November 22nd, 2021
Startup fundraising is really hard until it’s really easy. A common phenomenon in startup fundraising is to have a round start off with limited interest from investors to then end with investors jostling for positions in the round. What happens between those two phases of a raise is that a startup is able to find “signal” within the market that flips the dynamic from founders pitching investors to investors pitching founders.
In this post I will briefly explain what “signal” means in the current market, what founders can get out of it, how founders can find it, and how OnePager aims to accelerate the process.
Put very bluntly - Signal is when someone with a significant track record comes out in financial support of your efforts. If Sequoia leads your fundraising round, that provides a Signal to the rest of the market that you’re worth investing in.
Sequoia is just one example of a leading Signal provider, but other examples could be: Similarly successful investment firms. Successful operators who have turned to investing. Someone with specific knowledge and success in your industry.
Others might argue that Signal could include other things like team background or target industry dynamics, but in our experience “who’s leading the round?” is the most important Signal being asked about (for better or worse).
As a founder, Signal is worth making an effort to obtain because it unlocks a large amount of investment dollars that exclusively follow Signal. This is to say that (arguably) most of the market isn’t actually doing their own diligence - rather they are simply looking to follow Signal providers (investors with strong track records).
It’s common for founders to look negatively on this dynamic, but it’s something that happens in every market. From following public stock picks on CNBC to buying the same shoes as a celebrity after they post them on Instagram. It’s more efficient to follow “taste makers” than it is to do your own research.
Knowing this, experienced founders will prioritize securing a Signal providing investor early in their raise. Founders are then able to create a shorter list of high-impact conversations that can not only lead to investment, but to a key marketing item to bring with them for the rest of the raise.
Once a founder recognizes the importance of Signal it becomes easier to create a strategy around their raise and decide on a target outreach list. Looking at a list of thousands of investors is daunting and creating this criteria to narrow down that list can go a long way towards actually getting started. Here’s a list of “preferred co-investors” (read: preferred Signal to follow) from a prominent Angel syndicate to give you a sense of the firms involved:
From there, it’s a matter of doing the same type of outreach and pitching that a founder would normally have to. The bonus in this case though is that if you’re able to close a single investment from this group (even a small one) it gives you the Signal that you need to rapidly accelerate your round.
Here at OnePager we do two things well:
This allows founders to easily supplement their own outreach and accelerate the process of getting their pitch in front of these potential Signal providers. Moreover, by enabling founders to quickly get in front of multiple investors at once it helps them create more momentum around the raise in general.
As the OnePager team, we’re strongly incentivized to help founders find that Signal because once they do we look to help them capitalize on that Signal through our own network of investors looking to follow. In the ideal scenario, a founder would:
To take it a step further, we’re going to open up the economics we receive to incentivize people to refer great founders to great investors. Typically, when you send a friend to a great VC you’ll just get an emphatic “thank you” if they actually invest. With OnePager, if you refer a friend that ends up raising through us - we’ll share 25% of our carry with you! On a $250k raise, that comes out to ~$12,500 worth of participation in the round.
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