Raising money for startups is wild right now. I’ve never seen anything like it.

Lots of Founders are wondering how to approach it and who they should partner with.

Here are 10 observations / practical tips I've shared with 100+ Founders in the last few months 👇👇👇
1/ If you’ve got the hot hand, take the shot.

At some point the music will stop.

Until then, there’s $1T+ sitting on the sidelines looking to be put to work.

If you are showing strong traction, there’s never been a more "Founder Friendly" time to raise capital.
2/ If you don’t have a hot hand, it’s tough out there

Huh? You just said there’s a bunch of capital sitting on the sidelines.

Yes, BUT it’s reserved for the best deals.

In 2020, $50B+ was deployed into tech (all time high), but only 3.3k deals got done (lowest in 8 years).
3/ Do your prep work up front

Deals are moving a lot faster. AngelList just put out data showing the timespan between fundraises is compressing big time.

Implication: Have your materials ready to go and up to date

- Deck
- Financials
- Metrics
- Docs
- Reference Checks
4/ Diligence is still diligence

Deals moving faster has a counterintuitive effect.

I’m seeing the smallest miscommunications kill deals.

Implication: Be transparent

It's better for a deal to potentially die up front, then definitely die when you're at the finish line.
5/ Valuation is only one consideration

Some investors are throwing out big numbers (Series As are up ~80%)

Flattering, but don’t anchor to it.

It can take out a lot of investors that are better fits.

Remember: fundraising isn’t the end goal. Building a giant company is.
6/Pressure test your timeline

Tier 1 takes time. Angels / Tier 2-3 firms make faster decisions.

Don’t conflate this with “conviction.”

It’s a different game.

Work through who you're pitching and in what order.

Mismanaged timing = under-optimized fundraising.
7/ Lead with the Numbers

If your numbers are good, put them in the summary email you send to investors and make sure they’re in the first 3 slides of your deck.

Attention spans are shorter than ever, but consideration spans are long.

Good numbers always force engagement.
8/ Leverage your current investors

There are a lot of “unprecedented” things going on right now - amount/speed of capital raised, vehicles, terms, etc.

Your investors have 100x the data points you have.

Use them to match those data points to your situation.
9/ Be cognizant of the new benchmarks

300% YoY is the new 100% YoY.

Decacorns are the new unicorns.

When you see fundraising articles and think “That s*%t is crazy”, remember Investors have recalibrated “what good looks like.”

The benchmarks have never been higher.
10/ There are no rules in fundraising!

Clubhouse got a $4B valuation in 1 year.

That valuation is as much a mix of:
- Traction
- Founders
- Product
- Market

as it is....

the reality that every Investor has sold their LPs a different “product” (e.g. expected returns).
11/ So why is everyone excited?

It’s a modern day renaissance.

COVID is resetting, disrupting and accelerating everything.

- Markets are bigger than ever
- New business models are emerging
- Trend habits are becoming permanent

Most importantly, the winners are WINNING.
12/ Take look at this chart of the Top 20 companies in the world in 1989 and in 2020 from Berkshire’s latest Shareholder Meeting.

2021 is laying the foundation for the 2050 list.

Happy fundraising :)

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More from @RomeenSheth

29 Apr
0/ Breaking: Shopify Q1 earnings are out. They're BANANAS

In Q1, $SHOP had

- GMV: $37B (+114% YoY)
- Revenue: $988M (+110% YoY)
- Gross Profit: $559M (+117% YoY)
- Operating Income: $118M (vs. -$73M last year)

Here are the takeaways / how to put these numbers in context👇
1/ First, let’s define how SHOP thinks about their business.

Everything boils down to 3 components: (1) Merchants, (2) Partners / Capabilities, (3) GMV.

⬆️merchants with ⬆️capabilities drives ⬆️activity.

This is what Shopify means when they say they're “arming the rebels”
2/ Financial metrics are all growing fast (at 100%+ YoY), but the better way to think about the SHOP is by looking at how fast it’s growing its ecosystem.

- Financials are a TRAILING indicator of the business.

