 of 869 venture-backed founders, we noted that over half said it took them 3 or more months to raise their last round, over a third said they raised less than they set out to, and nearly a quarter pitched 20+ firms. Basically, it’s a knock-down, drag-out process for nearly everyone. Now imagine doing that over two dozen times. That’s the experience NYC startup legend 

As founder or chairman of companies like 

, he’s raised $750M in venture capital. “I’ve spent a lot of time successfully closing good deals with almost every VC you know,” he says. “But I’ve also been rejected over and over and over again.”

He’s also been on the other side of deals, making investments of his own and as an endowment trustee for Yale. He’s seen what works for founders from every perspective — including the little-known foibles that turn VCs off. We were thrilled to feature him and his extremely tactical fundraising advice at 

 in November. What follows is a rundown of what he advised founders in the audience to do, on a truly step-by-step level.

As Ryan puts it, “70% of your success in fundraising is your business and your people, and VCs will look closely at both. 

But there’s 30% outside of that — things you can plan, do and say that’ll make a difference.

Before anything else can happen, you have to make sure you can get VCs to the table. If you start reaching out to them when it’s time to raise, it’s already too late. “When I plan to be raising in six months, I’m already out there, proactively connecting with VCs, having coffees, making as many of them aware of my company as possible,” says Ryan. “The conversation is safer when I’m not raising money.”

In this preliminary phase, the goal is to secure early expression of interest — an “I’d love to hear about it when you’re ready” — from as many VCs as you can, 

 “No one can say no to the meeting when you’re ready to raise, because you can lead with, ‘You told me five months ago you wanted to hear from me when I went out to raise. I’m out there now.’”

Step 2: Strategize pitch timing, and play into biases.

When you’re scheduling pitches, always save the best firms for last. “I like to have one or two meetings with either VCs that might not be the ideal fit or angels or other people who can give me commentary on the idea and how I’m presenting it,” says Ryan. “Every time you go through and do a presentation for the first time — or even several times — you find out it’s not great.”

Each meeting will also make you more familiar with your industry’s special variety of groupthink. “You’ll see the same questions come up over and over again,” he says. “

By meeting three or four, you will have drilled yourself so you have tight answers to those questions.

Holding off on your top choices will also give you time to conquer a couple common VC biases. “Some biases firms have can’t be overcome — you have no control — like I’ve seen significant bias toward degrees from top schools.” 

 control: bias toward founders who know their numbers backwards and forwards, and bias toward founders who exude confidence in every interaction.

 With practice, you can make sure you hit the mark on both. It requires a lot of arduous and uncomfortable rehearsal, memorization and rounds of feedback, but it’s well worth it.

“I was once in a fundraising meeting, and the VC in question asked the CEO, ‘How do you feel about next year’s budget?’ The CEO gave the answer I’d like to hear in a board meeting, but not the answer I’d want to hear in a pitch,” says Ryan. “She said, ‘Look, it’s not easy. It’s hard. A couple things have to come together, but I think if they do, we’ll be in a position to make the budget.’ 

That’s a very honest answer. But it’s not the answer to give in this situation.

When you’re pitching, he says, the right answer is: “Absolutely. In fact, I actually think we’re going to do a little bit better, but I don’t like to over-promise. There are a couple things that are not in there that we think we can hit. We are absolutely going to make those numbers.” 

Investors need to feel that you’re going to build a big business and that you have no doubts about it. It’s imperative to get that across.

This confidence needs to extend to every detail of your business, not just the big picture stuff. Exude mastery of every metric, every piece of data. “Here’s a micro example,” he says. “I was in a VC meeting, and someone asked, ‘What do you think the commission structure will be next year?’ the CEO I was working with said, ‘I can’t remember the exact number. Let me get back to you.’ Once in awhile, you have to give this answer, but it’s a terrible answer. I stepped in and said, ‘Between 15 and 20%, but it’ll get better over time.’”

Ryan and the CEO had the same data — they both vaguely remembered that the figure hovered around 17 or 18%, but they weren’t sure. “My answer was accurate but projected confidence. I both responded and pointed to a positive trend. If just the CEO had spoken, the VC would have taken away that we had no idea whatsoever. Maybe it was 40%, maybe it was 5%.”

At the outset, you might need to fake the confidence that you can and will deliver. But with every presentation, it’ll become more natural. “

Don’t lose sight of the fact that VCs are not here to do nonprofit work. They’re looking for returns

You basically start to believe your own bullshit after a while, and that’s a good thing.

Step 3: Keep them interested until the very end.

At every stage, you’re managing a dynamic process of getting and keeping VCs engaged with your opportunity. The most effective way to do this is to convey that your fundraising round is competitive.

Never tell them who, but do say that there are other people at the table

,” says Ryan. “It’s simple really. A competitive round is better because that means more people are interested. People feel like they have schmuck insurance when they think other people like the company.”

There are subtle ways to continually demonstrate that your company is in demand. “

At some point in your raise, you might remind firms you’re speaking to that you’re going to the other coast — San Francisco or New York, depending on where you are — on Monday, a way to signal that you’re going to a partner meeting without being obnoxious and bringing it up directly

 Everyone will understand what you’re saying.

At the same time, make it clear that you’re also running a selective round. If you drop hints about too many interested parties, you lose credibility. “If you say to me, ‘Oh, I’m talking to 37 VCs,’ I know you’re lying, and that’s way worse than saying nothing,” he says.

Once VCs are interested, sustain that interest by developing a familiar, warm connection. “You want a VC to think, ‘I know there are other people interested, but I have a great relationship with the CEO. I think she really likes me and the firm and I have a good chance of winning that deal.’ You want all the VCs you’re talking with to feel this level of comfort.”

How can you convince every VC — every one of them (that’s essential) — that they’re your favorite? That’s what you need to think about.

Some ways to do this include personalizing your pitch and all subsequent communication for each VC and each person. What are the unique reasons you like them, specifically? 

What do they purport to be good at or what do they believe differentiates them? Can you lean into that when you talk about what appeals to you?

 What past deals have they worked on that you can highlight in conversation? Early in your process, you want to know this information about every VC in the mix and 

Perhaps counterintuitively, landing the best partners might require downplaying money as a decision-making factor. “You need to make it clear you value the services, tools, resources that they bring to the table, and that you’ve been hearing good things about them in the market,” says Ryan. “VCs are just like everyone else in the world. They want to be wanted. They need to feel like they bring value and that very smart people (i.e. you) realize and appreciate that. 

“When a VC feels this, they feel more invested in you.”

When you do bring up money, be strategic about how much you’re asking for. 

To keep firms interested, you want to start low.

 “When I want to raise $5M or $6M, I go out and I say I want to raise $3-5M. I believe in the auction strategy,” he says. “There’s nothing that makes people feel better than when you go back to them in two weeks and say, ‘Actually, I know I said $3-5M, but it’s really going to be $5-6M.’ That means other people are interested.”

No one wants to feel like they’re getting a deal in venture capital. They want companies that everyone else wants. If you change what you’re looking for, always go up, never down.

If you adjust your goal lower, investors are going to start bailing. That’s always the case.

“You need to keep as many people at the table as possible until the very end,” says Ryan. “

Don’t get thrown off by who you think the best partner will be — that’s irrelevant until the end anyway

. “Until you actually have a term sheet, don’t spend any time on it. Your goal in this process is singular: get as many term sheets as you can — not 50, but two, three, four.”

And remember, while you’re perfecting your poker face, VCs are too. You can’t read anything into the tone of meetings you take, just keep on wooing each firm consistently. “You’ll have a great meeting with some VCs just because they’re positive people,” he says. “That doesn’t mean they want to work with you. Then there are people who are kind of negative, but they might be very excited — you just can’t tell based on their demeanor. They might be semi-confrontational as a person. Don’t let any of this signal anything to you. Wait until the very end, when term sheets come in. That’s how you actually read people.”

With your pitch done and all questions confidently answered, it’s time to get terms on paper. You have to think carefully about the deadline you set for this. “

You need to give VCs enough time but not too much time

. Let’s say I told you that you’re back in college and there’s a paper you can write to win $10,000 but it’s due in six hours. You’re not going to work on it. If I told you it’s due in four months, you’re not going to work on it. If I told you it’s due in five days, you’d say, ‘Yeah, I can do that.’”

the right time frame between final meeting and term sheet is typically three to four weeks

. That gives VCs the time they need to get their ducks in a row, but not more. 

Be clear and specific about your deadline — give people the exact date when term sheets are due

When that deadline comes, you have a week to process your offers and go back and forth with interested firms. Some VCs may try to rush you as soon as their term sheet is in, but don’t give in. “Instead say, ‘There are other people I’ve been talking to for five months, and I can’t make a decision until I let them come in. I told you the schedule, and the deadline for term sheets was always September 27 (or whatever you said upfront). We need to wait for that.’”

Make every effort to ensure that all investors in the running are on the same schedule with you.

 It’s not fair to string along prospective partners for months. “There’s nothing worse than getting a term sheet from a great firm, knowing that you’re two or three weeks away from maybe getting another from someone else because you staggered conversations too much,” says Ryan. “That’s super awkward. You can’t let people hang out for weeks knowing you’re playing them off others.”

When your deadline for receiving term sheets arrives, hopefully you have multiple offers. Imagine that you’re considering term sheets at a $16M, $18M and $20M valuation. “At this juncture, you have to figure out who you want the most,” says Ryan.

Money isn’t the only variable that matters. 

Personality is a very real consideration, and should be heavily factored into your decision.

 “For most firms — with a few exceptions — you will seldom see anyone other than your point partner. So you’re not getting a firm, you’re getting a person. You need to feel good about that person,” he says.

Relationships with VCs are indeed relationships — with all the complexity that implies. And they’re long too. Sometimes they’ll be fraught, and you can’t end them. “Given this, if you have to choose between two people and one’s slightly smarter but he or she is a real jerk, I’d go the other way.”

A partner’s location is something to think about, too. “

If you’re raising your first round of funding, it’s always more valuable to have VCs that are local

,” says Ryan. “For your second and third rounds, you can go elsewhere. It’s less important.”

With these non-monetary factors in mind, turn your attention back to your term sheets. “If the $20M is from the person you like the most, you’re probably done. If you want to work with the point person on the $16M or $18M term sheet, you have to go back for another bite of the apple,” he says. “This is where you have to be 90% honest, and say, ‘Look, I really do want to do this deal with you, but you came in lower than others. Valuation isn’t everything to me — but it still does matter at the margin. I really, ideally need you to be somewhere around 20-ish.’ See if you can get there.”

If you’re really sure that a certain partner is the one for you, you can go even bigger. “At some point — and I never say this unless it’s true — you can say, ‘If you get to $20M, I will do the deal with you.’”

If you can’t get them there, though, you have a tough decision to make. How can you weigh the money against other intangible factors? “

Within 5% it doesn’t matter. At 10%, I still want to choose the right person. At 30%, I’m not going to go with someone that I like more.

 That’s too much for me to give up,” he says.

As the week you’ve budgeted for decision-making winds down, and you’ve had your back-and-forths with potential firms, you’ve hopefully arrived at a good place. Before you go any further, make sure your lawyer is involved and that the terms of your deal are on the up-and-up.

Unless you’re in trouble, there’s no excuse for having anything but incredibly clean terms. Every VC knows what a clean term sheet is.

Then, once it’s a done deal, put the fundraising process behind you completely. Don’t let yourself be brought down by a difficult round — or overly inflated by a great one. Just put your head down and keep working on your idea — the idea that got you to this point. Fundraising results are not actually a harbinger of your company’s ultimate trajectory, Ryan says.

After all, he’s lived this particular lesson. He knows well that VCs aren’t infallible. In 2007 and 2008, he founded Gilt Groupe, BusinessInsider and MongoDB within an eight month span. “A year and a half later, Gilt was raising money at a $135M valuation. Mongo? I couldn’t even beg for money. I’d already sold DoubleClick for a billion dollars, so you’d think some people might say, ‘Let’s cut this guy some slack.’ Not at all. Everyone passed. BusinessInsider grew really slowly those first two years because no one — and I mean no one — would put in money. It turns out that those two companies were ultimately far more valuable than Gilt. The market was wrong.”

The point is, you don’t know. You just have to be confident that what you’re doing makes sense. You have to stick with it and believe that absolutely.

After the emotional roller coaster of fundraising, it’s worth reminding yourself of one other truth: you’re not begging for money or accepting a favor from any VC.

 “What you’re doing is giving them an opportunity — a chance to be a part of a company that’s going to change an industry,” says Ryan. “As you go into every investor conversation, just keep this mindset: ‘I hope to work with you, VC I’m talking to, but if it doesn’t work out or you pass, I’ll be working with someone else — and together we’re going to change the world and feel great about it.’”

•Start lining up even casual meetings with VCs 6 months prior to your raise.

•Try to get them to an expression of interest in learning more down the line.

•Always save the best or most desirable firms for last.

•Use earlier meetings to refine your presentation, rehearse, and gain confidence.

•Know all the numbers relevant to your company backwards and forwards.

•Always put a confident spin on your responses, and if possible provide more clarity, even if you don't know an exact answer.

•Don't say who else is at the table, but do say that others are.

•Drop travel plans into conversation to convey when and how you're running your process.

•Work on creating warm, familiar connections with as many of these VCs as possible.

•Understand how to flatter VCs in a way that is both unique and sincere. Make it clear you understand their key value proposition as they see it themselves.

•Don't get thrown off thinking about who the best partner might be at this stage. Just get as many term sheets as you can.

•Give VCs 3-4 weeks between your last meeting and your deadline for receiving term sheets.

•Give an exact date when term sheets are due and make it very clear.

•Use this deadline to push back when VCs try to rush you to a decision earlier in the process.

•Run a tight schedule where all terms sheets are coming it at right around the same time. Don't keep people waiting.

•Make personality of point partner a real and serious consideration in how you decide who to work with. 

•If this is your first round of funding, give more weight to local partners. They will be more helpful.

•Try to get the VCs you really want to work with to the highest number that you've been offered.

•If they can't get there, as long as it's withing 5% or 10%, optimize for working with the right person. If it's a difference greater than 30%, go with the best offer.

•As soon as the round is closed, put the process behind you completely and get back to working on your idea.

•Know that the market is not infallible. Have the conviction that you and the partners you do end up working with are going to build something amazing.

Images courtesy of Brian Ach/Getty Images Entertainment.

