My name is Ali Safavi. I'm the CEO and co-founder of COVU. 

Covu is an InsurTech startup that works with insurance agencies.

We like to call ourselves AI Native Services for Insurance, which means we use a combination of AI technology and humans. We help customers and policyholders manage their risk and insurance.

For my previous company, VERO, we raised close to $2M in convertible notes. We realized the mission was great, but the execution was going to be very difficult. 

It just became harder and harder to fundraise moving forward. We also knew there were flaws in our business and our business model. 

We essentially pivoted from VERO to COVU and brought in a new co-founder along with a new set of investors. 

With a new business model and early proof points, it was a lot easier to raise a seed round.

All together we raised $10M for our seed round. After the first term sheet came in, it took us 2 weeks to get 5 term sheets. 

From the 5 term sheets, the valuation and the amount of capital we initially asked for kept increasing, just based on the competition that was created.

It was a tough market for Series A in 2023. That process took longer and it wasn't as favorable as we wanted it to be.

We eventually managed to raise our Series A and now we’re gearing up for our Series B. Altogether between the different methods and rounds, we’ve raised over $22M.

We had a financial plan in terms of what required investment. 

A lot of it was focused on our product and tech — our core platform which is AI native services. 

The funding was used for operational capabilities and expenses, including our carrier marketplace. The rest of it was used for extension of our runway.

For the seed round, because of the term sheets competition, I asked every investor how much they knew about our space and how much value they believe they can add.

I also asked each one to introduce me to a few of their portfolio companies. 

From being in this space, I knew some of their portfolio companies, so I could call them directly as well. 

Deciding which investors also had a lot to do with identifying how deeply the investor would be involved. 

Are they going to be a board member or not a board member? That is obviously a significant factor. 

Based on that and the terms that we got, we chose an investor who had the most knowledge in our space, had clear value add, and who portfolio company founders spoke very highly of.

There are always multiple options. I'm a big believer in cold outreach.

As long as you have a good business with a good track record, cold outreach can go a long way. I’ve done that through LinkedIn and email. 

In addition to that, I've always found asking for introductions being very useful. Having a very good group of founders around you is always helpful for this.

Warm intros are obviously a lot better than cold outreach and gives you some credibility. 

The one thing I learned with a warm intro is that obviously it makes a huge difference if the person knows your space. 

For example, if a healthcare entrepreneur is introducing a friend to a VC, it's not as impactful as someone who would think highly of their credibility or opinion in the same space.

Sometimes capital introducers are also good. In 2023 when we had to do a bridge round before our A round, I found that to be a great option.

I found that process to also be very helpful when I needed to fill the round quickly and to get exposure to a lot of options between family offices, smaller funds, larger funds, etc.

That was a very big takeaway for me. Being in San Francisco helps. There's always VC and networking events where you can meet people. 

In our space, InsurTech Connect was a conference that I only considered meeting prospects initially, but then I realized it can be great to meet investors there as well that specialize in our space.

It was very different for our seed round compared to our Series A.

For our Series B, I have a lot of people reaching out and now they're offering us money as an inbound versus us going out to find capital in the market.

Some founders have very high conversion rates, especially if they've had an exit before and have been a successful founder. 

I have a friend that raised $30M solely off of his background. The short answer is that it really has to do with the business.

It depends on the stage. If we're talking about a pre-revenue company, a lot of it is about the team's credibility and proof points. 

The larger you get it, numbers and finances become a lot more important. The questions become about your growth rate, your CAC and LTV, etc.

As a previous investor, I thought I knew exactly what investors wanted to see, but the more I went through the process, it depends on the type of investor you’re pitching.

Some investors are very gut feeling oriented while some investors focus on a public company comp and the multiples surrounding that comp.

I’ve seen funds who cut small checks that do a lot of due diligence and I've seen larger funds that don't do a lot of due diligence.

Founders need to understand who they’re pitching and what they care about most to be successful in fundraising.

FOMO tactics work great when you actually have something that has a lot of FOMO, but when you don't have FOMO, the tactic has a very negative effect. 

There's a lot of ways to create FOMO. When we had 5 term sheets for our seed round, FOMO played a huge role. 

But then in the Series A it was a tougher market, so creating FOMO was not as easy. 

You first have to understand what investors want to see. Then you decide when you’re ready.

You then need to figure out how much interest you have. 

If there’s enough interest, you can potentially pit those investors against each other. It has to be the right circumstances for this to happen.

When we had our good days, our challenge was how to drive up the terms, valuation and capital amount. In the good times, you just keep optimizing for the best option. 

When you're in a down market, the biggest challenge is finding someone that is willing to give you capital without a massive amount of dilution. 

Sometimes it's a matter of if anyone is willing to give you capital at any dilution.

Those are very different dynamics. I've seen both extremes. Each situation has its own challenges.

Once you have momentum, you have momentum and things are great, but once you lose the momentum, everything flips. 

We went from 0 to 5 term sheets quickly, but then when we wanted to add a little bit of money, you could see the difference in terms of how urgent people were to jump in.

That was a big lesson learned in terms of having momentum when you're fundraising. 

To have the momentum, there's a lot of pre-work you need to do to make sure people are excited and ready. When you go to the market, hit it hard. 

But if you're not ready and you hit the market hard, by the time the first funds give you feedback, you’ve already run out of a lot of options.

It's then harder to use that feedback to retreat and go back again to the market. 

The most important advice that I have is that it's really about building a good business. It's not about investors or capital providers. If you have a good business, people will give you money. 

Once you have a good business, you’re in a much stronger position because, when investors talk to you, you’ve thought about everything.

A lot of the questions that investors ask won’t be a shock because you know the business, you're underwritten yourself, and you're confident that this is a great business. 

It's simple, but that's probably the biggest mistake I've seen people make.

I'm super happy and excited about BGV. Eric Benamou was the founder of 3Com. 

The reason I like Eric is that he was an operator before. I've had a lot of advisors who were operators, but it's very different when they're an incentivized board member.

Whenever I need help, he's been a massive resource.

On the insurance side, I like Manchester Story. All their LPs are insurance companies. They’re an amazing team with great people, and they’re very supportive during good and bad times.

Markd Ventures has also been super good in helping us during the good and bad times. 

And of course, I came from Plug and Play, so I have to give them a shout out.

There's a lot of positives in terms of having access to a massive ecosystem, and especially for folks that want to sell to different countries and are looking for the right people in different companies.

Plug and Play has a very streamlined way of connecting you for a lot of business development.

I always loved YC's content and obviously Paul Graham.

Another VC whose content I’ve really enjoyed is Equal Ventures.

Lastly, First Round Capital’s First Round Review is of very high quality. 

Their content doesn't feel as if they’re putting out content for the sake of it. They go into specific topics and I’ve found it to be very good.

A lot of people are too focused on building software companies and solutions, and not that many people are focused on building great companies that could be ticked forward. 

The reason many founders can't fundraise is because the business is not great.

A good business could happen to use software, but building software for the sake of fundraising doesn’t work.

Instead of focusing on what the VCs want to see, go and build a great business and the money will follow. That mindset shift on building software is very important.