How to Plan and Execute A Successful Fundraise

I'm very excited for you to read this if you're fundraising. It's a summarised Q&A from the latest podcast I did with Gian Seehra on The Healthtech Podcast (Episode 333: Unlocking VC Funding). Gian's been on a couple of times and since coming on last time, he's grown a flourishing business helping founders raise hundreds of millions. He's a thrice-around founder himself, previously an investor at Octopus Ventures, a good friend of mine and someone that I trust. He runs his business with a huge amount of integrity and he's someone I actively root for in the space. We often work together on fundraises to bring the best of his work in practical fundraising and ours in communications and you'll see exactly the role he plays in this Q&A. Hope you enjoy it and find it useful.

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What does it really take to be a successful VC-backed founder in the healthtech space?

Success as a VC-backed founder isn’t just about having a groundbreaking idea. It requires resilience, an ability to endure tough days, and a willingness to make significant sacrifices. The journey is often grueling, with many founders facing moments where they question if the rewards are worth the effort. It's crucial to genuinely enjoy the process and stay committed to your vision, even when things get difficult.

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Many people think fundraising is all about having a great pitch deck. How true is that?

Gian: The pitch deck is important, but it’s only one piece of the puzzle. Its primary function is to secure you a meeting, not to close the deal - the real work lies in building a compelling narrative, developing a strong network, and executing a well-thought-out fundraising process. A pitch deck should be clear, visually appealing, and structured like a story, but founders must avoid the trap of spending too much time perfecting it at the expense of other critical tasks.

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What are the most common mistakes founders make during the fundraising process?

Gian: One of the biggest mistakes is spending way too much time on your pitch deck while you neglect other vital components. You need to spend time deliberately and carefully building relationships with investors and refining your narrative. Other really common and correctible issues are the lack of prompt follow-up after meetings, which can kill momentum and founders also often fail to prepare adequately, going into meetings without a clear understanding of what those investors are looking for or how to handle tough questions.

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How can founders effectively build and utilise their network before a fundraise?

Building a network should start well before you’re ready to raise funds. Begin by connecting with potential investors, advisors, and other industry professionals, attend industry events, be lively on LinkedIn, and look for as many warm introductions through your existing network as possible. The goal is to build relationships based on mutual value, not just because you need something, so when it’s time to raise, a well-cultivated network will make it easier to get those crucial meetings and get early interest.

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Can you break down the key elements of a successful fundraising process?

Absolutely. I break the fundraising processdown into three main pillars: preparation, execution, and follow-up.

1. Preparation:
   • Network Building: Start by identifying and engaging with potential investors early, long before you need to raise. Cultivate relationships through informal meetings and updates about your progress.
   • Practice: Rehearse your pitch with lower-tier investors or mentors. Record these sessions, review them, and refine your approach based on feedback.
   • Narrative Development: Craft a compelling story that ties together your vision, market opportunity, and why you are uniquely positioned to succeed. Ensure your narrative is clear and resonates with your target audience.
   • Pitch Deck: Develop a deck that’s visually appealing, concise, and tells a story. But remember, it’s just a tool to get you in the door.
2. Execution:
   • Launching the Fundraise: Timing is key. Aim to have most of your investor meetings within the first two weeks of your fundraising campaign. This creates momentum and a sense of urgency among potential investors.
   • Cohort Strategy: Manage your investor interactions like a cohort, keeping everyone on a similar timeline. This allows you to build competition among investors and maintain control over the pace of the fundraise.
   • Handling Objections: Be prepared for common questions and objections. Develop clear, concise responses and, where necessary, supporting documents that can be quickly sent after meetings.
3. Follow-up:
   • Timely Communication: After meetings, follow up promptly with any additional information or answers to questions raised. This shows you’re organised and serious about the process.
   • Maintaining Momentum: Keep investors updated on your progress and create a sense of FOMO (fear of missing out) by subtly indicating interest from other investors.
   • Closing the Deal: Once you have a term sheet, carefully negotiate the terms. Don’t rush into signing, but also avoid being overly aggressive. The goal is a balanced agreement that sets the stage for a successful partnership.