- Ecosystem is a LEADING indicator of the business.
Read 12 tweets
10 Apr
There’s a lot of bad advice out there on how to pitch your startup.

Last year, I invested $1M+ and heard 200 companies pitch.

Every great pitch I've heard nails 5 ingredients.

In this thread, we'll go through each to help maximize your chances when fundraising

Let's dig in👇
1/ Every pitch should have 5 ingredients:

- Problem: Is this an issue
- Solution: Do you have the fix
- Market: Is this a big enough issue
- Business: Can you make money
- Team: Are you the people to do it

The best pitches nail all 5. Good ones hit 4. Subpar hit 3 or less.
2/ PROBLEM

The problem statement is an explanation of why a set of circumstances is painful for a set of users.

There’s one word in that sentence that is most important: painful.

If your problem is not painful enough, it's a vitamin.

The best startups are pain killers.
Read 9 tweets
6 Apr
0/ Breaking: Coinbase Q1 earnings are out and they are bananas.

In Q1, Coinbase did….

- $1.8B Revenue
- $1.1B Adjusted EBITDA
- $730-800M Net Income
- $335B Trading Volume
- 56M Users

Here are the big takeaways / how to put these numbers in context 👇
1/ GROWTH

Coinbase is growing FAST

- Revenue Run Rate: $7.2B
- EBITDA Run Rate: $4.4B
- Net Income Run Rate: $3B

They’re growing each of these 3 metrics 200%+ QoQ.
2/ Users

56M users is no joke. That’s larger than:

- Almost every global bank
- Every payment gateway (Square, Venmo, etc.)
- Major stock trading platforms (Robinhood)
Read 7 tweets
27 Mar
0/ With 320 companies in the latest batch, it’s time YC seriously considers a YC ETF.

Why?

- The whole batch would get funded < 1 week
- Founders can personally de-risk and share in upside
- 1M+ new “outsiders” could get some skin in the game

Here’s how I would do it:
1/ First, let’s level set. What’s an ETF?

ETF = a collection of securities in a single vehicle.

Suppose you wanted to buy shares of all companies in the S&P 500.

Pre-ETF, you’d buy each individual stock.

An ETF let's you buy 1 stock (SPY) to get exposure to all 500.
2/ Let’s take a look at the latest YC Batch:

- Companies: 320
- Avg. Funds Raised at Demo Day: ~1-2M

Meaning, the total funds raised across the batch are ~$300-600M

Since Demo Day on Tuesday, 50,000 "investor intros" have been made according to YC's tracker (!)
Read 15 tweets
22 Mar
0/ Last week, @shl and @ArlanWasHere raised $9.3M from 14,937 people.

This was a breakthrough moment, but we're just at the tip of the spear.

In this thread, I'm going to lay out the backstory, data & implications.

Punchline? VC is on the verge of being completely upended:
1/ First, let’s set the stage.

Over the last 10 years, private assets under management (AUM) have risen over 2.7x from ~$2.7T to $6.5T.

Private equity (including venture) alone has grown to $3.9T.

That's 1.3x of ALL private AUM from just 10 years ago.
2/ At the same time, private company growth continues to dramatically outpace public equity.

Over the last 20 years, the value of private assets has grown nearly 8x. Meanwhile, public equities have grown by ~3x.
Read 15 tweets
7 Mar
0/ Over the last 5 years, I’ve had some lucky breaks and meaningful wins.

Growing a bootstrapped business by 8 figures in revenue is at the top of the list.

The “highlight reel” is pretty.

Reality was filled with failure, doubt and misstep.

Top things I wish I knew 👇
1/ Everything boils down to AMA

A: Ability - do you have the skills to pull it off?
M: Motivation - do you have the desire to pull it off?
A: Attitude - do you have the headspace to pull it off?

Strive for situations where each of these 3 are firing on all cylinders.
2/ Play games worth playing

My friend @ChrisJBakke has a pithy quote:

“$30M Under 30 > Forbes 30 Under 30.”

He said it in jest, but it’s spot on. In the internet era, it's easier than ever to chase vanity metrics (meaningless PR/accolades).

Focus on what actually matters.
Read 22 tweets

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