Index, Sequoia and Canvas investors weigh in on how to raise your first dollars

Founders seeking to raise their first round of capital may feel overwhelmed by the prospect. There is definitely plenty of capital out there, but there are also a lot of startups clamoring for it.

To help new entrepreneurs figure out this dilemma, we invited three investors to speak at a panel titled, “How to Raise Your First Dollars,” during TechCrunch Disrupt 2021 so they could share their best tips on what you should do as you attempt to raise that money, as well as strategies for who to pitch to, when to pitch and how to pitch.

Index Ventures partner Nina Achadijan started out by urging founders to first consider whether they actually really need to raise venture capital. “It’s a phenomenal time to be an early-stage entrepreneur. There’s more capital than ever before and there’s a willingness to accept technology from consumers and businesses,” she said. “And quite frankly, there’s a lot of platform shifts that are very exciting for early-stage entrepreneurs. But the first thing you need to do is ask yourself: Do you really need to raise venture capital? There are so many incredible businesses that can be built that actually don’t need VC funding.”

Achadijan said founders should first get clarity on what they would be using the money for. Secondly, she said, they should consider whether they want to eventually exit the company via an IPO or a sale. Once a founder decides to raise capital, the next step would be to make a list of companies that are either similar to theirs either in business model or by industry. Then using Crunchbase or PitchBook, she then recommends making a list of VCs that backed those companies, including angel investors.

“Then what you can start to do is go down that list and say, ‘It seems like this person focuses 100% on what I’m doing; I’m definitely going to talk to them,’ or ‘This person has backed similar business models and I’m really excited to hear their perspective on my space or my industry!’ And then once you have your target list … you can start to get introductions and basically start the process of fundraising,” she said.

Canvas Ventures’ co-founder and general partner Rebecca Lynn agreed with the exercise. In particular, she recommended listing what’s “non-negotiable” in terms of the investor and amount of money raised, and what would be a “nice to have.”