Thread by @jwdanner

A lot of founders chase venture fund logos and valuations like a sport.

It's a waste of time.

Here's what you really need on your cap table:

First, if you haven't built your own startup in the same space before, you need one main seed investor who knows the space, knows early startups and helps you find product market fit (PMF).

A generalist won't give you enough guidance, so find a specialist.

Your main seed investor may or may not be your lead investor.

There are plenty of funds that can be the 'lead' but they won't give you the help you need.

A lot of founders get confused about investors.

They assume that all investors are created equal, and after the first few show up with cash and no value add, they assume no one adds value and just optimize for cash, valuation and social proof.

This is not a bad assumption. It's probably true 95% of the time. But it's a bit like finding your co-founder.

Just because it's hard to find that person, it doesn't mean she won't have a big effect on your company.

Can the right seed investor really make a difference? Yes, if three things are true.

First, they need to have the time to spend with you, weekly is best.

Second, you need to align with the way they think about building a seed company.

For example, I think about PMF and experimentation non-stop, so if that's how you think, we are a good fit.

Finally, you have to get along well with this person and be excited about spending half an hour a week with them talking about the company and how to grow it.

If you don't get along personally,it doesn't matter how qualified they are or how aligned you are with them on approach.

As an investor, one of the things I do with founders before I invest is to do three or four conversations with them in the style we would be doing if I did invest.

That way we can both make sure we like working together and align on the approach.

I ask questions like 'What's your biggest problem right now?' 'What experiments would you run to try to change that?' etc and we talk about it.

After a few sessions, you know if this is going to be helpful.

If you think someone could be your main seed investor, you should ask to do this.

If they don't know how to have these meetings, it's a good sign that they aren't going to be that involved, find someone who is.

The other must-have on your cap table is the venture investor that will do for scaling what your seed investor did for PMF.

Like the seed investor, they need to have the time, an approach you like, and have to be someone you get along with. Try them out.

Founders often get distracted by venture firm logos, but the partner who leads your deal is 90% of the value you will get from the firm, so pick a partner not a firm.

This venture investor has either been a founder themself or has a lot of experience helping companies like yours.

If you are a SaaS company and your potential investor has done 20 SaaS companies, it's likely they have the experience.

Call as many founders that they have worked with as possible. Ask them specific questions about how that person helped them build the company - are they better at strategy, hiring, culture, metrics?

Make sure this is a fit with what you want.

It is very unlikely your seed investor is also amazing at helping you scale your company or your venture investor is good at helping you find PMF because they are both skills investors develop with many many repetitions, so you need two investors and not one.

It’s also why you shouldn’t worry about anything scale-related at seed stage. Finding PMF is the one and only goal, usually achieved with a two pizza team at most.

These two investors are like extended team members.

I rarely sit on the boards of my later stage companies, but am often the person my founder talks to first when she has a big decision to make.

The venture investor almost always will be on your board, but hopefully you develop a non-board relationship with them which allows you to be vulnerable.

And that's it. You only >need< these two investors on your cap table. All of the rest is just cash.

Of course you should get helpful angels and big branded firms too, but these two people will be more important than everyone else combined.

To get your two main investors interested, do your research and find people who have been involved in companies that are models for you.

Do this intentional search for your main investors rather than running the auction process that so many first time founders run.

Target these investors on twitter, follow them on medium and just generally show up a lot. You would be shocked at how effective this seemingly cold outreach can be.

Of course, having a warm intro from one of your existing investors or friends is even better.

I hope you liked this thread and if you did, please follow me @jwdanner and retweet this thread to help as many fellow founders as possible.

This piece is loosely based on the following blog piece in case you didn't get enough already :)
johnwdanner.medium.com/you-only-need-…