Phase 4
Test the waters and iterate
Fundraising Masterclass
Now is the time to present your plan to investors. You will first talk to three independent investors who bring in a neutral, external view. This will help you to iterate the teaser and fine-tune valuation.

Once you have done this you send out the teaser incl. proposed terms to your existing investors (if you have any). Setup a call with each of them to get feedback and find out whether they plan to participate in the round. Make sure the board members (which are typically shareholders) and the team are supporting your plan.
Why not start the feedback process with existing investors?
Here is why: You have built up a history with existing investors. They may think that you are a superstar. Or they think that things are moving ahead too slowly. They most probably have an internal agenda regarding your valuation; it could be that they want to see a massive valuation increase from the last round, or a low valuation to increase their stake in your startup at attractive terms.So while the view of current shareholders is crucial, we propose to start the initial review with external investors to understand how independent, new investors would look at your case.Depending on the complexity of current shareholder structure, this phase will take 2-4 weeks.

Selection of three (renowned) external investors

Many startups don’t seriously test their teasers in the market before kicking off the financing round. Some only test it with existing investors, who already know the case and may have an internal agenda. Other only talk to friends, who tell them how great the case looks. This is a big mistake, and can result in a failing financing round (which often endangers the entire startup).

So you want to present the deck you worked out in the previous phase with three external investors. They should be friendly, but fully independent – and willing to give you a radically open and transparent feedback.

The best way to find such investors is through fellow entrepreneurs who work in a similar but non competitive space. Ask them whether they have an investor who is great at providing feedback and would be willing to spend an hour discussing your case. You may also look for such an investor via board members, advisors, or go out to investors in your network directly

Here is the email your fellow entrepreneur may send out: “Hi XY, my colleague XY is building startup XY ( and is gaining lots of traction. They are thinking about doing a series XY round, and would very much appreciate to discuss their plans with an external expert to get radically transparent feedback before kicking off the round. I think you would be a perfect person to do this: Would you be willing to schedule a one hour video call with my colleague? Best, XY”

In general it should be quite easy to find three investors who are willing to do this. After all, investors are interested in evaluating new cases, and many like to provide advice to ambitious founders. This may even result in a future investment.

It is absolutely fine – and even desired! – if the three investors are “real candidates” to join the upcoming financing round. However, you probably don’t want to do this feedback round with the most promising investors: In most cases, the review process will lead to some substantial (and sometimes radical) changes.


  • Schedule 60-minute calls with three external investors

Structure of the call with external investors

Send out the teaser to the investor 24 hours ahead of the call (considering that you are in iteration mode, you want to make sure that they are getting the latest version).

The 60 minute call itself can be structured as follows:
Intro: Thanks, objective of the call, ask to be radically open, say how you would like to structure th
Initial question: “Have you already had time to flip through the deck? If yes, what are your first thoughts?”
Pitch your case: Go through the teaser, answer questions from investor (if any)
Questions, discussion:
- “How high do you consider the chance that we get the needed financing with this story?”
- “What makes this case attractive?”
- “What are the biggest concerns you have?”
- Tell the investor the expected pre-money valuation: “Does this seem right?”
- Tell the investor what valuation you are targeting in 24 months: “Does this seem right?”
- “Are there any additional points we should consider?”
Thank you, ask them whether it is ok if you send them the final deck
Don’t be defensive and don’t argue! Getting negative feedback and challenged is exactly why you are doing this call. Listen, ask for clarification and for tips how to improve, and keep your own arguments to a very minimum.

Block the hour after the call in your agenda, and immediately write down the key learnings and things you want to review or change. Small feedback can be directly integrated into the deck, bigger things will require more thinking and time to elaborate.


  • Sequentially do three one-hour calls with external investors, and improve your story line and deck after each call

Get feedback from existing investors


After the three calls with external investors you should have a good feeling how “the market” will look at your investment case. The size of the round, the use of proceeds and the valuation should be solid now.

This is the perfect time to approach your existing investors / shareholders. Send them the teaser, jointly with an email that states the size of the round including pre-money valuation. Ask them to jump on a 30-minute call to discuss. The agenda should be as follows:
  • Quickly go through the deck, and be euphoric about the upcoming round. Tell them that first discussion with potential new investors have been very encouraging
  • Tell them that the support of existing shareholders will obviously be crucial to make it happen (they will already know this but still good to mention)
  • Ask them whether they would join the round: A “yes” is your clear objective!
  • If yes: Tell them that you will send further information asap
  • If no: Ask them whether anything you can do would change this
There are three potential outcomes of these calls:
Best case
Existing shareholders like your plan, and (provisionally) commit enough financing to do the entire round without any new investors. Fantastic! Considering that they already know your company, you will be super fast: Setup a term sheet – and once this is signed go directly to Phase 10 to close the round. You could obviously try to increase valuation, or gauge whether you could get in (more) renowned investors at this stage. But you would probably only do this if you are not happy with your current investors, or if you feel that a specific new investor could add massive value.
Worst case
Your existing shareholders are not participating in the round. This endangers the financing round – especially if you have investors with deep pockets among your shareholders: Are they not participating because they are unhappy with your performance? Or because you are a difficult person to work with? Because they think the valuation is too high? Be prepared to discuss this – or even better try to find a way to get a minimum participation from existing shareholders. A personal commitment from the core team can help in such situations as well.
Typical case
In most cases you will get mixed feedback from your existing investors. Some react positively, while others say they will not be able to participate (for whatever reason). Frequently they will make their investment dependent on finding great new investors: If a top-tier VC enters there is a much higher probability that existing investors will want to join as well. In any case, even if you only have “soft commitments”, such a scenario is helpful for you to tell new investors that “existing shareholders will participate in the round as well”.


  • Try to get as many soft commitments from existing investors as possible

Decide whether you are ready to kick off the round

At the end of this round you should have a good gut feeling whether the round is going to close: Are external investors positive, and supporting your valuation? Are existing shareholders supportive, and ready to co-invest?

If this is the case you should move forward to the next phase. Make sure you have support from your co-founders, executive team and the board of directors: You definitely don’t want to have a discussion in the board in a later phase whether the valuation shouldn’t be higher or whether it would not have been better to allocate the proceeds differently. Similarly, you don’t want to have a CTO who is boycotting (or unaware of) the process if an investor wants to talk to her before taking a final decision.

What should you do if feedback from external investors is rather negative and existing shareholders unwilling to participate? This is the time to take a step back. Before working out a wealth of documents, reaching out to key persons to get intros, and sending out the information to a hundred investors over the coming phases you want to make sure that you are on track to make this a success. Take the test below to get a “2nd opinion”. And discuss internally how to move forward:
  • Is the pre-money valuation we are expecting to reach too high? If yes, to what level should we reduce it?
  • Is the strategy looking forward (= use of proceeds) challenged? Can we reach the targeted value inflection point with less money? Or should we go for another value inflection point, or leave projects we wanted to do on the side?
  • Are there any challenges on the team or product side? Has the viability of the market been challenged? Do we need more traction?
  • ...
Obviously these are tough questions – especially if you are running out of money (which you most probably will). We have been there. But believe us: Spending time on setting things up correctly before moving ahead will be valuable. Just thinking that the three external investors and/or your existing shareholders “don’t get it” is setting you up for failure.


  • Take an internal decision to kick-off the round