How Many VCs Should You Pitch for Series A? Actual Funnels Visualized

One of the biggest lessons I’ve learned in the 10 months since joining NextView is just how many exceptions there are to almost every “rule” in early-stage entrepreneurship. There’s no one right way to do most things at this stage of growth. There’s no single Path of Truth and Justice, no matter how much the bloggers and experts want to describe best practices as exactly that (this blog included).

Nowhere is this more evident than the fundraise process. While some underlying principles can increase your odds of success when pitching investors (e.g. frame your pitch as a story), there are even exceptions to the most fundamental approaches and advice. Some founders need to hit the pavement and scrap their way to new relationships by boldly approaching investors from a standstill — these are those familiar tales that become part of startup lore. In other cases, a founder needs to engage only a handful of cherrypicked investors who immediately cut checks, whether due to previous relationships or thanks to a referral from existing investors. Then there are still other founders who get mixed signals, talking to some investors who are over the moon excited and others who completely scoff at the idea.

All of this to say that when it comes to the right approach to raising a round, “it depends.” As always, the devil’s in the details (as is the angel, and the prophet, and the priest, and the entire choir…).

Analyzing Successful Series A Fundraises

Recently, we published the results of an analysis of our portfolio companies that have successfully raised Series A. (You can find the blog post here, and I’d also recommend viewing the SlideShare.) There were four main strategies that appeared to work, but again, this is only if we’re speaking generally.

Today, I wanted to address another question we’ve received based on that analysis: How many VCs does a startup need to pitch to secure Series A? Said another way: How many firms do you need at the top of your funnel to yield at least one new investor at the bottom?

Below, you’ll find the fundraise funnels of five of our portfolio companies across different sectors. In each case, these startups successfully raised that next financial milestone. (In general, we find that about 70% of our seed-stage startups do so — a number we’re proud to report, given our extreme focus on seed and helping startups get the best start, which we believe includes that next round of funding.)

What We Can Learn

If you were to ask how many VCs you need to engage to begin your process, the funnels run by the startups below can only lead to one, less-than-satisfying answer: “It depends.”

But there’s still value in seeing exact numbers like this, whether because you’re simply intellectually curious or because you’ll avoid seeking a nonexistent magic number and instead turn inward to formulate a concise plan with your management team and seed investors.

Lastly and most importantly, according NextView founding partner David Beisel:

The key isn’t to engage a magic number of investors at the outset of your process. Instead, what we can learn from our previous analysis and the graphic here is that successful fundraises are typically run in parallel, not in succession. The data doesn’t show that on face value, but the story behind each funnel is that these entrepreneurs were talking to investors all at the same time, rather than in fits and starts.

There’s a risk in getting introduced to a couple VCs, engaging them, getting further along in the process, then receiving new intros or realizing you need them. You want investors to come down the funnel at around the same time as each other. So, go as broad as you think you need at the top of your funnel at the very beginning. (It’ll invariably be broader than you might want to believe, so try to overshoot.) It’s much easier to prune out investors that you no longer deem a fit than it is to backtrack, add new VCs to the top, and then manage different stages of discussions with different investors. While it may not always wind up as a nice, neat funnel, you can at least manage towards that goal to make the process easier and more successful.

A Look at Five NextView-Backed Companies

All five have successfully raised Series A in the months since NextView invested in their seed round: