A Guide to Seed Fundraising • Hacker News Board

Re: A Guide to Seed Fundraising

#21

Post by ig1 » Fri, Jan 08, 2016, 11:52 PM UTC

danieltillett wrote: post #16

ig1 wrote: post #12

Earlier quoted context omitted.

If you've got a strong track record and connections then you can raise money with just an idea, but in reality most founders don't have that so the only way they can prove their ability is via their actions and these days that tends to mean at least building something to prove what you're capable of. BTW. Andy Bechtolsheim invested in Google three years after they'd started working on it (as part of their Phd), they'…

I don’t think anyone is disagreeing that a lot of work needs to go into a concept before it can be funded, but Andy still took a lot more risk than the average VC or angel in backing Larry and Sergey when he did.

I believe Google was already in the millions of searches territory by that point. What made Andy a risk taker in that case wasn't the traction (which would still be significant in todays terms with a vastly larger internet population) but rather that search was seen as a dead space. It would have been the equivalent of investing in podcasting in 2013, a space considered played out and dominated by existing players with no significant upside.

Re: A Guide to Seed Fundraising

#22

Post by gist » Fri, Jan 08, 2016, 11:53 PM UTC

> The difference between an angel and a VC is that angels are amateurs and VCs are pros. VCs invest other people’s money and angels invest their own on their own terms. Although some angels are quite rigorous and act very much like the pros, for the most part they are much more like hobbyists.

That's a pretty broad statement I would take issue with calling angels as a group, amateurs and hobbyists. Especially since some well know VC's also do angle investing.

Re: A Guide to Seed Fundraising

#23

Post by aagha » Fri, Jan 08, 2016, 11:54 PM UTC

estefan wrote: post #3

I've been reading "Angels, Dragons & Vultures" recently to learn about this stuff. I highly recommend it.

Looked it up, but couldn't find it. Who's it by?

Re: A Guide to Seed Fundraising

#24

Post by aagha » Fri, Jan 08, 2016, 11:57 PM UTC

If you hear an angel/VC saying they're interested in investing in you but they haven't done so within a couple of meetings, politely walk away.

When you're in the seed stage, angels are investing in you and the idea. Some will want to know about traction MRR (walk away)and others will want to do deep-dives of your concept (again, walk away).

Re: A Guide to Seed Fundraising

#25

Post by w1ntermute » Fri, Jan 08, 2016, 11:58 PM UTC

oneloop wrote: post #18

w1ntermute wrote: post #10

Earlier quoted context omitted.

If you're the sort of person who has to get info from a website on how to raise a seed round, then you're probably not in a position to raise money based on just an idea or who you are.

What do you mean, get info? Do you think successful people just do stuff in the dark without any idea of what they're doing?

No, they usually know other successful people to ask. Those who don't have to "get info from a website".

Re: A Guide to Seed Fundraising

#26

Post by josh_carterPDX » Fri, Jan 08, 2016, 11:59 PM UTC

So much incredible information in this document. I think the misstep some Founders make is trying to raise too early. I hear stories all the time about people trying to raise on an idea. And while that can be useful, it is usually the wrong time to go after Investors.

We made this mistake and failed miserably. It was only after we had a beta, some customers, and some press that people started to pay attention. Now we're close to closing our seed round and it's because we had better focus around what we were doing, how we were going to do it, and why it was important.

At the end of the day, a VC is interested in answering one question, "What's the 10x return?" How will you make them lots of money. Unless the pieces are all there to answer that question, Founders will get a lot of no's. The goal should be to go through your pitch deck and find ways to eliminate the ability for VCs/Angels/Investors to say "no."

Re: A Guide to Seed Fundraising

#27

Post by javajosh » Sat, Jan 09, 2016, 12:00 AM UTC

These rules are nowhere near as complex as combat rules in AD&D and yet I find my eyes glaze over when reading even clearly well-written summaries. I think the problem is actually that these are actually "combat rules", but they are never explained as such. The combat is between the investor and the investee, in that the investor wants as much as possible for his money under every circumstance, and the investee wants to give as little as possible in every circumstance. Certain important moments and thresholds have become "standard circumstances" over time, and these are basically used to divvy up the battle into bite-sized pieces.

