If I were to look at 100 companies, only about four of them are going to get a deal from us.
That's not a number I pulled from a slide; our esteemed editor asked me to walk him through our own funnel, step by step, and then did the math with me.
The results were that if 100 companies come through to us, roughly half get a meeting.
About 30% of those meetings get pushed through to the "we're interested and want to talk again" path.
Maybe 20 to 30% of those move into real diligence and a conversation about terms.
Then a high percentage of those - I'd estimate 85 or 90% - actually make it into the fund.
Run those numbers through and you land at 4.05. So let’s just call it four.
My editorial colleagues at StartMidwest also ran a version of the same arithmetic on the entire region along with Dealroom for their State of Midwest Innovation Ecosystem report. Take the region's graduation rates, apply them to 100 companies starting at pre-seed, and about 1.14 of them make it to Series C. Different question, sure, but it’s the same lesson: the funding funnel (sounds like an adult contemporary band) is long, narrow, and most companies fall out of it somewhere.
I'm not telling you all this to depress you, dear reader.
I'm telling you because most don't realize how much time it takes to get through that funnel, from both sides of the table. So this month, let's talk about that time, where it goes, and the one thing that can make it bearable: being organized enough that investors remember you when it actually matters.
Why your raise is going to take longer than you think
We tell founders that they should budget for around six months to close a round… and that's if you're good at it. It's a minimum, if you know what you're doing and it's not your first rodeo. Otherwise I suggest you/they allow for approximately a year, and it may even be longer for first-timers.
The data isn't kind. Carta's fundraising guide says it can take three to six months of regular pitching and conversations before you see any money, and that the median startup raising a Series A in late 2024 had waited about 2.1 years since its previous round. Carta currently suggests planning for 24 to 30 months of runway, which, for what it's worth, is why we also tell people to raise for 24 months of minimum runway. Closer to home, when StartMidwest cut the High Alpha SaaS benchmarks by region, 22.6% of Midwest founders were still in the market after seven months, nearly three times the rate of elsewhere in the US, according to the figures from their annual survey. This means that Midwest founders close at about the same rate as everyone else. It just takes them longer to get there.
Then there's the weekly load; it’s basically a full-time job.
At minimum, you should be willing to spend 20 hours a week exclusively on raising money, which is why you're probably working 60 or 70 hours a week at this early stage, because the business doesn't stop just because you're out raising funds.
And no, having done it before doesn't get you out of it. I even see veteran founders walk in and say, "Okay, I need to raise $2 million in three months." I think to myself “Good luck with that.”
Sometimes they’ve had the success of being quick previously, and they figure they'll tap all their old contacts and everyone will pony up again. But former success does not always predict future success. It certainly improves your odds - don't get me wrong - and we do look for it, but it doesn't guarantee anything at all. You raised for Startup X ten years ago, but your network's financial positions have probably changed, the economy has changed, and you're now on Startup Y, which is a totally different company in a totally different place, at a totally different time. Totally.
Where the 20 hours actually go
The first part is doing your f***ing research. I have raised before for my own company(s) - most good VCs have, so I’m not giving anything away there - I used to literally run an Excel spreadsheet and scored every firm on a scale of one to 10: how likely did I think they were as a fit for what we’re building? Was it a generalist fund, or one that deeply understands my industry?
That all takes time, though it does take less these days. AI helps, lists are more available than they used to be, StartMidwest's startups and investors database exists for exactly this purpose, and VCs are slowly learning that they need to be more transparent about what stage they invest in. Think of it like a dating app: you're putting up your criteria for a match, and then you prioritize.
Then you have to work out how you're going to meet these people, knowing that warm intros always do better than cold ones, and that in-person networking - actually showing up in the community - is also helpful.
Then comes the data room, in whatever form makes the most sense for you, in other words your financials need to be in order. You need a solid pitch deck, and pitching in and of itself is a chore that only gets better with practice.
On that note, a quick word about pitch competitions. I refer to them as beauty pageants. They are not useless per se, because they're good practice, plus they help you get known in your community. But winning should be a byproduct, not the end result. Being great on that stage doesn't make you a great business person (without calling out too many, but Theranos had a very good pitch for example), and the questions judges ask in these ‘pageants’ aren't necessarily the same you'll actually hear sitting across a partner's table.
Finally, there's your deal economics, which deserves the same deep research.
You need a floor and a ceiling for your terms, and you need to be able to answer the questions that are coming. Why are you raising $500,000 on a SAFE with a $20 million cap? (Hopefully you're not.) Where are your comps? Where did that data come from? Where's the money going? You can mine Dealroom, Carta and PitchBook for all of that, and it should be regionally priced, whether you like it or not. Silicon Valley valuations in the Midwest are not going to be taken seriously most of the time, unless, say, you have a Silicon Valley lead. In other words, your valuation expectations need to reflect the investors you're actually pitching, the traction you've demonstrated, and comparable deals in your market. If you're raising primarily from Midwest investors, don't assume they'll accept a Silicon Valley valuation just because you found a comparable company in the data.
There are always exceptions to this, of course. It's nuanced, after all.
Staying on investors’ radar without becoming the “won't stop texting” person
Here's where I get to use dating analogies again, and I'll try not to wear it out. Your first meeting should be low stakes, like introducing yourself at a networking event and gauging their initial interest. Then you ratchet it up. They'll take your 10-minute call, and if things progress they'll want to do diligence, and diligence can lead to terms, and terms lead, hopefully, to an actual deal. Most of that is not a transactional process, and treating it like one is one of the quickest ways to get quietly filtered out.
