VCs Say Founders Now Have the Power in the Market

Understanding the Venture Capital Fundraising Process

The methods venture capitalists employ when seeking funding can often appear opaque. However, investors must develop a robust go-to-market strategy for securing their own capital, mirroring the importance they place on portfolio companies achieving market fit.

Throughout this season of Build Mode, we have examined how founders should approach marketing initiatives. This week, our focus shifts to exploring how VCs present themselves to founders as reliable partners and to Limited Partners (LPs) as promising investment opportunities.

Insights from Industry Leaders

Isabelle Johannessen recently interviewed Leslie Feinzaig of Graham & Walker and Ross Fubini of XYZ Venture Capital. The discussion centered on their experiences raising initial funds and how these experiences have cultivated empathy for the challenges founders face during fundraising.

Feinzaig entered the venture capital landscape with a limited network of industry contacts. “The process involved hundreds of pitches and was funded primarily by individual investors. Ultimately, we secured commitments from 105 LPs,” she explained. “Without an established track record, investors are essentially betting on you – it’s akin to raising a substantial angel round without a lead investor.”

This unique perspective has enabled Feinzaig to position herself as a valuable resource for founders. She offers a space for founders to rehearse board presentations and refine their strategies.

Key Considerations for Partnership

Fubini emphasizes the importance of carefully evaluating potential partnerships. His assessment framework revolves around three core principles: person, firm, and terms.

“The relationship with this individual will be long-lasting. Therefore, factors such as personality, trustworthiness, and their ability to successfully close deals are paramount. It’s fundamentally about the human element,” he stated.

Shifting Market Dynamics

Both VCs acknowledged the change in market conditions. The 2022-23 bear market favored VCs, while the current environment empowers founders with greater negotiating leverage. This shift underscores the importance of selecting the right venture capital partners.

Fubini described this change as “thrilling,” noting that while due diligence remains crucial for both parties, “transactions can proceed much more rapidly” compared to the cautious atmosphere of bear markets. “I find this dynamic to be both enjoyable and invigorating,” he added.

Tactical Advice for VCs and Founders

Feinzaig and Fubini offer practical guidance for both VCs seeking to attract founder attention and founders making informed decisions about their cap tables.

While traditional methods like pitch decks and cold emails may have diminished in effectiveness, building genuine relationships and demonstrating a proven ability to execute remain the most effective strategies for attracting desired collaborators – from both sides of the table.

New episodes of Build Mode are released every Thursday. Subscribe to the podcast or watch on YouTube. Isabelle Johannessen serves as our host. Build Mode is produced and edited by Maggie Nye, with Audience Development led by Morgan Little. We extend a special thanks to the Foundry and Cheddar video teams.