One of my mentors raised over $500 million and went public. He taught me one remarkable fundraising tactic: He wouldn’t accept term sheets. He only SENT term sheets TO VCs with a hard deadline. I raised over $100 million using the same technique. Step by step 🧵👇🏻👇🏻👇🏻
There are only two types of deals in venture capital: Hot deals and not hot deals. VCs change their posture DRAMATICALLY based on which they perceive a deal to be. A good VC will shiv their grandmother to get into a hot deal. Your goal is to project “hot deal” vibes.
You are going to compress your fundraise into three weeks. Week 1 to set meetings. Week 2 to have meetings and send your term sheet that has only two lines blank. Week 3 to review your offers and sign.
Week 1: Posture is key. “Hey Jill, hope you are well. We are raising our next round shortly and already have a ton of inbound demand. I am taking term sheets to my board on [Weds of Week 3]. My team and I will be available in [Week 2] for meetings. Want to take a look?”
Week 2: Meetings. Don’t just dive into the pitch. Reiterate scarcity upfront and lay out the process: “To make things fair to our prior and future investors, we use a common term sheet. The only blank lines are the price per share and the dollar amount.”
At the close of each meeting, let them know that you have a board meeting on Weds of Week 3. “For your offer to be considered, we need to have it by then. Can you do that?” Most VCs have partner meetings on Mondays where they can get approval to submit term sheets.
If they insist on some changes to your (fair but entrepreneur friendly) term sheet, simply say: “if you don’t like the terms, just change the price.” The logic is inarguable, but they won’t actually change the price, as they know they are competing on price.
Week 3: Negotiate and Sign. If you have done your job well, your board is looking at multiple term sheets. Now you have one more cycle to negotiate. e.g. “We want to work with you, but we are struggling with your valuation compared to others. Can you move any higher?”
It is SO CRITICAL that you maintain the “hard to get” posture right until the end. You want your investor feeling as though they won a gladiator battle for the right to invest in the world-changing, visionary company YOU are building.
Remember – this whole time, you may not actually be a hot startup (yet). But it is SO IMPORTANT that you act like it. The energy you project becomes your reality. My mentor had incredibly difficult funding rounds. But in the end, his investors all were glad they invested.
When I share this technique, I get asked a lot for the term sheet I use. It is battle tested through many rounds (both mine and my friends’). I will open source it if this thread gets 100+ retweets, as I believe it is valuable for this to get out to more entrepreneurs.
