My favorite tips on how to raise a seed round 👇
Paraphrasing Paul Graham:
Pretend you are a venture capitalist, that you have their incentives in mind, then convince yourself that you'd invest if you were them.
Convince yourself you can convince your partners too.
Paraphrasing Paul Graham:
Pretend you are a venture capitalist, that you have their incentives in mind, then convince yourself that you'd invest if you were them.
Convince yourself you can convince your partners too.
Address all the reasons why you wouldn't invest in your hypothetical company in your pitch, b/c VCs will have the same objection.
Consider onion theory of risk: pmarchive.com/guide_to_start…
Consider onion theory of risk: pmarchive.com/guide_to_start…
Q's you should have good answers for:
- What's your unique insight?
- What's your unfair advantage?
- How does this become a $10B biz?
- Unit economics?
- Defensible?
- What is GTM, now and overtime?
- What have you proven so far?
- Biggest risk?
- What will you prove by the A?
- What's your unique insight?
- What's your unfair advantage?
- How does this become a $10B biz?
- Unit economics?
- Defensible?
- What is GTM, now and overtime?
- What have you proven so far?
- Biggest risk?
- What will you prove by the A?
How much money should you raise?
Before PM-fit, raise enough to get there
After PM-fit, raise enough fully exploit the opportunity & get to profitability
Enough = More than you think you should, to buy yourself insurance against both internal & external potential bad events
Before PM-fit, raise enough to get there
After PM-fit, raise enough fully exploit the opportunity & get to profitability
Enough = More than you think you should, to buy yourself insurance against both internal & external potential bad events
Checklist:
Traction—You have early signals around usage or engagement that indicate a modicum of PM fit
Go-to-market—You know who your customer is, how to reach them, & validated someone is willing to pay.
Fundraise—You know your milestones & how the $ will help you get there
Traction—You have early signals around usage or engagement that indicate a modicum of PM fit
Go-to-market—You know who your customer is, how to reach them, & validated someone is willing to pay.
Fundraise—You know your milestones & how the $ will help you get there
Before starting a process (or even months before), consider meeting with 3-5 "friendlies" who you are "giving a first look to" in exchange for direct feedback.
Ask them the question: "What would you need to see to invest?"
Ask them the question: "What would you need to see to invest?"
Time is your enemy & the VC's friend—as a VC you want to lower you risk, so your incentive is to let time pass so you get more info on the traction & fundraise.
Run a tight process to maximize momentum. Do 20-50 meetings in 2-3 weeks all back-to-back. Be 100% focused on raising.
Run a tight process to maximize momentum. Do 20-50 meetings in 2-3 weeks all back-to-back. Be 100% focused on raising.
Good ways to get investor referrals:
a) introductions from other founders or strong deal sources
b) introductions from existing investors
Bad ways to get investor referrals:
a) introduction from investors who aren’t investing
b) cold outreach
a) introductions from other founders or strong deal sources
b) introductions from existing investors
Bad ways to get investor referrals:
a) introduction from investors who aren’t investing
b) cold outreach
Understand the VC biz model:
"Out of ten swings at the bat, you get maybe seven strikeouts, two base hits, and if you are lucky, one home run. The base hits and the home runs pay for all the strikeouts."
"Out of ten swings at the bat, you get maybe seven strikeouts, two base hits, and if you are lucky, one home run. The base hits and the home runs pay for all the strikeouts."
"So logically their investment selection strategy requires a credible potential of a 10x gain within 4 to 6 years on any individual investment—so that the winners will pay for the losers & in the timeframe their LPs expect."
If you don't want to 10x in 4-6 yrs, don't raise VC!
If you don't want to 10x in 4-6 yrs, don't raise VC!
Parallel track angels & VCs simultaneously.
Tell angels if you want that you can secure their allocation if they commit early (or it's more likely),
Ask VCs at the end exactly how their process works.
Tell angels if you want that you can secure their allocation if they commit early (or it's more likely),
Ask VCs at the end exactly how their process works.
Do your research on the firms & angels. See what else they've invested in.
If you don’t understand their fund size, deal cadence, talk to their founders, you’re not taking it seriously enough.
You are one of dozens of meetings for them a week. Stand out by doing your homework.
If you don’t understand their fund size, deal cadence, talk to their founders, you’re not taking it seriously enough.