GettyImages-167751936.jpg

Kevin Ryan has spent decades on both sides of the fundraising table. Here, he provides secrets seldom shared for getting and keeping VCs interested before closing the deal.

Step-by-Step Fundraising Tactics from the NYC Legend Who Raised $750M

Sand Hill Road. Infinite Loop. University Ave. There are a lot of iconic addresses in tech, most of them in Silicon Valley. But for his inspiration, 

 looks to the 65203 — his hometown of Columbia, Missouri.

“One of my old bosses has a mortgage company, 

, with 1,500 employees, and he’s never raised a dime. Profitable since the start, but no one ever talks about them because it's a boring, old mortgage company in the Midwest right?”

If there’s such a thing as good Midwestern founder values, Foster has them. He’s no tech outsider, though; after all, he’s a graduate of Y Combinator, and Zapier’s very raison d’être is linking all the web apps the tech world can dream up. But he credits getting started in Missouri with his willingness to ask a simple question: Do we all have to follow the same fundraising playbook?

In Zapier’s case, the answer is no. The company is one of an elite group of startups, including 

 and a handful of others, that, to date, have raised only one institutional round of funding. He’s not making the case for bootstrapping — the $1.2 million Zapier raised in 2012 gave it much-needed room to grow — but for taking just the fuel you need to get where you’re going.

In this exclusive interview, Foster explains why thinking outside the Silicon Valley box positioned Zapier to build a uniquely customer- and employee-first culture. He walks through three key areas where most founders can be more capital efficient. And he explains why a conservative approach to fundraising may actually be the best way to keep your options open.

It bears stating from the outset that this type of lean fundraising isn’t for everyone. Any company that requires extensive physical resources — “a rocket manufacturer needs rocket fuel, for example”— will need a lot of capital up front. Startups operating exclusively in the enterprise space, too, may need more in the bank early on to accommodate its longer sales cycles and higher customer acquisition costs.

Traditional SMB software companies, on the other hand, usually exist in the sweet spot. “The margins are so good,” says Foster. “You can build a great product, sell it for a fair price, and pretty much start making money from day one.”

Still, many founders get caught up in the fundraising cycle, whether they have a clear need for cash or not. “There’s a lot of VC in the Bay Area, and the tech media spotlights companies that fundraise. A lot of reporters will tell you, ‘I don't want your news unless it's a funding round,’” says Foster. “That kind of mindset perpetuates the idea that success is contingent on fundraising. Of course, that’s not always the case.”

Moreover, Foster notes, there are plenty of counterexamples, demonstrating a variety of paths to success, but you may need to look beyond tech blog headlines to learn about them. “You see a lot more companies that are going at it for a long time with minimal funding or no funding at all. A lot of times these companies don't get talked about as much. The media isn’t as drawn to those stories, so there’s less visibility into companies that do it that way.”

“Fundraising is a tool to get you where you need to go,” says Foster. Too often, though, he’s seen startups so caught up in the frenzy to fill their bank accounts that they raise funds against their own interests or intuition. When that happens, he can often attribute it to one (or both) of two archetypal players:

 Great founders need to be able to pitch a compelling vision — it’s a skill that serves them well as they get investors, employees, and customers to take a chance on improbable new ideas. Some founders, though, may be a little too good at selling their vision. “Sometimes it allows them to talk people into giving them money for an idea that’s not working so well. They've been at it for a couple of years, and it's clear that the unit economics aren't really working out very well. They go back out to raise again, but because they're so good at delivering that vision or the promise of their potential. They get more money than may be deserved based on what the business has done so far. And as a result, they keep limping along for another 12 or 18 months.”

 Other times, faced with the daunting prospect of actually building a company, inexperienced founders are eager to get any guidance they can on their next steps. And since many of a startups’ earliest advisers come from the fundraising world, they’re likely to offer advice from one particular perspective. “Traditional VCs have a playbook that they run across their companies, and their business model works for them. Their goal is to place strategic bets in a handful of companies,” says Foster. Founders, though, aren’t managing a portfolio. They need to base their decisions on the specific needs of one company — theirs. Advice is crucial, and should be welcome, but think critically about the experiences and motivations behind it.

“I heard a great tip from someone who said whenever he’d get to a crossroads, an inflection point in the company, he’d try to get advice from somebody on both sides. He’d quietly write down the pros and cons of both, and then he’d put the paper aside and make the choice that felt right,” says Foster. “I like this because he treated each perspective as input, not wholesale options — and stepped away from all of them to make the final call. I’d rather go down doing it the way that I feel in my heart is the right way to do it. If I got convinced to do it some other person’s way, and it didn't work out, I’d always wonder, ‘What if we’d done it my way?’”

The key is not letting headwinds or tailwinds determine where you sail, but how you sail. To inform how you’ll tack to hit your mark.

