Venture capital fundraising has dropped off in the last couple of years—the first quarter of 2023 was the slowest quarter for both capital raised and deal count since 2017, Carta data shows. Even for startups that do secure funding, they’re doing so at lower valuations, as down rounds have increased, with 20 percent of investments being down rounds in Q1 2023.
Cody Barbo, founder and CEO of estate planning startup Trust & Will, has raised money in good times and bad—he has raised $50 million since 2018 from angels, venture funds, and corporate venture capital arms.
In February, the company raised $15 million from strategic investors including American Express, USAA, and Northwestern Mutual Venture Fund.
Carta’s Kiley Roache spoke to Barbo last week about his fundraising experiences—what worked, what didn’t, and what entrepreneurs at all stages should be aware of.
Watch the full video here, or see our recap of his tips and tricks, below.
Watch Carta’s full conversation with Cody Barbo of Trust & Will:
Read the right books to learn the industry
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There are two “must-reads” for every founder, Barbo says: The Secrets of Sand Hill Road, by Andreessen Horowitz Managing Partner Scott Kupor, and Venture Deals, by Foundry Group co-founder Brad Feld and Jason Mendelson. “If you’re an entrepreneur and you’re going to raise capital, please read those two books,” he says. “It’s the business of venture capital.”
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Barbo also mentions Angel, by Jason Calacanis, because it allows founders to peek into the minds—and motivations—of very early-stage investors. “It’s a book written for people who want to become angel investors, and I actually think for founders, especially early stage, it’s really advantageous to understand how to present your business as a venture-backed opportunity to someone who’s maybe never invested in a company before.”
Take advantage of accelerators
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Trust & Will was incubated at TechStars, a three-month program that includes ten companies per cohort. Founders should take advantage of accelerator opportunities, from name brands like Y Combinator to the many city-specific accelerators (although for less well-known accelerators, Barbo recommends checking with founders who have been through the program).
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“It was an opportunity to be equal with nine companies for three months, and just vibe off the founders, ask questions—it was so conducive to moving faster in the early days. Speed is the ultimate advantage for a startup.”
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Barbo still keeps in touch with his fellow founders, most of whom have gone on to raise venture funding. A key moment for Barbo was hearing a talk by Isaac Saldana, the cofounder of SendGrid, who spoke to Barbo’s TechStars cohort during the first week of the program, just after SendGrid had gone public.
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Barbo and his fellow founders watched Saldana’s original pitch video from his demo day nine years earlier, and spent more than an hour chatting with him and picking his brain (and in Barbo’s case, pitching him on Trust & Will). “That network is forever. … It’s really powerful,” Barbo says.
Run a tight fundraising process
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When he was raising his Series A round in 2019, Barbo sent emails to 50 prospective investors he deemed a good fit, saying he’d be in town for a few days and “meeting slots are filling up fast.” It worked—45 of the 50 meeting slots were booked.
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A key point: Investors were interested because Trust & Will had been sending regular updates on company progress to its mailing list, which included all the investors who passed on the company during its seed round.
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In the Series A round, the 45 investors winnowed down to about 20 interested investors after the first meeting, and within six weeks Barbo was actively talking to six or seven very interested investors. “These were the ones who had spent the most time with us. … It’s not just an associate—it’s partners, the managing director, or general partners that are now involved, and getting closer to a term sheet.”
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In the end, Barbo had three term sheets within a week of each other, after just a few weeks of concentrated fundraising, leading to a $6 million Series A. This was possible because he put all investors on the same timeline and treated the fundraising process as a sales funnel, casting a wide net at the beginning but quickly engaging with the best opportunities.
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A few months later, as Barbo continued to send out the positive news about the company’s growth, demand from investors grew, and Barbo opened up a two-week virtual roadshow for raising a Series B that included 24 potential investors, including many of those who passed on the Series A. The result: a $15 million Series B.
Use social media for personalized outreach
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Barbo curates his social media feeds and regularly looks for opportunities to congratulate investors or potential business partners on recent accomplishments, introducing himself and his company in the process.
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In 2018, when Trust & Will was at the seed stage, Barbo sent a LinkedIn message to Walt Bettinger, CEO of Charles Schwab, noting that the company often mentioned estate planning but didn’t point customers anywhere for more info. Barbo suggested a conversation about Trust & Will. “I don’t know if it was him or an assistant that opened up and accepted that invite,” Barbo says, but it led to multiple conversations, including with Schwab contacts in North Carolina who helped Trust & Will gain compliance approval in the state—the company’s first compliance win for its advisory product. “I have that same example that plays out with so many large entities,” Barbo says.
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LinkedIn is great for such outreach, since it includes social proof and because the title “CEO” carries weight, even for earlier stage companies. Barbo scours LinkedIn for investors with whom he has a mutual connection. A big one: A shared college alma mater. “I’ve pulled the Aztec card” (Barbo went to San Diego State University).
