How NOT to raise money in crypto
A thread for founders.
A thread for founders.
0/ Some background:
Alongside our venture arm, @TheSpartanGroup also has a 10-person advisory team.
We’ve sat across both sides of the table, and raised + invested 100s of millions in crypto for projects.
Here are the common overlooked lessons on fundraising.
Alongside our venture arm, @TheSpartanGroup also has a 10-person advisory team.
We’ve sat across both sides of the table, and raised + invested 100s of millions in crypto for projects.
Here are the common overlooked lessons on fundraising.
1/ Raising money is not about money.
Think of it as hiring your investors.
This is the second most important decision you’ll make early on, after actually hiring.
So don’t. Rush.
Think of it as hiring your investors.
This is the second most important decision you’ll make early on, after actually hiring.
So don’t. Rush.
2/ Who you bring on should not be a function of market climate.
Bull/bear should only influence valuation/raise size.
Would you lower your standards when you hire a founding member because $BTC is trading low?
Bull/bear should only influence valuation/raise size.
Would you lower your standards when you hire a founding member because $BTC is trading low?
3/ Fast money usually is bad money (but not always).
It’s tempting to take money from funds that move fast and don’t ask many questions vs ones that do multiple rounds of DD on you.
You’ll regret this for the same reason you’ll regret marrying someone after a 30 min date.
It’s tempting to take money from funds that move fast and don’t ask many questions vs ones that do multiple rounds of DD on you.
You’ll regret this for the same reason you’ll regret marrying someone after a 30 min date.
4/ Over-indexing signaling.
Most founders want to have “brand name” funds to signal they are legit.
It’s helpful sometimes.
But if you raise $100k from a $800M fund and you expect them to pick up the phone when you need help, you may need medical attention now.
Most founders want to have “brand name” funds to signal they are legit.
It’s helpful sometimes.
But if you raise $100k from a $800M fund and you expect them to pick up the phone when you need help, you may need medical attention now.
5/ Don’t cut investors to their min.
VCs will often tell you their min check sizes.
Min is VC lingo for “just big enough for us to handle the paperwork but you won’t hear from us after”
Not “big enough that we’ll spend the same resources on you as a position with 10x size”
VCs will often tell you their min check sizes.
Min is VC lingo for “just big enough for us to handle the paperwork but you won’t hear from us after”
Not “big enough that we’ll spend the same resources on you as a position with 10x size”
6/ Backing competitors
Funds have an incentive to spray+pray. Investing in competitors is hard to avoid. If you notice it, ask for their rationale.
Ask yourself whether you can trust the VC to not leak sensitive intel to a competitor.
This is how I handle competitors:
Funds have an incentive to spray+pray. Investing in competitors is hard to avoid. If you notice it, ask for their rationale.
Ask yourself whether you can trust the VC to not leak sensitive intel to a competitor.
This is how I handle competitors:
7/ NDA for intro calls.
You’re a clown if you ask for an NDA in the first call.
The VC’s job is to know YOU as a person first. Your first call rarely will cover extremely sensitive technical details.
A VC who agrees to an NDA in the first call is also 99% an amateur.
You’re a clown if you ask for an NDA in the first call.
The VC’s job is to know YOU as a person first. Your first call rarely will cover extremely sensitive technical details.
A VC who agrees to an NDA in the first call is also 99% an amateur.
8/ Check the fund mandate.
Crypto bros call every fund a “VC”.
But many of the short-termism + shady stuff people say VCs in crypto do…are not done by actual VCs.
An actual VC is rigid by mandate. It has a 5-10 year fund life + no monthly perf targets + doesn’t trade.
Crypto bros call every fund a “VC”.
But many of the short-termism + shady stuff people say VCs in crypto do…are not done by actual VCs.
An actual VC is rigid by mandate. It has a 5-10 year fund life + no monthly perf targets + doesn’t trade.
9/ Use the lead.
I’ve had many cases where founders reach out to me, as a non-lead or even angel, about stuff that the lead investor should have helped with.
Your lead investor isn’t just the guy writing the biggest check.
Being lead comes with obligations. Make them abide.
I’ve had many cases where founders reach out to me, as a non-lead or even angel, about stuff that the lead investor should have helped with.
Your lead investor isn’t just the guy writing the biggest check.
Being lead comes with obligations. Make them abide.
10/ Twitter status games.
Finally, REFERENCE CHECKS WITH FOUNDERS WHO WORKED WITH THE VC > any Twitter popularity contest.
If you raise from a VC *only* because they seem active on Twitter/ based on some popularity poll, you are definitely not fit to run a company.
Finally, REFERENCE CHECKS WITH FOUNDERS WHO WORKED WITH THE VC > any Twitter popularity contest.
If you raise from a VC *only* because they seem active on Twitter/ based on some popularity poll, you are definitely not fit to run a company.
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