I've also said before that once the check clears, it's less a courtship and more a partnership with a prenup attached. If I write you a check, big or small, we are now entwined until your company goes bankrupt or reaches liquidity. So yes, I kind of want to know who I'm doing business with before we get there.
But here's the part of ‘dating’ that founders forget. Nobody likes the person who keeps "just checking in" when you're not officially seeing each other yet. In the same way, staying on an investor's radar comes down to being organized enough that every time you do show up, it's for a reason, and that depends on how you run the process.
When you follow up, give me something worth reading. Tell me you landed a customer, hit a revenue milestone, brought on a key hire, or solved something we talked about in our last meeting. If I'm not ready to invest today, showing me meaningful progress over the next three or six months is a hell of a lot more compelling than another email asking if I've had time to think about your deck.
The founders I see who don't get stressed out or worked up about raising have figured out a way to systematize it for themselves, whether that's an Excel spreadsheet, a CRM, or whatever works. Out of 100 people you talk to, you're going to hear a lot more no’s than yes’s. You need a way to know who you want to talk to the most, what your ask is of each of them, and when.
That includes sequencing. Your first pitch is your worst pitch, by nature, so maybe you don't talk to your highest-value folks until closer to the end. You’ll only get one shot at certain folks, and if you know that's the case, they should be lower down your call list. Some investors are closers. They're not leads and they won't go early, but they'll say, "I can give you $100,000, and I want to do it at the end." In a region where everyone wants to invest and no one wants to lead, knowing how to put your stack together, and when to close whom, takes real time.
It also means tailoring. I used to keep a master slide deck and then pick, choose and rename the presentation for whichever group I was pitching, and even then I’d still tweak it every time. If I'm pitching an investor who specializes in my sector, I can probably skip half the education and spend that time on something else. Too many people shoot from the hip on this, or make it ‘one size fits all.’
And keep your own notes honest. I'd give each investor my one-to-10 fit score going in, and then come back to it after the first meeting. Sometimes the answer was: wow, they suck. They treated me badly, and if they ping me back I don't want them. Put them in your “if I’m desperate” column.
One founder I know does all of this. They’re very systematized, they work from their own spreadsheet, and when they’re ready to raise they start way ahead of time. They don’t call people saying they need money tomorrow. They work their network early, move through it intentionally, and are deliberate about who they talk to and when. That's what staying on the radar looks like: when they reappear, they’ve moved forward, and the people they’re talking to can see it.
The other half of that is being visible where it counts.
Entrepreneurship is an extroverted sport. Get to know your community, and not only the venture people. Get to know other founders, especially the ones who've raised, because they know people you need to know. You don't have to go to every damn event once you've found your network, but people pay attention to who shows up to what. We're looking for founders who engage with the resources that are available for them, and not ones who only appear when they want a check. If you take the money and run, that's probably how it's going to be at the end too, and building an ecosystem in the Midwest that lasts requires successful people who want to stay part of it.
What's happening on our side of the table
Now flip it around, because the time on our side is just as real.
Personally, I don't take unsolicited cold pitches much anymore. I used to make a point of reviewing everything that came in, but after hundreds of submissions without a single investment, I changed my approach. These days it's usually got to be a warm intro, or someone we've met at a networking or industry event, or a qualified source: another venture firm we work with all the time, or an analyst telling us a company isn't for them but may be worth a look for us.
That's partly because people take advantage, and partly because most people don’t have time for those conversations. It's also why the person introducing you matters. If someone sends me five deals and they're all bad, I'll tell them what I'm actually looking for. If the wrong stuff keeps coming, I stop paying attention. When someone I trust who has never sent me anything finally does, I pay attention, because I figure there must be a reason.
Remember the four in 100? Every one of the other 96 took up some time too. We had meetings, read decks, and may have conducted early diligence before passing. All of that time is attributable to the four deals we actually back. So when an investor seems really keen to talk to you, keep perspective: it's literally our job to be interested.
Then there's what happens after we decide we like you, which most founders don't budget for at all. Entity verification if you’re very early, meaning is your company actually filed correctly? Cap table review. Existing financing, and if you're further along and have raised before, what those terms look like. Verifying your previous documents. Legal negotiation on the current round. Wire instructions, tax forms, all of the minutiae… takes time. On a smaller team, everybody pulls some of that load, and they may still run things past an attorney when they want to be sure.
Here's an example of how that can go wrong. We were a few meetings in with a founder who'd been presenting themselves as a US-based company. They lived here and could actually be headquartered here. Then we started early diligence and found out there was no US entity at all; the company was headquartered overseas. That's solvable, and plenty of firms specialize in exactly that fix, but all of a sudden everything slows down. It's the equivalent of finding the skeletons in the closet after you're engaged.
That's why the front end matters so much. If you don't take the time to get your ducks in a row before you go out, it takes a lot of extra time on the back end, and you've then made it that much harder for us to say yes. Get your data room right, know your numbers, and be honest early.
None of this is meant to discourage you. It takes more time than you think, on both sides, and four in 100 is a difficult number to look at and think that it is reasonable. But the founders who get through it usually started early, kept their list in order, showed up in their community, and made it easy for us to remember them and say yes when the time actually came.
The Secret VC is a genuine and experienced investor, who writes anonymously so they can say what everyone else only says after the second drink. They will remain anonymous as long as they choose to, so please don't ask us who they are. The goal here is to inform, and share some home truths while we're at it. If you'd like to submit a topic or questions to be covered by The Secret VC, then go ahead and contact us here. You can also read previous columns here.