What’s paramount is ensuring that “my way” isn’t just the “default way” you’ve become accustomed to hearing. “So when you gather those pros and cons at forks in the road, heed 

 is sharing their pros and cons. In cases like fundraising, it may take time to find a representative of the ‘cons,’” says Foster. “So as much as you’re comfortable doing so, try moving to your periphery — outside your industry, zip code and stable of advisers — so that you really have to explain the fundamentals of the decision to someone who won’t just play back known points and counterpoints.”

That’s why Foster harkens back to his old boss at Veteran’s United, as well as a handful of other individuals — in and outside of the tech startup world — to give input that has led to more unconventional business decisions, starting with fundraising — and the outcomes have lead to equally unconventional results.

Part of taking that kind of ownership of your company means deeply understanding your cash flow, and making every decision about those dollars a personal one. In that respect, the (relatively) open checkbooks of Silicon Valley may be a mixed blessing. Back in Columbia, new business owners spend money like it’s their own — because it probably is.

“You have to think, ‘All right, where is the money going to come from?’” said Foster. “And in our case, it came from our day jobs.” He and his cofounders, 

, worked nights and weekends on the project for months, coming home from work and cranking until 1am. “That forced us to have a lot of discipline in how we ran the company. We understood what money we had — and didn't — from the very beginning.”

They didn’t have the luxury of aiming for perfection — they were just getting tasks done when and how they could. “Doing that for so long taught us that it's possible. We can do this. It's a bit insane, but it's not impossible to not spend a ton of money.” There were tradeoffs, of course. It took longer to get the company off the ground, since hiring help was not an option. But after about six months, in 2012, Zapier went live, integrated with all of 34 apps.

When the team did ultimately elect to raise a round later that year, it was in many ways less about cash than cred. As a workflow automation tool, Zapier connects apps, and they needed to be able to talk to the startups behind those apps with authority.

“For us, YC was a way to get a stamp of approval, someone to say, ‘This company is worth paying attention to.’ That's the calculus we made. It helped us get connected to other partnerships and open just enough doors to get things going a little faster,” says Foster. “But the introductions were more the primer than the capital. They allowed us to do just more of what we were already doing — not runway to figure out what to do. So if you do choose to raise, think of credibility as currency, too. Thought of in that way, if you do choose to raise capital, it may not have to be a lot. Maybe you want to hire one or two people, or get some marketing experiments running. Just a little bit of 'kick' can get key things going.”

And Save Money Like It’s For Someone Else

The best way to keep your options on the table — and to make funding decisions from a place of strategy, not desperation — is to run your startup as fiscally efficiently as possible. In Foster’s experience, there are three key areas where founders may be spending a lot more than they need to.

Fixed Assets: Office Space vs. Distributed Teams



After graduating from YC, the Zapier team finally had enough money, and demand, to start hiring. Perhaps fortuitously, though, they had no idea how to do it.

“We'd never done that before, and we didn't really have a network here in the Bay Area,” says Foster. “So when we thought about who we would hire, we just thought of the smart people we’d worked with in the past, people who might be willing to take a bet on us. I had a buddy in Chicago who was running one of the biggest Cubs message boards online. I figured if he could handle unruly Cubs fans he could probably do support for us.”

Co-founder Mike Knoop had moved back to Missouri by then, and they hired another engineer in Columbia. That brought Zapier’s head count to five — in three cities. “That just sent us down the remote path, and we got good at it. It didn't ever hinder our ability to ship things, to launch new features, to collaborate. So we thought, let's just keep doing it this way because it's working really well.”

Zapier, somewhat famously, still has no office space

. And it’s not that they’ve been successful 

 their remote workforce. Foster actually attributes much of the company’s success to the efficiency this strategy has engendered. “A lot of early-stage founders, right as they come out of YC, the first thing they're doing is raising money, hiring people, and getting an office space,” he says. “We never had to worry about how much square footage we could afford, or whether it could handle our projected growth rates.”

Of course, that’s a choice that won’t work for all — maybe even most — organizations. But either way, Foster advises founders to think about how their infrastructure is helping or hurting them, and where it could be streamlined to support leaner operations. Think you need a grand conference room to meet clients? A coffee shop might do the trick. “To this day, I do that, and no one thinks twice about it,” says Foster.

Building a remote team still requires an investment, though, of time and thoughtful culture building. As Zapier grew beyond its early hires — a group that was busy with families and local communities — it became increasingly important to establish a culture strong enough to unite the company’s far-flung employees. They created a buddy concept, for example, where employees are paired up weekly (founders, too!) for a video chat. A virtual coffee date.

Sometimes two people will get to talking about an idea that turns into a new app or product feature. Most of the time, though, buddy chats are simply about people connecting. (Recently, a funny snapshot spotted on one team member’s desk snowballed into an 

nested photo featuring a couple dozen team members

 from all around the country.) “Just because you're remote doesn't mean you can't have some of that camaraderie.”