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What are some specific strategies for handling investor meetings and pitches?

Handling investor meetings effectively is crucial. Here are a few strategies:

• First Impressions Matter: The first few minutes of the meeting are critical. Start strong with a concise, compelling overview of your company and the problem you’re solving to immediately capture the investor's interest.
• Tailor Your Pitch: Understand the investor’s background and tailor your pitch to what they care about. If they have a history of investing in certain types of healthtech companies, emphasise aspects of your business that align with those interests.
• Engage in Dialogue: Don’t just talk at the investor - engage them in a conversation. Ask questions to understand their perspective and concerns to make it feel more like a collaboration rather than a one-sided pitch.
• Control the Narrative: During the Q&A, steer the conversation back to your strengths and key messages. If an investor focuses on a weakness, acknowledge it but quickly pivot to how you’re addressing it or why it’s not a significant risk.
• End with a Clear Next Step: Conclude each meeting by clearly stating the next steps. Whether it’s sending additional materials or scheduling a follow-up, ensure there’s a plan to keep everything moving forward.

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How should founders approach the term sheet negotiation process?

Term sheet negotiations require a balanced approach. Here’s how to navigate them:

• Understand the Terms: Before you start negotiating, make sure you fully understand all the terms in the term sheet. Key areas to focus on are valuation, preference shares, and board control.
• Prioritise Your Negotiations: Identify which terms are most critical to you and where you’re willing to compromise. For example, board control might be non-negotiable, but you might be more flexible on valuation.
• Negotiate Respectfully: Don’t be afraid to push back on terms that seem unfair, but do so respectfully. Investors want to see that you’re a savvy negotiator who understands the importance of balance in a partnership.
• Seek Legal Advice: Always have a legal expert review the term sheet before you sign. They can help you identify any potential red flags and suggest alternative terms that might better protect your interests.

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What should founders do if their fundraising efforts are not going as planned?

If your fundraising isn’t gaining traction, just remember that almost everyone has been there at some point, take a step back and reassess. Here's a framework when you get to that point:

• Fail Fast: If you’re not getting the responses you expected within the first two weeks, consider whether it’s time to pivot your approach. This might mean tweaking your narrative, targeting different investors, or even reconsidering the timing of your raise.
• Leverage What You Have: If you’ve got commitments from smaller investors but no lead, consider structuring a “party round” where multiple investors come in together without a single lead. This can help you reach your funding goal and create momentum.
• Reevaluate Your Pitch: If feedback from investors indicates consistent concerns, it might be time to refine your pitch or address specific weaknesses in your business model.
• Stay Resilient: Fundraising is tough, and it’s easy to get discouraged. Stay resilient, be open to learning from the process, and be ready to pivot if necessary.

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Given the current market conditions, what advice do you have for healthtech founders raising money?

In today’s market, where investors are more cautious, founders need to be strategic:

• Be Realistic with Valuation: Don’t chase inflated valuations. Instead, focus on securing fair terms that set you up for long-term success. Overvaluing your company can lead to difficulties in future rounds.
• Highlight Traction and Milestones: Investors are looking for proven traction and clear milestones. Be sure to demonstrate any progress you’ve made, such as user growth, clinical validations, or partnerships.
• Focus on the Fundamentals: With more scrutiny on business models, ensure that your unit economics and path to profitability are solid. Investors need to see a clear route to returns.
• Explore Alternative Funding: Consider alternative funding options such as grants, strategic partnerships, or venture debt. These can provide additional runway without diluting equity.
• Maintain Flexibility: Be prepared to adapt your fundraising strategy as market conditions change. Flexibility can be a significant advantage in a volatile market.

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Some incredible gems from Gian here and if you want to listen to the full podcast, it's episode 333 of The Healthtech Podcast which you can get on Spotify and Apple Podcasts. ‍

To find out how SomX can support your fundraise, contact us.