Thread by @callmehouck

This might sound surprising to hear from someone whose startup has raised $10 million from a16z

But you don't actually need to raise money from VCs to build a startup

Though many founders I meet feel it's 100% essential

Here are 11 ways you can raise money for your startup:

A quick note:

Startups can raise dilutive or non-dilutive capital

Dilutive = in exchange for equity

Most, if not all, billion dollar companies raise at least one round of dilutive capital (and most raise considerably more than one)

So I'll cover the dilutive options first.

SAFE:

Y Combinator created SAFEs as a simple, fast way to close deals

It lets investors buy shares in the future for a price you agree to now

And is now the standard for early stage deals

I covered them in more detail and included doc templates here: houck.news/p/ways-to-raise

Convertible Note:

If a SAFE is a square, a convertible note is a rectangle

There are other types of notes founders can use

One example: the KISS note from 500 Startups

But the SAFE is the most founder-friendly

Here's a full list of differences:

Priced Round:

This is when investors actually purchase shares in a startup

Differences to SAFEs:
→ Longer negotiation
→ Closing process + data room
→ Need existing investor signoff

Most often used for Series A+

Here's a great explainer from YC:

Accelerator:

They offer:
→ Mentorship
→ Funding (usually with set terms)
→ Founder community

Most prefer to invest early, so the terms can be aggressive

I'm currently putting together a list of the best ones

Get it next week by trying my newsletter:
houck.news/subscribe

Community Round:

A way for anyone to invest as little as $100 in a particular startup

But it only shows up as one line on your cap table

Notably different than crowdfunding because you're selling equity, not the product

Wefunder explains how they work:
communityround.com/faq

Token Warrant:

Got a token?

If so, you can include the purchase and issuance of some of them as part of (or in addition to) an equity fundraise

I've seen some investors back away from these in the last year, but not all

Similar to SAFEs, SAFTs exist:
pulley.com/guides/saft-si…

Onto non-dilutive options!

They preserve ownership for founders since you're not selling any equity

And they let you move faster if you're not a founder with a large investor network already

But you likely need to sell equity at some point to hit venture scale

Future Cashflows:

If you have MRR, you can turn it into ARR

By selling your contract with users for the year, you can get $0.92 - $0.98 per dollar upfront

Buyers calculate the risk of default on marketplaces like Pipe pipe.com

Grants:

Grants came back into fashion due to web3 in the last few years

Foundations, governments, protocols, etc use grants to incentivize innovation in specific areas

Your startup won’t qualify for every one. But it might quality for some
opengrants.io

Pre-sales:

If you don't have a ton of ways to access capital, a pre-sale can get you there

Try a small FB ads test, or a simple cold outreach campaign, to generate initial sales

It's also a great way to validate your ideas before committing to a build:

https://twitter.com/dickiebush/status/1564773998461861892

Venture Debt:

With limited revenue, taking on debt that requires interest payments can kill a startup

Debt is expensive

But it can work for capital intensive sectors like real estate

Typical structure:
→ Fee
→ Annual interest
→ Equity kicker

https://twitter.com/FrancisPSantora/status/1631396096969678852

Bootstrapping:

Airbnb succeeded despite maxing out their credit cards

But they're the exception, not the rule

Only invest capital into your own startup that you can afford to lose

But if you have no plans to reach venture scale, you can bootstrap indefinitely

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How to get funding for a startup:

1. SAFEs
2. Convertible notes
3. Priced rounds
4. Accelerators
5. Community rounds
6. Token warrants
7. Future cash flows
8. Grants
9. Pre-sales
10. Venture debt
11. Bootstrapping