178: SaaS Fundraising 101 For Early Stage Startups - With Elizabeth Yin
Jun 14, 2018
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Elizabeth Yin, co-founder and general partner at Hustle Fund, discusses SaaS fundraising for early stage startups, including tips on approaching investors, valuations, and finding value-add investors. She also shares insights into the importance of velocity and customer acquisition unit metrics, as well as where to find potential investors and the types of SaaS businesses the Hustle Fund is interested in. The podcast also includes a quick Q&A and insights into Elizabeth's passion for open water swimming.
Be concise in initial communication to secure investor meetings.
Valuation is driven by supply and demand dynamics.
Seek value-add investors with relevant expertise and connections.
Deep dives
Overview of Hustle Fund and Elizabeth Yin
Elizabeth Yin is the co-founder and general partner at Hustle Fund, a pre-seed software fund that invests in early-stage founders building software or software-enabled products. The fund focuses on investing in teams that are at the earliest stages, usually with a product or near a product, and some level of sales. Elizabeth started Hustle Fund in late 2017, driven by the need she observed for more investors at the pre-seed stage.
Fundraising Landscape and Different Stages
Elizabeth discusses the fundraising landscape in 2018 and explains the differences between pre-seed, seed, and post-seed stages. Pre-seed is the earliest stage, with startups that have a product and some level of sales, but not necessarily meaningful traction. Seed stage startups have more customers and a more nuanced understanding of the market, but may not have a fully developed growth engine. The post-seed stage is the last stage before the Series A round, where startups have a stronger understanding of their customer acquisition channels and are optimizing their growth.
Tips for Fundraising Process
Elizabeth provides advice on running an optimal fundraising process. She emphasizes the importance of being concise and clear in the initial email or pitch deck to get the meeting with investors. Once in the meeting, she suggests focusing on listening to the investor's questions and concerns, as well as asking the investor about their investment preferences and thesis. Elizabeth also recommends packing meetings closely together and creating urgency to keep investors moving at the same pace in their decision-making process.
Valuation Considerations and Strategies
When it comes to valuation, Elizabeth explains that it is driven by supply and demand. She suggests using a YC safe or similar document to set your own valuation and testing the waters by starting with a lower valuation in a limited initial tranche. If you are easily able to fill that tranche, it indicates that the valuation might be too low. If you struggle to get investors on board, you may need to reassess your pitch or approach. Understanding supply and demand dynamics is essential for determining valuation.
Importance of Value-Add Investors
Elizabeth highlights the importance of having value-add investors in your round. Value-add investors bring specific expertise or connections that can benefit your business. For example, if you need help with customer acquisition, having investors with experience in that area can be valuable. Additionally, if you plan to raise more money in the future, having investors who have strong relationships with downstream investors is beneficial. It is important to assess the specific needs of your business and seek out investors who can provide valuable support.
Finding and Researching Investors
To find potential investors, Elizabeth recommends using resources like AngelList and a Google spreadsheet of micro-VCs provided by Samir Kaji. These platforms can help you identify investors who may be a good fit for your business. She also advises conducting research on investors, understanding their investment preferences, and determining if they have relationships with other investors who may be interested in your business. This research will help you create a list of potential investors to approach.
Additional Insights and Fun Fact
Elizabeth shares insights on the fundraising process, including the importance of addressing feedback and adapting your pitch, and the need for brevity and clarity in communication. She also reveals that she loves hippos and is passionate about open water swimming as a personal hobby.
Elizabeth Yin is the co-founder and general partner at Hustle Fund - the seed fund for hilariously early hustlers. She's also the co-founder of Hustle Con, a conference for non-technical startup entrepreneurs.