings, right, if you are out of network or you haven't done it before or whatever. But the idea of spending your time networking into a super connector rather than—or finding your way into—a super connector. YC is an example. Meeting ODF’s example. Just meeting someone maybe like Julian or like Andrew who, if you can, are in-network. And if you can convince that one person to be a node for you, that’s the way to multiply.

It's a really interesting take that I haven’t heard before compared to again, and compared to, oh, you're just gonna have to talk to a lot more people. And I think that gets to actually an interesting point as we get towards the end here of when do you think it’s, like, when do you think you've gone far enough? Like, you've tried hard enough? Like, when is the moment where—because there's the great part of the story, right, where you do it all the right way. You know, you build a pipeline, and you find your way into the network.

You have 125 conversations. You go from lots of nos to a few yeses to too many yeses. You take all the right people, you close-up shop. Then there's the, you know, the mid—that’s the bold case. There’s, like, the medium case, the base case, maybe it drags out longer. Right? And then there's the other case where it doesn’t work out. And when, in your experience dealing with other founders, is maybe a time to consider the nos as the right—like, maybe I’m not thinking about this the right way, or is there just no right. Because I think as a founder, you have to put on a face of, I don’t care about the nos.

And then after maybe, I don't know, you've been doing it for 6 months, and all you've got is nos. Maybe you should think about what's going on more or maybe think about the conviction you have. Like, what's—and that's a really hard question, but have you all had conversations with friends ever about this or seen people that they get to the point where it's like, maybe you should think about what you're building rather than the way you're telling the story and stuff?

I think so much of this is just like, even most of what we've talked about with, like, what works in fundraising is almost like pre-fundraising itself. Yeah. I think if you, as a person or your idea or what you're building, whatever, is backable, I actually think it's much more important to focus on getting to a point where you and what you're doing are backable than it is on all the fundraising stuff. Because all the process stuff is actually, like, so much—it's like 20% of it. It's like execution, and it's very easy to execute on. Like, when I meet a founder who's clearly incredible and they're doing something, it's so easy to help them because the execution details are not that hard since the substance is there.

And so usually when something—and I think this is true for early stage—I think, like, later stage rounds I won't pretend that I'm an expert on. But if you're talking like pre-seed to seed type fundraising, sometimes it is just gonna be tough. Like, I had friends that just had to grind it out for 6 months, and they eventually got a round done. But if you've gone forever and it's just not working, there probably is something there, and I would hope you have someone around you that will be honest with you about why the market is not receptive. It could just be the market; the timing is bad, or your market is out of favor.

But sometimes it could just be the idea is not very good, or something about your team is really uncompelling. Maybe there's a huge piece of the team that's missing, but there’s probably something in that. And I think a lot of times people just aren't being honest with you about what that is. So, ideally, find someone that will be honest with you, and then be honest with yourself. Yeah.

Usually, if people give reasons for passing, they're not the right reason. Because usually, the reason they're passing is because of you, which is really hard to hear. Yeah. And I should say it's even harder to say, to give some sort of empathy, which is why it doesn’t get said. Right? Because it's... Yeah. Like, nobody’s gonna say, sorry, you're not the guy. Like, I don't believe in you. But that's a fact of what people are saying. To some degree, if the market is very clear, that's often what it means, unfortunately.

And look, I think that oftentimes the reason that fundraisers don't work is usually some form of self-sabotage. Often not intentional, of course, because nobody wants to sabotage themselves. But, like, recently, there's a founder that I just absolutely love, and he's been making progress on his fundraise. And he just had the worst time with lead investors. There was this lead investor who essentially was the only person we could get, and they were like, yeah, we'll invest if you get, like, x 100k or x million in commitments outside of us. Right?

But you have to line up those angels and those smaller funds first. And it’s like, okay. Well, that sucks and that’s annoying, but it seemed like they would do it, maybe. I think these conditional commitments are usually bullshit, and you shouldn’t trust them. But, you know, it's like, okay. We're gonna keep trying to get commitments from these other investors anyway. We want to raise money.

And of course, when they actually got to the point where they had all these commitments, the investor had a bunch of reasons why these weren't actual commitments or whatever. It didn’t pass muster. And it was like, oh, fuck. We actually have this position where we had all these investors lined up, and now the lead isn’t gonna commit. Have we just tried asking the people who were committing to sign and wire safes now? And they were like, you know what? We should just ask them to sign.

They hadn’t necessarily thought that they could do that and that people would be amenable to that. They always framed it to people as, like, yeah, we're raising this amount of money. But they hit all of those people up after dealing with that bullshit from the prospective lead investor. Every single person was like, of course, I’ll sign and wire. Like, I’m super excited. They didn’t need a lead investor. So I think sometimes it’s just stuff like this, where you're kind of like, oh, wow, I need this thing. And actually, maybe you don’t need that thing in the case of a lead investor.

And then also just stuff like, if you’ve been at it for 6 months, I hope you've been making traction with your business. Right? Because if you're making actual traction and momentum with the business, you’re gonna have increased interest from some investors. Some investors will just never be interested, no matter what. You could be a series B stage, and they’ll still be writing you off.

But, like, some investors will be like, okay, this is interesting, but I’m kind of curious what’s gonna happen. I’ve seen so many times where the investor ends up coming in after seeing a month or two worth of progress. There's this whole concept of some investors really want to see lines, not dots. They want to see progress over time. And you can actually show them that progress over time if you're raising over two and a half months and making business progress in parallel. Yeah.

I think the thing that comes to mind too in all of this, and I talked about timelines a little bit, like two and a half months. Right? It’s... and the shortest raise anyone's ever heard of. Right? It’s like the third-time founder, multiple exits, they raise in a week. And it's similar to Andrew’s story a little bit where it didn’t happen in 5 weeks for Andrew because he put years of work in beforehand that allowed for it to execute on that timeline. I think that’s a really interesting and important lesson, whether it’s over the course of years or decades for some founders who have been at it for exits and stuff like that. Or if it's just your first time, you're out of network, just thinking about that time you spend before you start as really the real determinant of whether or not it's gonna go well, rather than it being all about the execution phase or the calls and stuff like that. Yeah.

Yeah. Because as an ender, I know we’re at time here and... could I actually just say one quick thing on that? Yeah. Yeah. Because I feel like, I feel like Andrew kind of, almost to his credit, undersells just the amount of incredible work and things that he’s done in advance of fundraising and having this great early traction with Taxwire.

It reminds me of that, perhaps apocryphal, story about Picasso and how some lady asked him to make a drawing on a napkin at a restaurant. He did it in 15 seconds, and he told her it would cost $1,000. She was like, it only took you 10 seconds. He's like, no, it took me my entire life. That prework, all of those things go towards having a more successful fundraising outcome, like 5 weeks. If Andrew hadn’t done all this stuff, it could have taken months, right, in advance. So, like, I think there’s all that prework, and I don't think people should necessarily look at it as a chore. Well, hopefully, you didn’t think working together was a chore.

Like, hopefully it was actually fun and beneficial and all that. Yeah. Yeah. 

No, working with Julian was a blast. And, no, I think all of it, to Julian's point, adds up and is part of it. Like, I certainly didn't know I’d be starting Taxwire when I joined OnDeck. And so I’m also not here without that piece of my story, that chapter. And I think the last quick thing I'll say, even with our relatively successful case scenario: We got told no more than we got told yes, and it was hard. I was really stressed out. I at one point told my co-founder, Steven, the market feels so tough right now. We may still be raising in January. And we were coming up on the holidays, so we had a lot of stress to try to get it done before the holidays. And I was like, we need to be prepared for the scenario where this really doesn’t go our way.

So there was a moment where I really didn’t think we were gonna get it done. It was actually a 2-month process if I include how much time we spent getting our materials and story prepped before we even started fundraising. So, yeah, just every single thing—most of these things, everything we've talked about today—has been really simple, actually. People underrate the sheer amount of time and effort that goes into anything you're probably relatively proud of on the other side of it.