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Ask HN: What's your advice for someone who's raising capital for the first time?

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Re: Ask HN: What's your advice for someone who's raising capital for the first time?

#31

Post by greenspot »

coffeemug wrote: post #17

Speak softly and carry a big stick. VCs constantly talk about supporting entrepreneurs through tough times, enabling creativity, building amazing companies, etc. They're not lying -- they really believe it, and it's an important thing for them to believe. But while they say all this stuff, they're also human. And humans follow their incentives. They do that before they do anything else. So your job is to make it easy…

This. So true and extremely well framed.

The only thing I can add: At the beginning of a relationship, everybody is kind. Background checks not just help, they are essential, do them.

Getting into conflicts and power plays with VCs, or just any person at some point, should be expected but there are still huge differences in how people deal in messy situations in terms of morale and ethics. You will find everything between feeling uneasy and facing a nuclear war.

Re: Ask HN: What's your advice for someone who's raising capital for the first time?

#32

Post by jeletonskelly »

meritt wrote: post #5

Ask yourself if you actually need the capital. Between the ubiquity of pay-per-minute cloud computing for every imaginable service, tools to enable extremely productive remote employees, and thousands of software companies ready to handle the complexity of payments, email, ecommerce, hosting, etc, starting a tech company is easier and cheaper than ever.

This is great advice. The further you can get on your own dime will save you equity and get you better terms when you really do need capital investments. Early on, the biggest expense will be your time.

Re: Ask HN: What's your advice for someone who's raising capital for the first time?

#33

Post by startupdiscuss »

Focus on sales growth to the exclusion of (almost) everything else. If you focus on the product, change the features to increase sales. If you hire a new tech person, you do it because you need a feature that was asked for by a customer. As you set prices, aim for the highest revenue growth.

Re: Ask HN: What's your advice for someone who's raising capital for the first time?

#34

Post by ptero »

modi15 wrote: post #19

1. First figure out plan B - what happens if you are not able to raise funding in the next 6 months. 2. Assume a position of power - you will make this company big even without funding because plan B is in place. 3. Talk to investors from this position. You are smarter than them. You know more about this business. You don't need this particular investor to invest because others have already signed up. 4. Treat invest…

IMO 1-3 is good advice, 4 has the good info weighed down by the wrong mental model, 5 is just awful.

From #4: I think it is critical to be efficient with your time. For example, make meetings short and do not waste a lot of your time getting a few extra tidbits for an investor. This has nothing to do with how you treat investors. And treating anyone like shit can backfire, probably not this time but later on. Be nice. Efficient, strong, self-interested but nice. It has much better ROI.

From #5. Do not make things up. On the other hand, do not disclose unrequested information that does not make your project look good

Re: Ask HN: What's your advice for someone who's raising capital for the first time?

#35

Post by edshiro »

coffeemug wrote: post #17

Speak softly and carry a big stick. VCs constantly talk about supporting entrepreneurs through tough times, enabling creativity, building amazing companies, etc. They're not lying -- they really believe it, and it's an important thing for them to believe. But while they say all this stuff, they're also human. And humans follow their incentives. They do that before they do anything else. So your job is to make it easy…

Great advice. I am not seeking investment yet but this is definitely something I may have to do in the future if I want to accelerate growth for instance.

After a few unsuccessful attempts working as employee in startups, I have decided to build my own. Over time and through multiple setbacks I have learned more about myself and what I want when it comes to the type of company I am building. To me it's very important for my co-founder and I to have control over the destiny of our company. Getting VC money can shift the balance of power and you could lose control over what you have built, which is not ideal. For instance VCs could block an exit opportunity which could result in life changing money for you because the return they get is below their expectations.

This may sound very naive, and I don't claim to understand your circumstances, but make sure you already have a strong, growing business so that you play a strong, iron-clad hand when discussing funding with VCs.

All the best my friend.

Re: Ask HN: What's your advice for someone who's raising capital for the first time?

#36

Post by lbriner »

* Know your audience so you can use appropriate language

* Think about it from their point of view. How clear is your message?

* Take advice on how much to ask for so you don't sound too green

* They will care about ROI but also the quality of the team. Theory is great but only a good team can deliver the theoretical ROI.

* Try and back up claims with facts e.g. We have a market of X billion - according to whom?

Re: Ask HN: What's your advice for someone who's raising capital for the first time?

#38

Post by kenneth »

I run a $30M early stage venture fund. Here's what I wish first-time founders knew:

• Don't bother cold emailing me, you'll end up straight in the trash. Don't even think about reaching out on LinkedIn, I open it once a month to mark everything as spam. Instead, find someone we know in common and ask for a warm intro. I receive way too much inbound, and a referral from someone I trust is one of the best ways to skip the line.

• Have a good deck, and make sure I see it before I talk to you. For the majority of new startups, a deck is the best way to share your story, and I will make my decision of whether to spend time talking to you in person while reviewing a deck.

• Understand what I'm looking for: (1) solving a real problem that matches my investment thesis (look it up on our website), (2) a team that's worked together before and is uniquely qualified to solve this problem, (3) a market that has the potential to build a billion-dollar monopoly, and (4) a real business model and a realistic path from zero to a billion.

Re: Ask HN: What's your advice for someone who's raising capital for the first time?

#39

Post by kenneth »

modi15 wrote: post #19

1. First figure out plan B - what happens if you are not able to raise funding in the next 6 months. 2. Assume a position of power - you will make this company big even without funding because plan B is in place. 3. Talk to investors from this position. You are smarter than them. You know more about this business. You don't need this particular investor to invest because others have already signed up. 4. Treat invest…

This is terrible advice if I've ever seen any. You do not start a productive long-term relationship my lying to investors or treating them like shit.

I have noticed a growing trend in generally arrogant founders in the past few years, and it's disappointing to see. I do have a strong "no assholes" criteria, and won't fund such founders no matter how good everything else looks. At the end of the day, a startup is people first, and life is too short to work with assholes.

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