Thursday, 30 March 2023

Startup founders are trying to automate the worst part of the job: fundraising

by Earn Media

With a drier than normal investment scene, founders are looking for more effective ways to reach the right VCs. Toward that end, over the past few weeks, thousands of founders have applied to land capital through a common app, but instead of hoping to land into a university, they’re hoping to land capital from top investors. The platform they’ve been using is Seed Checks, launched by venture capitalist and growth marketing entrepreneur Julian Shapiro around one month ago. Founders are invited to apply using a 1-minute form that asks for a deck, memo and region. The app is then blasted to 16 investors, including Conviction’s Sarah Guo, Mercury’s Immad Akhund, and CapitalX’s Cindy Bi – all of whom have unilateral or individual check-writing capabilities.

There aren’t many restrictions, though the group only invests in startups valued under $20 million (a quick scan of submissions suggests that most that apply are valued between $5 million to $10 million). Further, the Seed Checks crew does not invest in any CPG or DTC products. The applications are reviewed every two weeks, and, if a startup is of interest, the founders will hear back within two weeks after deck submission. So far, the tool is resonating: after launching on Twitter and Product Hunt, Seed Checks received 2,000 applications over 2 weeks.

SmartPass co-founder Peter Luba, who is building a digital hall pass for schools, was part of the first application batch. The founder is undergoing the fundraising process for the very first time since deciding to turn Smartpass from a side gig into a full-time startup. Since applying to Seed Checks, he’s started conversations with four of the investors from the cohort.

Luba found out about Seed Checks from scrolling on TikTok. Up until then, the process of mass emailing numerous investors at once was more informal. The closest thing to a common app-style pitching process was through super-connectors in Silicon Valley, who would connect him to 10 investors all on one email thread (talk about FOMO).

“Fundraising is a full-time job, it’s super time consuming and I want to get back to building,” Luba said. “Not that this isn’t fun, but it’s not why we’re building a company.”

Some aren’t as immediately thrilled with the idea of automation. Sanjay Goel, founder of NachoNacho, was first dubious about the idea of any platform that tries to scale fundraising. He changed his perspective when he saw the “very smart” investors involved. He’s interested if the caliber will help make this effort scale better – but as a three-time founder, Goel still believes that fundraising is “a relationship-based activity.” The entrepreneur, who also invests, says that platforms like Seed Checks can be one source of deal-flow, but he would not want it to be the only one.

Shapiro sees the platform as filling a gap in a marketplace dominated by accelerators that offer a standard deal and programming in exchange for equity. Seed Checks is landing applications from founders who historically didn’t apply to accelerators because they didn’t need the help or introduction to a broad swath of investors; they just wanted access to the faces of the platform. The platform isn’t alone in trying out the common app style of pitching. Afore Ventures launched a common app program back in January; as of 8 weeks ago, it has received 1,600 startup applications, or around 200 applications a week. The investor pool has grown from 10 investors, to 30, to 52 individuals or firms.

Bi, a solo general partner building CapitalX, hasn’t made any investments from the initiative yet – but she said Seed Checks is more effective than her own inbox in landing new deal flow. She adds, “the combined brand is much stronger than one.”

“People who wouldn’t normally pitch to me, one GP with a $250k check, would now pitch to a group of VCs with potential to get [a million dollar] check,” she said to TechCrunch. “It’s more efficient for founders. “Why didn’t other smaller funds do this before?”

Bi’s comments track: while co-investing is common among early-stage venture capitalists due to the sheer size of checks and popularity of party rounds, efficiency is of evergreen importance among investors. Especially considering how solo GPs are struggling in today’s LP risk-averse landscape, concentrating on a group instead of individuals might help block out all the noise.

“I know a lot of investors who are basically just investing in the best of whatever happens to hit their inbox, like whatever the top 10% of deals that hit their inbox is,” Shapiro said. Many, he says, are “not proactively” spinning up projects to pull deals toward them, whether through building a Twitter audience or publishing Youtube videos, or in the case of solo GPs, investing in an entire marketing apparatus that helps them get in front of more entrepreneurs.

When Shapiro sought out the 16 investors that would make up Seed Checks, he said he was able to convince them to join because of the appeal of combining their collective social audiences to get better deal flow. “By putting our faces together, we were getting higher conversions from the founder submitting pitch decks and admittedly much better deals,” he said. Shapiro himself no longer directs people to his own website; he just sends them to Seed Checks.

Another tool gaining steam is VC Sheet, built by Ali Rohde of Outset Capital and Shapiro. The duo created a website that publishes lists of investors based on their stage, location or startup vertical. It’s like a more refined, easier to search Crunchbase, Rohde explained. The issue with any tools helping with investor access is that it can be difficult to keep track of changing taste buds. In fact, TechCrunch once tried to create a guide to active venture capitalists, dubbed The TechCrunch List. It died.

Rohde said that VC Sheet is different from TechCrunch List in that it is explicitly focused on helping provide intel on early-stage venture market; and instead of only offering investors focused on proptech, they opt for lists such as most active pre-seed investors of New York. 

“For founders, it doesn’t make sense to get a really holistic deep view of the early stage funding ecosystem because they’re gonna go through it once. So like, figure out who you need, move on, get back to building,” she said. “Again and again and again, we’re in these calls, talking to founders, and they ask us who they should talk to – and so it actually makes sense for us to spend some real time putting together that central repository – it does not make sense for a founder to do that.”

Both VC sheet and Seed Checks are free for founders and investors to use; neither are trying to become businesses or charge for access.  , which could play a role in its success due to accessibility. 

Shapiro says that VC Sheet is trying to solve a larger structural problem around founders being able to find investor-startup fit, while Seed Checks is about getting in front of over a dozen top investors with priority and ease.

“Seed checks isn’t trying to be some giant fix on the VC ecosystem, it’s not being offered as a panacea,” he said. “It’s just another outlet for founders…a reflection of where fundraising might go for greater efficiencies and access.”

If you have a juicy tip or lead about happenings in the venture world, you can reach Natasha Mascarenhas on Twitter @nmasc_ or on Signal at +1 925 271 0912. Anonymity requests will be respected.  

Startup founders are trying to automate the worst part of the job: fundraising by Natasha Mascarenhas originally published on TechCrunch