Raising money for your startup as a founder is a lopsided game.
VCs, angels, and repeat founders all know the dance, but the rules can be really unclear as a first time founder.
Here's a little brainstorm on seed rounds.
If this helps one person, mission accomplished. 😎
VCs, angels, and repeat founders all know the dance, but the rules can be really unclear as a first time founder.
Here's a little brainstorm on seed rounds.
If this helps one person, mission accomplished. 😎
Background: I'm primarily a founder + operator, but I also do a lot of angel investing and am an LP in several VC funds.
I'll try to skew my advice toward being founder-friendly.
This is also what's worked for me - your experience may differ.
I'll try to skew my advice toward being founder-friendly.
This is also what's worked for me - your experience may differ.
First, there are lots of good articles on raising money. They will all be better than this thread.
Here's a great one: paulgraham.com/fr.html
In general though, understand that asking a VC/angel if you should raise money is like asking a barber if you need a haircut.
Here's a great one: paulgraham.com/fr.html
In general though, understand that asking a VC/angel if you should raise money is like asking a barber if you need a haircut.
Okay, how much to raise? Ideally:
* Raise enough to last at least 18-24 months.
* Ideally, you raise enough in your seed to get to profitability (so you never need to raise again).
* Don't sell more than 20% of your company in the seed.
* Raise enough to last at least 18-24 months.
* Ideally, you raise enough in your seed to get to profitability (so you never need to raise again).
* Don't sell more than 20% of your company in the seed.
When to raise?
* When you need money 😄
* But really, this is one of the hardest things to answer. Timing is different for every company, but you should probably have some traction: this might be a couple customers, a tiny amount of revenue - *something* other than an idea.
* When you need money 😄
* But really, this is one of the hardest things to answer. Timing is different for every company, but you should probably have some traction: this might be a couple customers, a tiny amount of revenue - *something* other than an idea.
How do you raise a round?
* There are a dozen mechanisms, but the easiest is a SAFE: ycombinator.com/documents/ You will find some investors who don't like SAFEs - they have their upsides and downsides, but they do the job in 95% of scenarios for early capital.
* There are a dozen mechanisms, but the easiest is a SAFE: ycombinator.com/documents/ You will find some investors who don't like SAFEs - they have their upsides and downsides, but they do the job in 95% of scenarios for early capital.
* Get fundraising over as fast as possible. Don't drag it out. You'll kill momentum and your company. The best companies can pull a seed round together in 2 weeks, but don't be discouraged if it takes you 3 months. Keep pushing.
* Getting to your first "yes" or two is critical. Any/all momentum is good. At my last company, we raised four small checks of $10k-$40k to start. Then, you'll get more confidence asking for $50-$500k checks.
* This is one of my favorites that few people tell you is possible, but it happens all the time: ratchet up both the check size *and* the valuation as you go...
...Your first investors might put in $25k/each at a $4m cap, your next investors put in $50k each at a $6m cap, your last money in might be $250k checks at a $8m cap - or whatever.
You'll know the cap is too high when 51% of investors tell you to gtfo. :)
You'll know the cap is too high when 51% of investors tell you to gtfo. :)
Who to target:
* I think the advice about "don't talk to associates" is antiquated bullshit. Plenty of associates and non-partners can be your internal advocates and get deals moved through quickly.
* I think the advice about "don't talk to associates" is antiquated bullshit. Plenty of associates and non-partners can be your internal advocates and get deals moved through quickly.
* Many exceptions to this rule, but angels and small VC funds (by both employee count and fund size) will move faster and ask less of you than funds with 100 people and $8b under management.
On not hearing back:
* Generally if you pitch someone and don't hear back quickly, it's a sign they're not interested, but you should absolutely follow up. Many of the best investors are incredibly busy. It took multiple email nudges to get my favorite 2 angels into my last co.
* Generally if you pitch someone and don't hear back quickly, it's a sign they're not interested, but you should absolutely follow up. Many of the best investors are incredibly busy. It took multiple email nudges to get my favorite 2 angels into my last co.
On getting a "no" from a VC:
* Don't read past the "No." Investors make up all sorts of shit about why they didn't invest. A no is a no. Don't let it get to you, and generally don't let it change your business/strategy, unless you've heard the same thing from 5+ investors.
* Don't read past the "No." Investors make up all sorts of shit about why they didn't invest. A no is a no. Don't let it get to you, and generally don't let it change your business/strategy, unless you've heard the same thing from 5+ investors.
Couple tactical things:
* Have one person fundraise and the others build the company.
* Generally the CEO should be the one fundraising.
* Have a deck + send it freely. You think everyone wants to steal your idea, but that only happens when you are actually successful :)
* Have one person fundraise and the others build the company.
* Generally the CEO should be the one fundraising.
* Have a deck + send it freely. You think everyone wants to steal your idea, but that only happens when you are actually successful :)
On pitching:
* Speak slowly
* Be excited! You will be 10x better than all other founders if you are just pumped about what you're building!
* Demo the product if at all possible
* Ask for feedback
* Leave plenty of time for ?s
* Speak slowly
* Be excited! You will be 10x better than all other founders if you are just pumped about what you're building!
* Demo the product if at all possible
* Ask for feedback
* Leave plenty of time for ?s
Here's your seed deck outline:
1. Title
2. Problem
3. Solution
4. Traction
5. Market/TAM/competition
6. Vision: how do you become a gigantic company?
7. Team: why are you the right people to do this?
8. Use of funds/how much you're raising
1. Title
2. Problem
3. Solution
4. Traction
5. Market/TAM/competition
6. Vision: how do you become a gigantic company?
7. Team: why are you the right people to do this?
8. Use of funds/how much you're raising
After closing your first investors:
* When you close any investor - ask for intros to other investors! Please do this. (Not enough founders do this.)
* Send updates to investors you've closed. How can they help?
* Stay in touch with VCs who passed via quarterly updates.
* When you close any investor - ask for intros to other investors! Please do this. (Not enough founders do this.)
* Send updates to investors you've closed. How can they help?
* Stay in touch with VCs who passed via quarterly updates.
What did I miss? Happy to answer specific questions.
Good luck and enjoy the process! 🚀
Good luck and enjoy the process! 🚀
