Investor Herd Dynamics
paulgraham.com
Investor Herd Dynamics
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Re: Investor Herd Dynamics
#2[deleted]
Re: Investor Herd Dynamics
#3Seeing that YC's demo day is coming soon, it's awesome to be able to peer into PG's mind - this essay along with "How to Convince Investors" must be the exact advice relayed on to the current YC batch.
Re: Investor Herd Dynamics
#4Seeing that YC's demo day is coming soon, it's awesome to be able to peer into PG's mind - this essay along with "How to Convince Investors" must be the exact advice relayed on to the current YC batch.
That is exactly right. I'm trying to get a complete guide to fundraising done in time for Demo Day, so I don't have to repeat all this stuff verbally (and incompletely) yet again. There is at least one more coming on fundraising tactics.
Re: Investor Herd Dynamics
#5After you raise the first million dollars, the company is at least a million dollars more valuable, because it's the same company as before, plus it has a million dollars in the bank.
This seems a bit specious. Sure, the lower bound on the pre-money valuation for investor #2 should be the post-money valuation for investor #1, not the pre-money valuation for investor #1; but the valuation per share won't necessarily be any different.
Re: Investor Herd Dynamics
#6"VCs will sometimes ask which other VCs you're talking to, but you should never tell them."
Why not? (Unless I missed it, the article doesn't explicitly say.)
Re: Investor Herd Dynamics
#7It seems like the earliest investor in a multi-party round invariably gets shortchanged in the literal dollar value of the deal. If committed investors raise the valuation of a startup, would it make sense for a startup to offer a slightly-sweetened valuation for the first investor to commit?
I understand that no one likes to have the price raised on them later, but perhaps the underlying truth of increasing valuations could be restated in a different way so it seems more like a discount to the first-in vs a price-hike to the last in.
Re: Investor Herd Dynamics
#8I'd always wondered if anyone could upstage PG on HN. Apparently, Elon Musk can.
Re: Investor Herd Dynamics
#9Seeing that YC's demo day is coming soon, it's awesome to be able to peer into PG's mind - this essay along with "How to Convince Investors" must be the exact advice relayed on to the current YC batch.
That is exactly right. I'm trying to get a complete guide to fundraising done in time for Demo Day, so I don't have to repeat all this stuff verbally (and incompletely) yet again. There is at least one more coming on fundraising tactics.
Would love to see some info about the difference in strategy for raising in a toxic industry/vertical.
Re: Investor Herd Dynamics
#10After you raise the first million dollars, the company is at least a million dollars more valuable, because it's the same company as before, plus it has a million dollars in the bank. This seems a bit specious. Sure, the lower bound on the pre-money valuation for investor #2 should be the post-money valuation for investor #1, not the pre-money valuation for investor #1; but the valuation per share won't necessarily b…
Startup valuations are not accurate. Your comment essentially proves the point: If an investor is going to fund a company at valuation X, they prefer that X is a combination of cash and stock and not purely stock. This implies that a dollar of valued startup is not worth a dollar, which should be an axiom.
A 3 MM dollar company comprised of 2 MM stock and 1 MM cash is more desirable than one with just 3MM in stock.