Oftentimes you will hear that you have to treat fundraising as a sales process: in order to get multiple termsheets at time T, you need to have more conversations at time T-1 and you need to have to reach out to many more investors in the first place (T-2). It is like a sales funnel with conversions and churn from the initial stages (outreach to your long list) to the final stages (termsheet negotiations). You should start with a large enough sample in the top of the funnel, and if you optimize for conversion, you will end up with a termsheet, or two.

In theory, this makes sense. However… there is a key difference between fundraising and doing sales that is important to realize as a founder:

More customers = better vs. There is only 1 lead VC

In order to create investor FOMO for your startup, you must create a negotiation position for yourself. And your negotiation position will improve when you have optionality.

On another Friday I’ll dive a bit deeper into how to create optionality, but for today: ideally you’ll have multiple termsheets from different VCs in your inbox at the same moment. In this way you can choose the investor with the best offer and the one that is the best fit with your company (and yourself).

With sales it’s probably the more customers the better. You can convert and on-board new customers one after each other. They often don’t care so much about other customers or exclusivity, they care about your solution for their problem.

When it comes to raising an investment, on the other hand, you will probably end up with one lead investor (sometimes with a co-lead). Ideally, there is competition for the deal; only one lead can win the deal.

So, in order to create that competition so need to set up a ‘sales’ funnel where you speak to investors *in parallel*. Not only will this prevent you from going back in the process when that one investor that was “very interested” turns out to not invest in you, with delays and potential runway issues as a result. It also helps to create some sense of urgency with investors. If they know they have to act quick or they will miss out, this helps to create priority for your deal.

Fundraising is like sales, you do need to think about it in terms of a funnel, but you should also care about controlling and synchronizing the timelines. This will help you to create optionality, the sense of urgency and investor FOMO!

Read more insights in Startup Funding book, the book about investor readiness, fundraising and deal terms that I wrote together with venture capital lawyer Sjoerd Mol to help founders to nail their fundraising process. Order it via bol.com, Amazon or your local bookstore.