Insider Tips for Raising a Seed Round with Rich Maloy

INTRODUCTION: Welcome to the Daily Bolster. Each day we welcome transformational executives to share their real world experiences and practical advice about scaling yourself, your team, and your business.

Matt Blumberg: Welcome to The Daily Bolster. I'm Matt Blumberg, co- founder and CEO of Bolster, and I'm here today with Rich Maloy. Rich is a partner at SpringTime Ventures. He is the host of his own podcast called The VC Minute, which I just recorded on Monday of this week with him. So that will come out around the same time that this podcast comes out. Rich, welcome to The Daily Bolster. Awesome.

Rich Maloy: Thanks Matt. I love the work you're doing with the Daily Bolster and honored to be here.

Matt Blumberg: Thank you. So can you describe for our audience real quickly, SpringTime Ventures, what is your sweet spot?

Rich Maloy: Absolutely. So we're a seed stage fund. We are investing nationally. USA only software only. Typical check size for us is 600,000, and we invest only in FinTech, InsureTech, logistics and supply chain and healthcare. Currently investing out of our second fund, we do not lead. However, we have a very strong practice of supporting founders getting to yes before there's a lead in place and helping founders pool around together.

Matt Blumberg: I love that. Well, that certainly helps you get a lead when you show up with a$ 600,000 soft circle. So my question, since you live in the world of seed stage financings, my question for you is what are your top three tips for CEOs raising a seed round?

Rich Maloy: Yeah, I could talk about fundraising all day. In fact, I do on the VC Minute podcast, but today I've brought three tips for your audience. The first is the cornerstone analogy for the VC minute is the pool party, and you think that you're fundraising, but what you're actually doing is throwing a pool party except it's worse. It's like a high school pool party where the peer pressure is so thick, you could cut it with a knife. Everybody's milling around the pool, but nobody wants to be the first one in the pool. Because if I jump in and nobody else does, now I'm soaking wet and I look like a fool. And so what you have is, instead of FOMO, is you have FOLS fear of looking stupid. Everybody's milling around going, " Hey Matt, are you going to get in the pool? I'll get in the pool if you get in the pool." What you want to do, what you have to do as a founder is you have to keep scooting those investors closer and closer to the edge of the pool. And now where the analogy breaks down is just as important as the analogy itself, and that is that found other investors can't actually see each other in your virtual pool party. So you have to constantly communicate to every investor that there are other investors around the pool that you've got a hot pool party, that there's people in the pool, maybe SpringTime is in for 600,000. Talk about that all day long. Whoever you have in the pool, you need to communicate that back to your other potential investors.

Matt Blumberg: That is vivid the pool party and the fear of looking stupid. All right. What's number two?

Rich Maloy: So number two is founders don't ask enough questions. To flip the tables, VCs are professional question askers, and as soon as we get started on our call, I'm just going to start driving questions and I'm going to drive questions until we either run out of time or I run out of interest and you will not have time to ask any question. And we might have 30 seconds at the end and say, " Oh, did you have any questions for me?" And you say, " Oh, well, what's the next step in your process?" And that's not helpful. What you need to do as a founder is you need to start out by asking questions and just keep it simple in the beginning. But in that first meeting though, what the question you need to be asking right now is tell me about your most recent investment. Who was it? When did you make it, and why did you say yes? Now you get-

Matt Blumberg: I love that.

Rich Maloy: Right. You get some critical pieces of information. Are they actively investing? Was it six months ago? Was it yesterday? And why did they say yes? Also helps you tune your pitch about what it is that they're looking for.

Matt Blumberg: It's so great. I don't think CEOs realize that they can ask questions a lot of the time. And if you put your first two tips together, it's great. You want to have a lot of people ready to jump in the pool, and that actually makes you as the founder, the driver. You get to pick who you work with, so you've got to learn more about them. I love that. You got a third one?

Rich Maloy: Yeah, absolutely. And I'm going to throw in one more question that that's critical for founders right now, just to build on that. As you get further into the process, ask about their follow on funding. It's so important in this market right now. Every seed round be begets a seed two round. So what's your allocation for reserves? How do you that? Is your investment committee different for follow on than it is for first check and so on and so forth.

Matt Blumberg: And are you open to doing bridges and notes and yeah, that's great.

Rich Maloy: Yes. Yeah.

Matt Blumberg: All right, so bring us home. What's number three?

Rich Maloy: Okay, number three is that there are a thousand reasons that investors say no, but only one reason that investors say yes. And the reason investors say yes is when they can't possibly say no. Now let's put the yeses aside. Let's talk about the thousand nos, because the real meat of this advice is that... I'll back up. For The VC Minute, I've been interviewing a lot of founders and consistent feedback from the founders is that you're going to get a thousand nos or it's going to feel like a thousand nos. And some of those you can control and some of those you cannot. And so for the things that you can control, you need to keep refining your pitch and learning from those. But so many of these nos you can't control as a founder. And so when you get an investor that has given you a no, cross them off your list and move on, you can't possibly convince an investor that they're wrong. Now, the flip side of that is when you have interest and you have an investor that is interested in you, you can keep moving them forward down the line until they can't possibly say no. And then they absolutely are going to be a yes. And now you've got a check, you've got your investor in the pool.

Matt Blumberg: One quick follow up question before we wrap. If you hear no, what is your advice on either asking for feedback or asking if it's no never or no, not now.

Rich Maloy: That's a great point. I would hope that investors that are saying not now truly mean no, not now. Right? And that's fine. The first thing you should do is say thank you because it was Jenny who said the term the half ghost. I really love that from season one. I call it the SHITS, show high interest then stall strategy, right? So if you're getting the shits or you're getting the half ghost, cross that investor off the list, they're not helping you. The investor that said, " No, thank you, that's wonderful." No is the second best answer. Do ask for that feedback. How do you ask for feedback? You just ask for it. Tell me why. Right? And not with the intent to convince them otherwise. You're not going to convince them. Otherwise, put that down, drop the curtain and get the real genuine feedback.

Matt Blumberg: Rich Maloy SpringTime Ventures, thank you for joining me.

Rich Maloy: Thanks for having me, Matt.