Sanchali Pal‘s entrepreneurial journey stemmed from a personal goal of diminishing her carbon footprint. While earning an MBA, she had an idea to create an app to track user’s food choices and show how food consumption impacts climate change. After winning a place in HBS’s Startup Bootcamp, her idea evolved into a broader goal of reducing carbon emissions. She co-founded, Joro, a technology platform that enables users to track and improve their carbon footprints on their smartphones.
Upon graduation, she dedicated herself to building the company full-time and became Joro’s CEO. As a graduate student, Pal and her small team won cash prizes and grant money from clean energy competitions, but raising capital to grow the startup proved more challenging. After meeting with VCs and receiving a series of “no” and “maybe” answers, she successfully raised significant funding—from angel investors and a VC firm—that enables Joro to steadily grow.
In a conversation with Shikhar Ghosh, Pal discusses her perspective as a newly-minted CEO of an early-stage startup seeking funding. She shares tips on approaching the fundraising process, recovering from common mistakes, and gives strategies for avoiding them.
4 Takeaways on Raising Capital as an Early-Stage Founder
- Go Beyond Your Pitch Deck
- Emphasize a Big Opportunity—But Have Proof to Back Up Your Claims
- Be Strategic about Who You Approach—and When
- Listen to Common Themes and Adapt
Preparing to Raise
It’s helpful to understand the process of fundraising and basic mechanics, such as what are VCs looking for? What should the term sheet look like? How should your pitch deck cover? All those things are really valuable, Pal shares, “but you don’t know how to actually raise money” until you try—and fail.
Joro had won prize money from clean energy competitions that enabled it to build the first MVP and do some testing. But the company needed a larger infusion of capital to get to the next level. Pal felt ready to pitch to VCs and recalls, “I had done all my research and I would be ready. And I had eight or nine meetings over the course of two weeks scheduled. Every single one of them said no, and I felt extremely disheartened after that.” But Pal learned from the feedback at those early meetings and made adjustments—to her pitch deck, approach, and ultimately to the business model.
There is no substitute for going out and trying to raise money and failing, and then having to revise. No amount of reading can substitute for the actual experience of getting the feedback and having to go back to the drawing board again and re-explain yourself.
Go Beyond Your Pitch Deck
It’s easy to obsess over creating a “perfect” pitch deck. But resist the urge to present the deck to investors slide-by-slide in your meeting. More importantly, don’t assume that a polished deck can convince investors to take a risk on investing in your venture. Relying on your deck to tell convey your enthusiasm is “rarely an effective way to have a meeting,” Pal remarks. Instead, effective founders learn to use their deck as a tool or visual aid to enhance your pitch’s narrative.
Prior to your first formal investment meeting, if possible, schedule time to talk one on one with the investor and use that time to walk through the deck together. “Don’t let them walk through it by themselves,” she elaborates, “because then they form their own opinions that may—or may not—be directly related to your story.”
Personalize Your Ask
They want you to tell them as a human, “Why are you working on this? Why do you think it’s going to be big? And why does it matter if I personally get involved?”
Pitching a Big Opportunity When You Have Limited Proof
VCs need to be convinced of a potentially big outcome to invest. But many early-stage founders struggle with the ethics of confidently stating projections that are not yet true, especially before having evidence to substantiate their claims. Pal remembers, “I was very careful and cautious about my initial market sizing numbers” and only presented what she could prove from existing business models.
How can you ethically project that your startup will deliver a big return without any certainty? “The worst thing you can do” when pitching to VCs, Pal learned, “is to be overly practical.”Don’t be overly modest or afraid to emphasize a big opportunity, she suggests. Remember you are “trying to build a market that doesn’t exist yet. That requires imagination”—grounded in fact.
Investors want to know that you have the confidence in yourself to try to build something that’s going to be the next unicorn or the next IPO company.
Swing for the Fences But Stay Grounded
Pal discovered that “experienced investors understand that early-stage founders are presenting more dream” than hard reality. At the same time, investors want to see some evidence that your dream can materialize. When talking with investors, she advises, distinguishing between what has happened and what you intend to make happen is critical. One way to bridge the gap between wish and reality, Pal shares, is to incorporate both bottom-up and top-down projections.