You are one of dozens of meetings for them a week. Stand out by doing your homework.
During the meeting, don't read your deck to investors. Make it a conversation.
In the beginning perhaps ask "Have you invested in the space before?" to gauge their knowledge.
Midway through the pitch ask "What's interesting to you about this biz? What's unclear?"
In the beginning perhaps ask "Have you invested in the space before?" to gauge their knowledge.
Midway through the pitch ask "What's interesting to you about this biz? What's unclear?"
When pitching:
It’s helpful to consider the biggest reasons an investor might *not* invest, and pre-emptively address those reasons.
If you’ve solved for them, point to evidence.
If you haven’t, point to how you’ll address them, and the moat you’ve built to date.
It’s helpful to consider the biggest reasons an investor might *not* invest, and pre-emptively address those reasons.
If you’ve solved for them, point to evidence.
If you haven’t, point to how you’ll address them, and the moat you’ve built to date.
Ask in the beginning:
"Do you believe there will be a multi-billion dollar co in the space?"
If no —> don’t go further until yes
If yes —> here's our unfair advantage and why now (instead of 5 yrs ago or 5 yrs from now)
"Do you believe there will be a multi-billion dollar co in the space?"
If no —> don’t go further until yes
If yes —> here's our unfair advantage and why now (instead of 5 yrs ago or 5 yrs from now)
When fundraising for a complex co, you might simplify it for investors by saying something like:
"In order to invest, you'd have to believe that we can execute on X, so that we have Y, which will lead to a multi-billion $ biz."
Frame it simply so they can pitch their partners.
"In order to invest, you'd have to believe that we can execute on X, so that we have Y, which will lead to a multi-billion $ biz."
Frame it simply so they can pitch their partners.
A founder told me it was reasonable to him that the conversation break down in an founder-to-investor pitch would be 90% founder, 10% investor.
IMO it should be closer to 50/50. The more they talk and ask Qs, the closer they are to getting to a yes.
IMO it should be closer to 50/50. The more they talk and ask Qs, the closer they are to getting to a yes.
Unconfident fundraisers talk 90% of the time, hammer home hand-wavy talking points, & grasp at straws for what they think VCs wanna hear.
Confident fundraisers listen 50% of the time, ask questions, & admit the risks to investing as well as what they have & haven't proven yet.
Confident fundraisers listen 50% of the time, ask questions, & admit the risks to investing as well as what they have & haven't proven yet.
After pitching, one thing you may try — under the context of your improvement — is asking them to role play as if they were pitching your biz to their partnership.
If they don’t pitch it well, that may tell you something. Conversely, you may like their phrasing better.
If they don’t pitch it well, that may tell you something. Conversely, you may like their phrasing better.
VCs will say nice things but It's always a no until it's a yes
Most likely nearly all investors will say no but you only need one or a few to say yes.
You're going to feel like a total failure at it until someone says yes and then you feel like a huge success.
Most likely nearly all investors will say no but you only need one or a few to say yes.
You're going to feel like a total failure at it until someone says yes and then you feel like a huge success.
You have to maintain a sort of dual awareness: the confidence of someone who's going to raise easily alongside the paranoia of someone who won't (so that you'll prepare like mad)
Every pitch meeting in which you don't consider updating a slide in your deck is a missed opportunity to learn.
Other things to think about:
Money should last to 18-24 months and enable you to reach meaningful milestones
Seed rounds typically result in 15-25% dilution for founders.
Know whether existing investors are following-on, and how much of the round is already spoken for.
Money should last to 18-24 months and enable you to reach meaningful milestones
Seed rounds typically result in 15-25% dilution for founders.
Know whether existing investors are following-on, and how much of the round is already spoken for.
Don't recommend setting price at the beginning.
"We want to work with the best people, so don't want price to be the reason why that wouldn't happen"
"We're gonna let the market set the price, but it'll be something reasonable, but ultimately we want to pick the best partner."
"We want to work with the best people, so don't want price to be the reason why that wouldn't happen"
"We're gonna let the market set the price, but it'll be something reasonable, but ultimately we want to pick the best partner."
Question to have an answer for:
If this failed, why? (related to biggest risks)
You may want to ask the investor that too:
If this failed, why? (related to biggest risks)
You may want to ask the investor that too:
