Good Morning, this is Napkin Notes: the Starbucks of startup newsletters. You open up this email tired and bored. And we hand you an oat milk pumpkin spice venti cup of memes, tips and startup goods ☕️

Today’s no different.

Drink up, friends. Before it gets cold.

Our Line-Up Today

• 🍿 RSVP to our mini demo day on Sept 27th

• 💸 How to oversubscribe your round in a down market

• 💡 Timely startup ideas you should build this weekend

• 🤣 Startup swipes of the week

📰 Startup News You Missed: We’re all still addicted to Athletic Greens. Neuralink’s recruiting for human trials. Amazon’s Alexa got major AI updates. A new Dall-E iteration is coming. Klaviyo and Instacart IPO-woahed. Someone made a site of AI angel investors. October’s starting in a week. And you’ve barely emptied your email inbox from the first week of September.

*Big ups to Silvia Stephenson for bagging our Apple Gift card award this week. Email us to confirm your prize. 👏

If you wanna win our next prize, keep an eye on your inbox fam. Now, let’s get to the good part. 🎶

🎟 T-5 days Until Our Startup Event

Seats are filling up quickly for our first startup idea tear-down event. If you’re free Wednesday, Sept 27th at 1 pm PST we’d love to see you there. We’ll have:

• Business Insider Famous Andrew Yeung

• Sustainability Pro Joanna Buczkowska-McCumber

• And fresh off his own $1M raise, Saba Karim

In short, it’s gonna be an action-packed hour. These 3 judges will be taking on a couple of timely startup ideas (with the help of the crowd) to decide which ones have enough momentum to make it big. RSVP below.

💸 How To Fundraise in a Down Market

Meet Joseph Lee:

• a Kernaler (his first idea’s below)

• an adventurer (skier, hiker traveller)

• and an AI founder who just closed an oversubscribed round for his startup Supademo during what the experts call “the worst time in history to raise capital”

Joe (as his friends call him) recently wrote about his fundraising process and we thought his gems were so applicable we wanted to re-share them with all of you.

In sharing what he’s learned, his hope is that you can leverage these lessons to:

• a) spend as little time on fundraising and more on building and

• b) find values-aligned investors that will amplify your mission

• c) go quicker from startup idea to money in the bank to scale

Let’s break down how Joe recommends founders go about a one-month fundraising process…

Day 0–3: Do you want to do this?

1. Clarify why you’re embarking on a fundraise. Is it for glory, a relative told you to or to build a word class business that has a venture-backable playbook that makes sense

2. Ensure your startup is a good fit for VC for bootstrapping. Talk with a few trusted folks to validate this. Not every great idea needs VC capital.

If you decide to go the VC route, Joe says to “mentally prep yourself for a lot of rejection and the difficulties that come with raising during an economic downturn vs. a bull market/low-interest rate environment.” This includes:

• More investors dragging their feet without urgency to decide

• The longer due diligence process

• Lower valuations, less assumption of risk

Days 3–7: Prepare Your Stack

On Day 3, you should get all your ducks in a row. Here’s the tools Joe used at Supademo:

• Canva and Journey.io for making pitch decks

• Supademo for building an illustrative, interactive product demo

• Docsend (you can get up to 90% off the first year) to keep your deck, demo, and data room gated behind email access (this is critical)‍

• MailTrack to track responses and reads‍

• Loom for short, <5 min narrated versions of the pitch deck‍

• Notion for tracking investors and their statuses

After your tools are sorted, get your comms together:

• Finalize your blurb: 2–3 sentence overview that quickly pitches what you do, market opportunity, traction, and team.

• Get your deck handy: at the pre-seed stage, try to keep slides to < 15. Use handy resources like the video linked below to build an engaging, visual-first decked"

• Practice and record your pitch: build and practice a script for each slide. Once you are confident with the narrative, record a short 5-min narrated version so you can speed up investor conversations. Here’s a 30 second snippet from Joe’s personal pitch along with an awesome resource from On Deck on crafting a fundable pitch.

• Build your investor list: search through investors who funded founders in your network or folks you look up to. Jot down their names along with partners. Make sure they invest in your space and haven’t funded your competitor.

Digging the fundraising insights so far? Spread the word.

Need ideas for good investors to list? Check out NFX Signal, VCSheet, or Space Cadet to identify potential investors. If you need more, Joe recommends Googling (i.e. search “enterprise SaaS pre-seed investors in Canada”)

• Create your interactive product demo: investors want to see what you’ve built — your product will do a much better job of illustrating what you do vs. words or videos that may never watched. Here’s an example of what Joe built using Supademo 

• Get data room handy: make sure you have access to core metrics like MRR, LTV, Churn, Retention, etc. In addition, identify key customers that would be willing to be referenced

Days 7–15: Request Intros

Joe reminds us that there’s loads of platforms that aim to democratize access to investors. SeedChecks and Handwave are great examples. He still prefers to get warm intros from other founders to cut past the noise, especially during a time when VCs are not in a hurry to deploy capital.

To do this, he recommends:

• Looking at your network (direct or adjacent) and identify everyone who has raised for their current or past company

• Make a list of all of the investors they are connected with (add this to the Notion doc mentioned above)

• Ensure the fund thesis aligns with your company and that they haven’t invested in a direct competitor

• Put a heavy emphasis on identifying investors that can lead rounds first as leads are the biggest determinants of whether you’ll successfully raise or not

Next, Joe thinks founders should:

• Make the ask personable and warm

• Aim for ~100 warm intro requests with an anticipated conversion rate of 60% for double-opt-ins.

• Make sure you follow up often as founders are busy and this might not be their top priority.

• Focus on warm intros to lead investors (and it’s partners) FIRST who can write a significant % of your round vs. spray and pray. Once the lead is in place, everything naturally follows (FOMO)

“Finally, when thinking through intros — don’t ask/accept intros from investors that passed on your company”, he says, “It’s a bad signal.”

Days 15–30: Meet and Iterate

If you’ve done the steps above property, now you’ll have a big list of investors that are ready for a double opt-in to have an initial convo. Here’s what you do next:

• Start to get meetings scheduled and push for high density (i.e. bucket meetings all together in one week).

• Having a power week of meetings will create FOMO, drive momentum, and help you close faster

• Target 3–5 investor meetings every single day — which means you need to have a strong pipeline of warm intros.

• In the meetings, write down objections from every investor that passes. Update and address these by tweaking your pitch or presentation accordingly.

• be prepared for a string of rejections and be ready to expect 20–30 no’s for every yes. It’s just a numbers game.

Little hack: Once you have interest from a potential lead, aim to communicate via text or WhatsApp instead of email. 

This will drive velocity and quickly suss out whether the investor is serious or not.

Days 30+: Due diligence

According to Joe, “If you’ve played your cards right, you’ll likely start to do some due diligence with a handful of potential leads. This is where you should have your data room and metrics handy from your Day 0 preparations.”

Remember these 2 things that will help close the lead:

• Continue to highlight how you can be a BIG company, even if you’re starting with a smaller wedge

• Connect the investor to personal references and customers that will go to bat for you.

Hopefully, by the end of this 30-step playbook, you have a term sheet from one of our desired investors.

Joe recommends that “you then start negotiating terms (a great guide to term sheets here) and looping in follow-on investors to generate velocity for closing.”

There you have it!

Special thanks to Joe Lee for the handy first-hand experience. If you have questions, Joe says you can reach him via LinkedIn if you mention the Kernal newsletter in your personal invitation note.

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🍷 Swipes of the Week

💚 The Kernal Fam

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