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Another tip: Reach out to fellow founders for an introduction to their investors. ‘It’s a power move. I don’t know why more people don’t do it.”
Get amped up for your pitch
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It’s two hours before an important pitch: How does Barbo get himself in the right frame of mind? “I blast AC/DC at full volume in my home office to get in the zone,” Barbo says, recommending that founders find their go-to music “You’ve got to get yourself hyped.”
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Barbo also recommends removing all distractions during virtual pitches. “I quit every app. The only thing open is Chrome, and there’s four or five tabs open—it’s the deck, it’s the spreadsheet, it’s the data room.”
Shift to an ‘I’m in control’ mindset
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It’s natural for young founders to view investors as deities who can make or break your dream, and approach fundraising with the subservient attitude to match. Change the mindset, Barbo counsels.
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“You’re in control. Don’t let the investors be in control. You’ve got to remind yourself that they’re not giving you the opportunity. You’re giving the opportunity to the investors. You’re welcoming them onto the cap table. Setting the expectations with yourself and your team upfront is really powerful. It took me a while to learn that. It’s really important to hold that cap table near and dear to your heart.”
Learn the “Power of No”
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“Say no to a bad investor,” Barbo says. “Say no to a bad term sheet. Because there’s always another investor.”
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Founders should trust their gut when a deal just doesn’t feel quite right. He cited the example of a potential investor during the Series A fundraising process who wanted Barbo to fly to New York to pitch the firm’s limited partners. “I’m like, ‘Are the LPs the gatekeepers, or are you guys? Because you’re the venture fund.”
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Even though the valuation and deal amount was what Barbo was looking for, he “didn’t get a good feel for it.” He and his team put two competing term sheets side by side and chose another investor to lead the round.
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Barbo also recently turned down a $5 million opportunity because the investor wanted to come in at the same valuation as the company had raised a year earlier, even though the company had significantly grown in the meantime.
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“It’s crazy at this stage to say no to $5 million because in the early days I would have said yes to all $5 million offers. But there’s times in the journey your perspective changes based on the health of our business and our balance sheet. And we just didn’t need the money, especially at that dilution. So we said no, even though it was very uncomfortable for me.”
Dictate the next steps
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That mindset shift makes it easier to take control of the fundraising process, Barbo says. That starts with asking upfront what a prospective investor’s decision-making process and timeline is. “Be very direct with your questions,” Barbo says. “These are investors, they can handle these questions. Sometimes as founders, we’re hesitant to ask them.”
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He ends pitch meetings with an outline of what will happen next—he explains that he’ll send a link to a data room, as well as a Google Doc in which investors can ask questions, and he and his team actively engage with the document to create a real-time dialogue around business specifics. This saves time ahead of a follow-up meeting, and allows the founder to gauge the level of engagement by the investors, including how much time they’re spending in the data room.
Learn from ‘good’ rejections
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Every founder will hear “no” from investors. Barbo says Trust & Will pitched 500 investors in six years. Very few of those rejections upset him—except for the very few that “ghosted” him after seemingly very positive meetings. “You wonder, ‘Did they die? What happened?’”
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The best investors say no quickly, and for clearly stated reasons. “The quicker an investor can get to a ‘no,’ I have the highest respect for them. That’s what really good investors do. Or they’ll tell you very prescriptively why they’re not investing,” (for example, citing lack of recurring revenue, questionable total addressable market, or a lack of experience on the leadership team). “When they’re very specific, it’s super helpful.”
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That specificity allows you to come back to that investor in a later funding round and point out the progress you’ve made in all the areas they previously found lacking. “That’s a big win for you as a founder … it’s very likely they’ll reconsider the opportunity.”
Explore corporate venture capital
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With about 10 corporate venture capital investors on Trust & Will’s cap table, Barbo emphasizes the need to understand their motivations, since each one is different—they may see the investment as a research-and-development opportunity, a revenue play, or a future acquisition opportunity.
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One key advantage to using corporate venture capital: It associates your company with “world-class names,” which adds to your company’s credibility. Another plus to CVCs: They are not tied as closely to funding cycles or investment returns as traditional venture funds and may have more flexibility. That allowed Barbo to conduct a “rolling close,” bringing on strategic investors over time instead of having to raise on a tight timeline.
Work hard—and then rest
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Building a company is hard work, and there’s no shortage of social-media posts about “hustle” and “grind” that tout the necessity of working yourself (and your employees) to the point of exhaustion on the way to rocketship status.
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Barbo, who is married and has a daughter, has a different philosophy: “Your company is not your identity,” says Barbo, who usually ends work by 5:30. “Take care of yourself.”
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For Barbo, that means prioritizing health, sleep, and family time. “If you’re happy in your personal life and taking care of your health to the best of your ability, you’ll be the best version of yourself at work. … It’s super hard for founders to lean into that. … You forget you have to have a life outside the business.”
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