Investors are impressed when you can confidently state, “This is what I have achieved so far and this is what I have tested, these things are facts, and then here’s the ambition that I have or the dream that I’m trying to build, and that does not exist yet and I need your money to make that reality happen.” Grounding herself in real numbers from the bottom up, Pal calculated specific costs—like hiring one employee and using Amazon servers. From those figures, she could predict, with reasonable certainty, the costs of building a team of ten or twenty and benchmark those expenses against those of other growing startups. Weighing those costs against the upside of what you can create—”how big can this be?—can help you stay balanced “between realistic grounded cost assumptions and ambitious visionary top-line assumptions.”
At the early stage, investors are looking for the opportunity you’re creating. You can show the opportunity will be big and that you as a founder have a sense of reality—and what it will take to get there. That’s the only way you can achieve balance.
Be Strategic about Who You Approach—and When
To win investors, your story—and your mission—has to resonate with their interests at some level. Pal observes that the investors “who ended up saying yes always said ‘yes—maybe’ in the first meeting. She cautions that not everyone who offered a cautiously optimistic “maybe this could work” ended up invested. But if they said, “I’m probably not interested in this” in the first meeting, none of those people ended up investing.
I learned that it is hard for people to part with their money and, if someone doesn’t have an initial reaction that maybe this could work, then they probably will never reach that. People didn’t fundamentally change their minds.
Identifying Investor Fit
Thousands of articles explore the importance of selecting the right co-founder and founding team. But identifying the right investors is equally critical. You have to find investors who already have some interest or belief that the problem you’re trying to solve is worthwhile. You want to approach people with whom the idea will resonate on a personal and professional level. Without those things, Pal found, “nothing else is going to matter.”
She advises founders who are preparing to raise to identify which investors would be the best fit for your vision. Then, plan to meet with them after meeting with other investors. Why? You have the opportunity to learn—and improve—from every pitch.
First, go to the people that you don’t think are going to invest. Save the people that you really want for later.
How Much You Want to Raise & Your Risk Tolerance Influences Investor Fit
Other factors that influence investor fit include how much money you want to raise, your tolerance for risk, your vision, and how you want to shape the company. As she raised funding for Joro, Pal shares, “I could have raised $500,000 and built a certain company at a certain rate, and I could’ve raised $2 million and try to build a different company at a different rate.”
When determining how much capital to raise, Pal was guided by her mission to make an impact on climate change and the type of company she wanted to build. Like most founders, she wanted to preserve her equity share, and she also pondered “how much will it really take to get, to prove something that’s a good enough product, that I’ll be able to achieve a higher valuation? And what’s the amount of money I need to raise to not be constantly anxious and worrying about money?”
As you’re meeting with investors, know your baseline needs. Ask yourself:
- How much of the company am I willing to give away?
- What will it take to prove my idea?
- How much do I need to build a product that will get us to the next inflection point so we can reach a higher valuation?
- What figure will help me to feel financially stable so I’m not constantly anxious or worried about money?
Answering those questions can help you determine which investors will be the best fit for your startup. “Thinking about those points—for me as an entrepreneur—and for our business, which is a software mobile-based business,” helped Pal determine how much to raise which helped her identify the best investors and prioritize whom to approach and when to approach them.
Listen to Common Feedback Themes
After every meeting, Pal wrote down and reviewed any comments she received. Having concrete feedback helped her tweak and strengthen her pitch deck to appeal to investors’ expectations. After seeing reactions at those initial meetings, she reframed how she presented Joro’s narrative, highlighting the team at the outset and expressing stronger opinions about which steps to pursue next, instead of presenting multiple options.
She learned, “It wasn’t good enough to say I have two different hypotheses on monetization and I will test them when I raised this money.” Instead, investors expected her to demonstrate her ability to make strategic decisions, such as which monetization path to start with. From their perspective, she explained, “If I don’t already have a sense of which monetization path is going to be the most successful, then I won’t be able to spend my own effort effectively.”
Using Feedback to Make Positive Changes
The process of pitching to VCs sharpen her leadership skills and ultimately helped shape the business. After hearing several investors ask for more user data, Joro increased its testing group from twenty to between fifty and a hundred users, giving Pal “more meaningful data about what was working and then started also understanding what could the business models be around this.” After spending a couple of months conducting more extensive testing, Pal recalls, “We went out to raise money again. By that time, I was a little bit more successful in raising from angel investors and then eventually from a VC.”
After hearing some of the same things from some people, I decided to change how I was telling the story—and put the team upfront—and have a stronger opinion about which monetization channel was going to come first. . . . it was not only to meet the investor’s requirements but also because I have limited time.