Why your #startup #fundraising process should be very similar to your college application process?

There are over 4000 universities and colleges offering 4 year degree program for students graduating from high school. Of the 20+ million students that apply, 13 million get into the college undergraduate programs. Of the 13 million students enter 4 year under graduate programs each year and only 2 million graduate from the programs.

So, it is pretty obvious that while the acceptance rate of students into college is fairly high, the graduation rate from undergraduate programs is fairly low.

The graduation rate from the “top and elite” 100 colleges is much higher than the rate from the bottom 3500 colleges. So it make sense to get into a top college if you want to ensure you successfully graduate.

There are 800+ venture investors that fund companies each year in the US. Of the 30K+ companies that are looking for VC funding, about 3900 get funded. Of the 3900 companies that get funded each year, only 1200 actually have exits.

The % of companies that get funded is fairly low, while the “success rate” is reasonably decent,

The similarity of the college application process and get institutional or angel funding process is striking if you consider top entrepreneurs and top investors.

The top investors are most coveted and so are the top entrepreneurs. They are the ones with the most offers and have “competing” term sheets or startups looking to seek their attention.

Most college applications are coached by career counselors to apply to about 8-10 colleges, with a 3 level system – 3 of them are safeties, 4 are good matches and 3 are reaches.

Having been a fund raising advisor to over 102 startups over the last 3 years, I’d highly recommend you follow a similar process with different numbers to raise funds at any stage of your startup.

To raise funds for your startup use a fishing pole not a fishing net.

Here are some assumptions I make. 1) Smart money is better than just money – all things being equal you are better off raising money from an investor who can help advice you and connect you 2) Fund raising is important, but not the goal. The goal is building a great company.

That’s the best advice I can give entrepreneurs. Let us assume you are in the SaaS space and are looking to raise $1 million for your post accelerator round. There are less than 50 angel investors and micro VC fund who might be the best fit for you. There are exceptions, and you *might* get a good VC firm interested, but that’s a crap shoot.

I would recommend you start your fund raising process by building a list of the 50 VC’s.

Then put them into buckets of safeties, good matches and reaches.

Try your pitch first (email connections and warm introductions help) with the safeties, then try the good matches and finally go with the reaches.

That way you can tweak your pitch and model consistently and keep getting feedback as you learn more about what investors like and have problems with your company.

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