There are twice-yearly retreats, too. Since the inaugural gathering of seven people (“We all just showed up in Seattle, and that was that,” says Foster), they’ve evolved into properly planned events, with an agenda full of lightning talks, panels, and clear goals for what the team wants to cover. “People like to use the in-person time to do things that they can't do otherwise, maybe talk a little bit about more pie-in-the-sky stuff. It's only a week in person, though, so you've got to make sure to schedule that stuff or it might not happen.”

Onboarding is another essential process that had to be reinvented for Zapier’s nontraditional setup. And it’s another one that Foster finds they’ve actually improved on. “Think about a co-located office. When you join the company you walk in, get introduced to everybody, maybe meet the executive team for a lunch the first week,” he says. Enter Zapier’s “Airbnonboarding” concept, where a new hire or two join the three cofounders, often with a couple other team members, and work out of a Mountain View Airbnb for a week.

“It really helps build the relationship between us as founders and everyone on the team, because they come out here and for a week and we work in the same room. In the evenings, we hang out and take them out on the town,” he says. “They know we care about them and we want them to be successful. It makes it a lot less scary to interact with us — and everyone else on the team — in Slack.”

Clearly, the Zapier team are big fans of their distributed structure, and they’ve taken pains to make theirs a rich, complete workplace. But whatever your setup, Foster shares one note of caution: 

think twice before moving toward a hybrid local/distributed workforce

. “The toughest scenario seems to be doing the split, because now you have these two cultures. You've got your in-office culture and now you've got these remote people. It creates a second-class citizen out of remote workers, because they aren't hooked into the hub. ”

Moreover, do both and not only are you not conserving capital, you’re likely blowing through more of it. Zapier’s decision to invest in a distributed workforce isn’t free — making it work well means paying for all those Airbnbs, retreats, travel costs, and more. “Still, our CFO estimates, versus having an office in San Francisco, we’re saving around $2 million a year now,” says Foster.

Again, it’s not a choice that would work for every company. But if founders can make operational choices that save even a fraction of that each year, the pressure to raise might just let up.

Determining when you need to hire — and when you don’t — is another key skill of the lean startup. Perhaps not surprisingly for a company all about making workflows more efficient, Zapier leans heavily toward automating whatever it can.

We've long had and honored this value: don't be a robot, build a robot.

It’s a philosophy that’s played out most clearly and regularly in the company’s customer support operations. For starters, that’s an area of the company that every team member touches — Foster makes sure of it. “Everyone spends time in support,” he says. “One of the great things that's come out of this is our engineers realize that there's tooling that could help them be a lot faster at support. So they build those internal tools.”

Over time, support queries that once required a lot of digging or guesswork have been simplified to one-click processes. “A single person can now do probably twice what they could previously thanks to the tools that we’ve built,” says Foster. “Not only that, but the quality of support has improved dramatically. Whereas support personnel once had to guess why a customer’s account was wonky, now they can instantly tell them what’s up with help from real-time data logs.”

Providing better, faster help to customers is obviously top priority. Automation can also help do that by lightening the load that makes it to a human in the first place. “We get a lot of auto-responders — we’ll send out an email and someone is out of office or something like that. We recently looked into it, and 40% of the emails that come in are auto-responders, so it really fills up our support inbox,” says Foster.

Clearing out all that junk used to be a manual job, which, while effective, is about the most expensive way you could do it. Then the data scientists and infrastructure engineers stepped in. “They put this algorithm in place that can detect, with about 99% accuracy, whether a ticket needs a reply or not so we're able to weed out all those auto-responders.” The result? A supercharged support team that suddenly has that much more time for real tickets.

Of course, eliminating 40% of your support inbox is a pretty clear-cut case for automation. Other times, it won’t be worth your engineers’ time to tackle a project. So where’s the line? “There’s 

 about this. Several of our engineers have it sitting next to their machines,” says Foster. “It talks about how you know when to automate things. How often do you do the task? You just have to do an opportunity cost analysis.”

Streamlining your operations is only part of the equation. Even after you automate what you can, hiring will remain essential to scaling a business. It’s another area where Foster urges fellow founders to make thoughtful choices. Done too liberally, it can quickly add a lot to a fledgling company’s bottom line.

“Generally when we decide to hire it’s for one of two reasons,” says Foster. “One, we're overworked in some way and we can't solve it otherwise. That’s most common in areas like support that are demand driven. Two, we’re looking to make product investments and don’t have the staff for all the initiatives on the table.”

Zapier’s team has grown slowly and deliberately to under 100 people in five years, and Foster notes that they generally only hire when they’re feeling a pinch. “We're always going to expose the work that needs to get done and the opportunities that exist. We’re never going to say, ‘I think Janice is getting a little overworked, so I'm going to hide some work from her.’” The goal, supported by weekly one-on-ones and a culture of open communication, is to allow hiring needs to become so obvious that there’s no choice but to tackle them.

