Fundraising Mistakes Founders Make
blog.samaltman.com
Fundraising Mistakes Founders Make
1–10 of 54 posts
Re: Fundraising Mistakes Founders Make
#2To me, one of the biggies is raising too early. To Sam's point, you want a competitive environment. To get that you want to obviously be a good investment to as many investors as possible.
If you don't have some combination of an amazing v1 product, a traction graph that's moving in the right direction, credible investors already on board, a big/timely market, or a top 5% team, you're almost certainly fundraising too early... And you should do whatever you can to get one or more of the above.
See: http://andrewchen.co/2011/06/21/video-the-anatomy-of-a-funda...
(note: salesmanship can trump all of the above)
Re: Fundraising Mistakes Founders Make
#3Beware, though, that saying things like “our round is closing really fast” when you have no offers usually backfires. Investors talk and will call your bluff.
True, but this sort of investor collusion is unethical and only (possibly) legal because private stock isn't regulated in the way that publicly traded stock is. In fact, the whole and only purpose of the VC-funded economy is to take stock strategies that were made illegal 30-100+ years ago and apply them to fast-growing, private, volatile tech stocks.
Shit like this is why most of us who are paying attention hate VC, and why the U.S. has gone from admiring Silicon Valley to vilifying it (and justly so; the ethics in Wall Street are way better than those in the VC-funded world.)
That this kind of scumbag collusion is tolerated is just unconscionable. Investors are supposed to be competitors, but they compare notes so much as to function as a cartel.
Re: Fundraising Mistakes Founders Make
#4Beware, though, that saying things like “our round is closing really fast” when you have no offers usually backfires. Investors talk and will call your bluff. True, but this sort of investor collusion is unethical and only (possibly) legal because private stock isn't regulated in the way that publicly traded stock is. In fact, the whole and only purpose of the VC-funded economy is to take stock strategies that were m…
Just because it's unethical doesn't mean a founder who is fundraising should ignore it. It's happening regardless of your feelings on the subject.
This doesn't mean I don't agree with you, but sometimes you have to play the game.
Re: Fundraising Mistakes Founders Make
#5Beware, though, that saying things like “our round is closing really fast” when you have no offers usually backfires. Investors talk and will call your bluff. True, but this sort of investor collusion is unethical and only (possibly) legal because private stock isn't regulated in the way that publicly traded stock is. In fact, the whole and only purpose of the VC-funded economy is to take stock strategies that were m…
Collusion is a pretty big charge. If investors are upfront about the fact that they talk to each other (and, hey, it's right there in the blog post) then investor A calling up investor B to verify he has made an offer to a startup isn't collusion. It's just due diligence. I'm also unclear about the analogous situation in the public markets that you alluded to.
Re: Fundraising Mistakes Founders Make
#6This is a great compilation of wisdom passed on while participating in YC, plus lessons learned I can appreciate 1.5 years later. Well written Sam.
My personal favorite on this list is to focus on what you're most passionate about during your pitch. This should drive the entire conversation. Investors do not expect you to know everything from day one. Don't go into a pitch trying to have the perfect answer for every question, focus on what you do know and can speak passionately about.
Re: Fundraising Mistakes Founders Make
#7Beware, though, that saying things like “our round is closing really fast” when you have no offers usually backfires. Investors talk and will call your bluff. True, but this sort of investor collusion is unethical and only (possibly) legal because private stock isn't regulated in the way that publicly traded stock is. In fact, the whole and only purpose of the VC-funded economy is to take stock strategies that were m…
Michael,
Would you mind clarifying what strategies VCs execute that would be illegal if the stocks in question were public?
Re: Fundraising Mistakes Founders Make
#8Beware, though, that saying things like “our round is closing really fast” when you have no offers usually backfires. Investors talk and will call your bluff. True, but this sort of investor collusion is unethical and only (possibly) legal because private stock isn't regulated in the way that publicly traded stock is. In fact, the whole and only purpose of the VC-funded economy is to take stock strategies that were m…
Collusion is a pretty big charge. If investors are upfront about the fact that they talk to each other (and, hey, it's right there in the blog post) then investor A calling up investor B to verify he has made an offer to a startup isn't collusion. It's just due diligence. I'm also unclear about the analogous situation in the public markets that you alluded to.
On the public markets, using social sway or inside connections to intentionally up- or downregulate the reputation or market price of another company for personal profit (say, a pump-and-dump scheme) will put you in prison. No question about it; it's unambiguously illegal to do that. You don't get to, for example, spread negative rumors about a company and ruin its reputation because you think you should be able to buy it at a discount.
Investors do the same thing, and it wrecks peoples' careers and makes it hard as hell for people to get started amid that feudalistic reputation economy. The excuse is "well, investors talk".
I say: fuck that and fuck them. If Silicon Valley entrepreneurs are really going to tolerate that shit-- which only hurts them-- instead of agitating for proper laws to be written, then they're a pack of self-hating losers for not knowing how to fight for themselves.
Re: Fundraising Mistakes Founders Make
#9I would second webright's comment about raising too early. One other mistake we made was underestimating the number of investors we needed to speak with in order to create momentum and a competitive environment. You definitely do want to raise in parallel, and in order to truly do so you should overshoot the number of people you plan to talk to so that you don't find yourself done with all of your leads and not with the full amount raised. Chase more leads than you think you'll need to.
Re: Fundraising Mistakes Founders Make
#10No 1. by miles and miles is fundraising at all.
Just saying, but nobody successful I know spends or spent any time raising funds for their company that wasn't just saving their wages.
The one case I know of where they tried (after already being successful I would add) they were already doomed before going down that path ... it just took a while for it to come to fruition. Given that the only people I know who thought this was a good idea lost their business from right under their nose anyway I'm not inclined to think that in general it is a good idea.
The small number of spectacular successes that came from VC capital make it seem more reasonable as a choice than it is... they also make it easier for VCs to invest and see a return because some of those spectacular success are worth a lot and more than make up for the fact that without them its just a game of losing money constantly...