Raising venture capital like a pro: Family Dinner with Marc Davis

Cashing big checks requires big steps. 

Marc Davis, co-founder and CEO of Nyck AI, advised Residents and Tinkerers on approaching investors at The Garage’s Family Dinner on Tuesday. Nyck AI streamlines procurement for mid-sized distributors and manufacturers, enabling businesses to spend their time on strategy instead of tedious work. 

Mix and match funding

Oftentimes there’s a notion that entrepreneurs should follow a clear, definitive progression for their funding—from friends and family to an accelerator to a seed round to VC—but this isn’t the reality, Davis said.

“The right way to think about it is that these four sources are one big bucket of money you can mix and match to get where you need to go,” Davis said.

Sell a stock, not a product. 

Davis told the audience to convince investors their stock will grow, not to demonstrate their product.

"Remember - these are not your customers. They're investors,” Davis said. “They care about a financial instrument. You are a stock. You are not a person, a product or a passion. You're the sum of that money.”

Illustrate the next ten years

Entrepreneurs are usually concerned with the viability of their startup over the next year, Davis said, but VCs want to hear your ten-year vision. 

‘“I won't sleep until the entire U.S. manufacturing and distribution market runs on Nyck, and Nyck is the agent brokering every B2B procurement transaction in the country’—That's what gets a VC fired up,” Davis said.

Request ambitious investments

Davis said that paradoxically, entrepreneurs often find greater success asking big-time investors for higher sums.

“I went out and said, ‘Hi, I'm raising $350,000.’ And they said, ew, a small round signals small ambitions,” Davis said. “In their minds, which business has a better chance of hitting a billion in ARR: one that raises $300K in its first round, or one that raises 30 million?”

Make your success look like a certainty

Davis advised the audience to prove to VCs not just that your product works, but that it’s illogical for it not to exist.

“You need to give investors a future vision that feels obvious,” Davis said. “Think about Uber. Twenty years ago, if you said, ‘You'll press a button on your phone and a car will show up and pick you up,’ people would have thought you were crazy. Now that we have smartphones, it's obvious.”

Manufacture FOMO

A failure for a venture capitalist isn’t making a bad investment; it’s passing on a golden opportunity, Davis said. 

“If a VC writes 100 checks, they fully expect 90 to 95 of them to go to zero. But if they had the chance at the one — the Facebook, the Uber, the Airbnb — and their partners know they passed, their career is over,” Davis said. “In addition to making them feel like you're going to print money, your job is to make them feel that if they don't invest in you, it could cost them their career in VC.”

Find funds that deliver what you need

Be strategic about what you’re looking for and which investors can provide it, Davis said.

“Step one is figuring out how much money you need,” Davis said. “You run the math and decide you need, say, exactly $1.1 million. Step two is filtering every fund down to only the funds whose check sizes fit.”

Build a strong first impression

Davis advised audiences to present themselves well even when they aren’t actively seeking funding in order to build connections.

“When you're in a coffee chat and not raising, you are building a relationship for 30 minutes,” Davis said. “So are they, and they're also snap-judging you in the first five minutes based on your timeliness, your energy, and your credibility.”