“We want to avoid a situation where managers are hoarding tasks because they don’t want their teams to feel burdened by them,” says Foster. “That's not helping anyone. You think you're doing as much as you possibly could and that may not necessarily be true.” When key opportunities are known, though, and they’re still being put off month after month? Everyone can agree it’s time to post a job description.

Perhaps because roles are only created once they are mission critical, Zapier’s hiring process prioritizes one simple factor: skill. “We tend to not care as much about credentials or resumes or cover letters. I couldn't tell you where most of our people went to school, for example, and quite frankly I don't really care,” says Foster.

Of course, it’s a lot easier to determine alma mater than design chops or coding proficiency. So here, too, Zapier has invested on the front end to design a process that cuts through the noise. It begins with an application form that vets for certain key skills; those responses then go to a hiring panel that scores them against a role-specific rubric. Interviews, too, are heavy on skills tests — and not just hypothetical exercises.

“These aren't whiteboard tests. Engineers, for example, work on an actual engineering problem that you might encounter in the wild. They code on it together with one of our other devs,” says Foster. “We try to vet people against the actual skills they'll be doing on the job rather than some sort of hypothetical scenario or code trick questions.”

Once you automate your way out of mundane tasks and hire for the roles that only humans can fill, a gray area will inevitably remain. “We’d love to semi-formalize a way to manage that,” says Foster. “Create an internal auditing team that serves the whole org, going around and looking for tasks that people are spending time on every week that we might cut out.” He’s not there yet, and don’t worry if you’re not either. Just thinking in these terms can go a long way toward establishing a culture of conservation.

Customer Development: Sales vs. Dev Platform

When Zapier was founded in 2012, its process was simple: the team identified popular apps — the Google apps, Salesforce, MailChimp, Facebook, etc. — found their public APIs, and got them up and running. Quickly, as the company became more popular, they started fielding thousands of requests to add new apps.

Then they started hearing from potential partners themselves. “We’d hear ‘How can we get on Zapier?’ That phrasing made it sound like people might be willing to put some effort in,” says Foster. Realizing that they could never build integrations for every app out there, the Zapier team did a little digging to see if companies would be open to investing a little engineering time of their own. A lot of them said yes, and the Zapier Developer Platform was born.

It’s been a resounding success — there are now nearly 800 apps on Zapier — and Foster attributes that to his company’s strategic positioning. “SaaS companies don’t want to be in the business of integration; they want to be in the business of CRM or email marketing or customer success or what have you,” he says. “When it comes to integration, they’re thinking, ‘What are the one or two I can build that are really strategic.’ Zapier is just a really easy way to just get that breadth right out of the gate. It's an easy way to go from telling their customers 'no' to saying 'yes.'”

Not every product lends itself to a developer platform, but every product can benefit from building for an engaged community of users and would-be users. “Tap into communities that already exist in some way and be a relevant participant for those folks,” says Foster. If you’re building a recruiting app, for example, work hard to engage with people who are already providing recruiting best practices. “Try to get into those areas that will get customers coming to your inbound funnel so you don't have to be dialing-for-dollars all day long. Because dialing-for-dollars is really expensive.”

The result is a sort of self-reinforcing, mutually beneficial ecosystem: Zapier continues to improve its platform to make it easier and faster for partners to use. And developers, for their part, continue to release integrations that build Zapier’s value and expand its potential reach. “Each of those 800 apps is a user base that we can tap into. With our partners, we work hard to make sure there's a landing page for each integration, with the necessary docs and directories.” Between co-promotion of new integrations and search traffic to each of those landing pages, Zapier derives nearly all of its sales from inbound traffic.

In fact, the company has never had a sales team. Instead of spending time and money 

 customers, they can devote their time to 

 customers. “We've tried really hard to make the UX super, super easy so that people can self-serve, for example. We wanted to serve small businesses so we knew we had to keep the price point low.”

Because at the end of the day, Zapier answers, almost exclusively, to its customers. “The only thing we need to care about is making our customers happy. That’s who we want to solve problems for. We don't have to worry about investors or stakeholders or things like that. We have a few of them, but not so many that it's deafening,” says Foster.

Being sparing with fundraising and operating leanly doesn’t mean creating some sort of Dickensian workplace. On the contrary, in Foster’s experience it’s about giving yourself the freedom to — and keeping the discipline of — trying creative ideas that not only enable, but also preserve the ability to have a wider range of choices down the line. Being one-and-done with fundraising isn’t suited for every business model, but it’s an option that many could consider, but don’t. Seek input outside of the mutually reinforcing founder and investor stereotypes to determine if it’s a possibility. If you raise money, spend it like it’s your own and save money like it’s for someone else. Rein in early startup expenditure on fixed assets, personnel and customer development to stave off the hunger pains for future financing.

“We have nearly four profitable years behind us. It’s not only a point of pride, but a release. We feel like 

 determine our runway, versus build on borrowed time. That goes a long way in helping us follow our instincts at Zapier,” says Foster. “That may mean spending six figures to get everyone together to Texas for a retreat or pouring all our energy into building a feature the way we see fit. There are early choices that make this type of agency possible for startups, but you’ll have to consider key milestones differently, starting with fundraising. This isn’t the ‘disruption’ one normally thinks about when it comes to entrepreneurship, but it should be.”