Imagine a variant of D&D where every encounter begins with you and your party naked, and after assessing your enemy you have to negotiate with Elves for your armor and weapons - to be paid for after either winning the battle. (If you lose, you might have to give back your battered armor, and try a different group of Elves). In the best case, if you beat the final Boss (which is always the same, the Grand Vizier of Product Market Fit) then you get to keep like 10% of the treasure and the Elves get 90%.

(You could grind lower level monsters to buy your own armor, but that can take a very long time and it might wear you down until you're no longer fit to be a warrior anymore. The Elves are smart because they risk money (which is replaceable) but not life (which is not).)

Re: A Guide to Seed Fundraising

#28

Post by josh_carterPDX » Sat, Jan 09, 2016, 12:02 AM UTC

aagha wrote: post #24

If you hear an angel/VC saying they're interested in investing in you but they haven't done so within a couple of meetings, politely walk away. When you're in the seed stage, angels are investing in you and the idea. Some will want to know about traction MRR (walk away)and others will want to do deep-dives of your concept (again, walk away).

It's funny. I read this and thought about a meeting with a VC a friend of mine had where the VC Partner was on his phone the whole time. My friend suddenly stopped talking and sat there for a good minute before the VC realized he had stopped. When he asked why he stopped, my friend said that he took the meeting to get his full attention. After a while the VC did it again. My friend closed his laptop and walked out of the building without saying a word. Weeks later they closed their seed round without that firm and now they're growing like crazy. I'm sure that VC Partner is kicking himself for being so inconsiderate.

Re: A Guide to Seed Fundraising

#29

Post by danieltillett » Sat, Jan 09, 2016, 12:03 AM UTC

ig1 wrote: post #21

danieltillett wrote: post #16

Earlier quoted context omitted.

I don’t think anyone is disagreeing that a lot of work needs to go into a concept before it can be funded, but Andy still took a lot more risk than the average VC or angel in backing Larry and Sergey when he did.

I believe Google was already in the millions of searches territory by that point. What made Andy a risk taker in that case wasn't the traction (which would still be significant in todays terms with a vastly larger internet population) but rather that search was seen as a dead space. It would have been the equivalent of investing in podcasting in 2013, a space considered played out and dominated by existing players wi…

There was also the minor point that Larry and Sergey were just a couple of PhD students with no business and no clear path to revenue. Still a gutsy move which many of the current crop of angels and VC would pass on.

Re: A Guide to Seed Fundraising

#30

Post by cperciva » Sat, Jan 09, 2016, 12:06 AM UTC

geoff wrote: post #17

cperciva wrote: post #13

How rapid is interesting? This depends, but a rate of 10% per week for several weeks is impressive. I wish this was a bit more specific -- how long exactly is "several weeks"? 3 weeks (total growth of 33%)? 7 weeks (total growth of 95%)? 13 weeks (total growth of x3.45)? 52 weeks (total growth of x142)?

It turns out that it is hard to be specific, other than the longer you have that sort of growth, the better. Also, it is, perhaps, obvious that large percentage growth beginning from very small numbers is not as impressive as sustained growth even as the numbers get larger. Impressive / interesting growth is very much in the eye of the beholder, and most investors will just say they know impressive when they see it.…

Thank you! Your point about "starting from small numbers" is something else I was considering -- obviously increasing from $1/week to $10/week of revenue over the course of three months is not that impressive, despite being a 20%/week growth rate!

I wonder if a good way to explain this would be via examples of (starting point, growth rate, duration) tuples and an "interesting" / "not interesting" assessment for each. (Can YC publish anonymized data on its portfolio companies?) This would allow readers to look for an example which roughly matches their performance -- which may sound silly to people in the valley who are surrounded by startups all day long, but there are a lot of us outside of the valley who rarely meet anyone working for a startup and never see any sort of concrete numbers like these.

I absolutely agree about keeping the guide short though -- this is more a matter of something I'd like to see you (or someone else at YC) write more about in the future.