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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?

#41

Post by bendavis381 »

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…

I think the sentiment behind #5 is right, but your wording is wrong. It's not about bullshitting. It's about storytelling and choosing which parts of your story to emphasise and how to frame them. People don't realise the extend to which raising money is simply storytelling. And with any story, you dictate where your story takes somebody. Investors want to believe in your story (especially angels / early VC) so give them the story they want to hear.

That said, it's a fine line between good storytelling and out-right lying. You should be telling a story "based on true events", not a fantasy epic that's easy to pick apart. Credibility is everything. And just like watching an implausible action movie, playing with the truth is easy to spot, and the fastest way to damage your credibility.

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

#42

Post by gwbas1c »

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…

There's a difference between stretching the truth and outright lying.

Outright lying always bites you in the end.

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

#43

Post by icedchai »

godzillabrennus wrote: post #28
skrebbel wrote: post #24

Earlier quoted context omitted.

I agree with most of what you wrote but: > Make up stuff to make things look good. That's gonna backfire.

Theranos is a good example of why that doesn’t work.

I'd say the opposite. It actually worked for about 15 years... that's a pretty good run and shows you just how susceptible to bullshit some of these guys are...

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

#44

Post by rsweeney21 »

I've started a few modestly successful companies over the past decade. Most of them were bootstrapped, but for one of them I went the VC route. I raised $16M over 4 years, starting with Angel, then VC, then "top-tier" VC.

Taking VC funding made the experience of owning and operating a business worse in almost every way.

There are many reasons why I wouldn't recommend raising VC money, but I'll focus on just two right now. First, once you take VC funding, it's no longer your company. Think about that - this business that you created from nothing, sacrificed so much for, know inside and out, and poured years of your life into - now you share control with someone who you've spent maybe 8 hours with. And you're going to have to do that again and again over the years.

The second reason is the disparity in the invested interest between the VCs and you. You have EVERYTHING riding on this startup. The VC has almost nothing riding on your company. It's not their money, they get a great salary either way, and they are expected to have most of their investments fail.

There seemed to be more worldly prestige running a VC backed company, but that's probably because we bought press coverage. :-) In terms of my own personal happiness, I've never been happier than when I was running my own bootstrapped company...and I also made a ton of money.

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

#45

Post by CPLX »

kenneth wrote: post #38

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…

This almost reads like a parody of the entitled God-complex VC mentality.

I wonder how long it will be before people feel some shame advocating for overtly classist and exclusionary network-only policies in public at least.

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

#46

Post by wiz21c »

antonkm wrote: post #29
quizbiz wrote: post #27

Earlier quoted context omitted.

"do bullshit" is unethical and possibly illegal. More importantly, overpromise underdeliver is a sure way to fail.

You cut out the context. It wasn't "do bullshit", but "Do bullshit padding around your entire story." That is pretty much every company out there. Company leaders revise their history to make them more attractive, come up with visions in hindsight and add ethic concerns etc. OP did not say what you claim he/she did.

So, if I read correctly : "add ethic concerns" is "bullshit padding". Right ?

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

#47

Post by rsweeney21 »

kenneth wrote: post #38

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…

Some counterpoints from my experience fundraising.

  - I had a ton of success cold-emailing VCs. I was able to cold email my way into Accel, a16z, NEA, etc.
  - I raised $16M through 3 rounds and was heavily oversubscribed in each round *without ever creating a deck*. My pitch was a conversation that included a compelling story I got really good at telling.
  - No counterpoint on your third bullet. This is spot on. :-)

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

#48

Post by kenneth »

rsweeney21 wrote: post #47
kenneth wrote: post #38

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…

Some counterpoints from my experience fundraising. - I had a ton of success cold-emailing VCs. I was able to cold email my way into Accel, a16z, NEA, etc. - I raised $16M through 3 rounds and was heavily oversubscribed in each round *without ever creating a deck*. My pitch was a conversation that included a compelling story I got really good at telling. - No counterpoint on your third bullet. This is spot on. :-)

Agreed there are exceptions to the first two rules — the two best performing investments in my portfolio respectively are exceptions to #1 and #2. That said, these are the exception, not the rule.

• Out of ~70+ companies I've invested in, exactly one reached out cold (and I had already met the founder once before socially). I do take a look at each of the companies that reach out cold, but I'm bombarded with these email, so I give them about a tenth of the attention I can afford to give to someone who comes with a recommendation already.

• The best companies can raise without a deck if they have a strong personal connection or really good traction to get past the screening stage. In my mind, the deck is the most effective way to succinctly pitch a company before I meet the founder. We don't actually use it in the initial conversation.

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

#49

Post by nobody271 »

rsweeney21 wrote: post #44

I've started a few modestly successful companies over the past decade. Most of them were bootstrapped, but for one of them I went the VC route. I raised $16M over 4 years, starting with Angel, then VC, then "top-tier" VC. Taking VC funding made the experience of owning and operating a business worse in almost every way. There are many reasons why I wouldn't recommend raising VC money, but I'll focus on just two right…

How do you know what type of company to start and how much of your own money did you invest when bootstrapping a company.

I heard about startups that do something like make medical insurance billing easier. That raises a lot of questions, actually.

* How does one even learn that is an issue?

* It seems like something where getting started is driven entirely by having contacts in the industry.

* There has to be a ton of prohibitively expensive red tape to cut through. Would you just pay a lawyer to figure all that out? Lawyers are expensive!

* It doesn't seem like something that really makes the world better although I'm sure you could tell yourself that it does if it was your business. Is having your business do something you consider positive important?

* Where do you get the knowledge you need to get started in an industry. Say you're really only good at programming and want to start a ...fashion business. How do you even start? It can be hard to use Google when valuable information is buried under an ocean of click bait articles.

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

#50

Post by vincentmarle »

CPLX wrote: post #45
kenneth wrote: post #38

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…

This almost reads like a parody of the entitled God-complex VC mentality. I wonder how long it will be before people feel some shame advocating for overtly classist and exclusionary network-only policies in public at least.

You can try to shame them but I rather have them being open and honest about it.
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