Wade-Foster_069RT (1).jpg

Zapier CEO and Co-founder Wade Foster is a fundraising contrarian. But he doesn't think he should be. He shares how it's possible to approach financing as a boost — not a crutch — and ways to approach key business decisions early on to keep the itch to fundraise at bay. 

How Zapier Pulled Off Its One-and-Done Approach to Fundraising

Two years ago, our team at First Round, led by Partner 

, began to quietly build out a program to help our founders navigate the choppy waters of follow-on fundraising. Long had we observed founders caught off guard by what was needed to raise their Series A after having a relatively easy time at the seed stage (

only further exacerbated by an influx of seed funding in the market

). All together, we have immense knowledge in fundraising that we've accrued witnessing our companies raise over 1,000 rounds and $18 billion in follow-on funding. It’s possible for startup founders to know more about almost every facet of company-building, but fundraising is one area where we'll always be able to offer more experience.

Realizing how well positioned we were to help, 

 — a four to six week bootcamp for our startups that are getting ready to raise follow-on capital. At the end of the program, they emerge with a well-designed deck, a strong narrative, and a clear strategy for how to approach the fundraising process. Unlike normal fundraising advice, Pitch Assist is an immersive program where we advise, build presentations and rehearse side-by-side with First Round founders. Trenchard, in particular, has experience on both sides of the table, having started and fundraised for 5 companies before joining the firm.

What follows is an inside look at how we run the Pitch Assist program, and what startups everywhere can apply from what we’ve learned helping create fundraising pitches and processes for over 10 years.

Given the cyclical nature of tech and venture, there are distinctly good and bad times to raise capital. “Avoid August, the second half of November and December, when many venture firms slow down. The year-end holidays and summer dog days are dead zones for fundraising, so why set yourself for an uphill process? July can be slow, too. You can finish your fundraising process in late July — just don’t start it then,” says Trenchard.

For businesses that have seasonality, it’s prudent to coordinate your growth and fundraising cycles. “If you're in education, think about the start of the school year. September is probably a great time to raise because your performance in August is ticking up, and by September and October you're on on a roll,” says Berson. “Keep in mind that you're having these fundraising conversations over a period of about 4 to 12 weeks. As you're fundraising, more data's coming in. The ideal is that data — whether it be user growth or new enterprise customers — is looking good and you’re on the upswing. There are few better things than updating your deck with new data that’s pointing in the right direction.”

A partner at a Series A or Series B firm will typically lead no more than one to three deals per year, a cadence that makes choosing a company to invest in a significant and emotional decision. Founders who understand this dynamic are a step ahead.

The reality — and difficulty — with fundraising advice is that it’s not all created equal. “There are two approaches: one for the the top 10% of startups and one for the other 90%," says Trenchard. "For the vast majority of early-stage companies, raising capital is a slower, relationship-building exercise. It may not be a competitive process, so your goal should be to to get one or two partners to fall in love with what you’re doing. Running an aggressive, get-every-meeting-lined-up approach won’t work as well for the 90% as it will for the top 10% of startups."

In either scenario, it’s critical that your fundraising process be organized and methodical. Never run an ad hoc process or be half-heartedly fundraising. 

founder, you should either be fundraising or not — and if you are, it should be done with great intention.

Of course, applying the 10/90 rule comes with its share of challenges. “For many there’s a 

: everyone thinks that they're in the top 10% until they realize they’re not," says Trenchard. "Given that there are two different fundraising tacks, this can have a major impact on your ability to raise capital."

According to Berson, here are common traps that might trick you into thinking you’re in the top 10% of companies raising funds:

 “It’s understandable to think that momentum is building when an investor says, ‘I want to get together’ or ‘I’m really interested,’ but set your expectations after you’ve first met, regardless of the name on the door. This is especially true if the inbound is from a non-partner.” Just because a number of investors reach out pre-Series A doesn't mean a deal is going to get done.

All of our Fundraising articles

Step-by-Step Fundraising Tactics from the NYC Legend Who Raised $750M

How Zapier Pulled Off Its One-and-Done Approach to Fundraising

The Fundraising Wisdom That Helped Our Founders Raise $18B in Follow-On Capital

AppNexus' First Pitch — Before It Steered Around the Cloud to Win Big in AdTech

What the Seed Funding Boom Means for Raising a Series A

You Aren't Getting the Most Out of Your Investors — This is How to Start

How Crowd-Funding Is Changing Everything and What That Means for Your Startup

Not Another VC Blog - First Round Review

Zach Sims of Codecademy on Lessons in Raising $12.5 Million for the First Time

Take Your Fundraising Pitch from Mediocre to Memorable with These Storytelling Tips