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How to Raise Money

paulgraham.com

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Re: How to Raise Money

#101

Post by jacques_chester »

jacquesm wrote: post #57
diminish wrote: post #32

Earlier quoted context omitted.

we need to combine individual experiences and create a curated tabular list of investors classified by different dimensions in pg's great article. such a list combined with this article would be the ultimate cheatsheet for fundraising.

That is an excellent idea and barring a pile of non-disclosure agreements I could see a lot of people contributing to this. Deal details with investor names attached are not likely to materialize until long after the fact and even then someone is breaking a promise, which professionals with ties to VCs are not going to do. Founders could technically get away with this, especially if a deal fell through but this world…

> That is an excellent idea and barring a pile of non-disclosure agreements I could see a lot of people contributing to this.

The former law student in me sees it as a magnet for defamation lawsuits.

Re: How to Raise Money

#103

Post by friendstock »

jacquesm wrote: post #8

For years I've been toying with making a start-up board game. This essay could easily serve as the basis for that. Slight disagree with the line: "For example, if a reputable investor is willing to invest on a convertible note, using standard paperwork, that is either uncapped or capped at a good valuation, you can take that without having to think." A good valuation means you're going to have to think anyway and if…

Re: board game, have you seen Burn Rate?

Re: How to Raise Money

#104

Post by friendstock »

graycat wrote: post #87

The line in the essay I liked best was: > But there may be cases where a startup either wouldn't want to grow faster, or outside money wouldn't help them to, and if you're one of them, don't raise money. Having the essay earlier would have saved me a lot of time and effort. For my startup, I tried for a long time to raise money, and as in the essay it was a huge distraction from the real work. Eventually, at absurdly…

Just to provide a counter example to balance your assessment of VCs: Our lead investor has a Ph.D. in EE from Stanford. Our secondary investor has an engineering degree from MIT and is a serial entrepreneur. They have been very helpful in terms of advice and support.

Re: How to Raise Money

#105

Post by lifeisstillgood »

johnrob wrote: post #90
nimble wrote: post #74

Earlier quoted context omitted.

What do you mean they don't make money that way? Do you just mean that $100m isn't a hit? If that's all you mean, change that number to $1b or $10b or one hundred... billion dollars (pinky to lip). But I think what you mean is that investors make money by finding companies that are grossly undervalued, to the point that an order of magnitude change in valuation shouldn't affect the decision. I'm still skeptical of th…

Your questions are interesting, because (outside of the startup world) they are based on sound logic. The basic rules of expected value don't apply to startups, because the present value is not a good predictor of future value. Some people are good at predicting the outcome (success vs failure), but nobody can get the number right ($10m vs $1b). Any investor who lets marginal changes in valuation influence his decisi…

Great explanation !

Re: How to Raise Money

#106

Post by hynahmwxsbyb »

Great article PG. I'd like to see more case studies on a successful fundraise at the individual level. How much foreplY do you need before you ask them to bed? How many initial meetings will here likely be? How long does this take?

Re: How to Raise Money

#107

Post by [deleted] »

friendstock wrote: post #104
graycat wrote: post #87

The line in the essay I liked best was: > But there may be cases where a startup either wouldn't want to grow faster, or outside money wouldn't help them to, and if you're one of them, don't raise money. Having the essay earlier would have saved me a lot of time and effort. For my startup, I tried for a long time to raise money, and as in the essay it was a huge distraction from the real work. Eventually, at absurdly…

Just to provide a counter example to balance your assessment of VCs: Our lead investor has a Ph.D. in EE from Stanford. Our secondary investor has an engineering degree from MIT and is a serial entrepreneur. They have been very helpful in terms of advice and support.

[deleted]

Re: How to Raise Money

#108

Post by rafaelc »

ig1 wrote: post #15
pg wrote: post #2

Incidentally, this is the actual advice we give startups about fundraising at YC. This batch I finally wrote it all down, and the s2013 startups used it when raising money.

"I don't know of a single VC investment that began with an associate cold-emailing a startup." I can vouch from personal knowledge that this has happened a number of times at a number of different European VCs, and at least once with a major US VC in the last year. I'm guessing it's far less common for YC startups because YC startups have demo day which essentially initiates the process. They also have a strong netwo…

PG - just today, Yesware announced they raised an additional $13.5 million which started with an associate cold-emailing them.

http://www.yesware.com/blog/2013/09/18/just-simple-idea/

For what it's worth, we've also funded great startups where it started with one of our associates sending a cold email.

Re: How to Raise Money

#109

Post by mathattack »

pseut wrote: post #83
ig1 wrote: post #15

Earlier quoted context omitted.

"I don't know of a single VC investment that began with an associate cold-emailing a startup." I can vouch from personal knowledge that this has happened a number of times at a number of different European VCs, and at least once with a major US VC in the last year. I'm guessing it's far less common for YC startups because YC startups have demo day which essentially initiates the process. They also have a strong netwo…

I read "associate" as the more important part of that sentence than "cold-emailing." So, just to clarify, you're talking about a cold email from an associate vs. a partner?

I interpret it as distinct - the junior employee. He refers to the partners subsequently, though still advising to delay (rather than skip) the meeting.

If you get cold-emailed by an associate at a VC firm, you shouldn't meet even if you are in fundraising mode. Deals don't happen that way. [5] But even if you get an email from a partner you should try to delay meeting till you're in fundraising mode.

And from the footnotes:

[5] Associates at VC firms regularly cold email startups. Naive founders think "Wow, a VC is interested in us!" But an associate is not a VC. They have no decision-making power. And while they may introduce startups they like to partners at their firm, the partners discriminate against deals that come to them this way. I don't know of a single VC investment that began with an associate cold-emailing a startup. If you want to approach a specific firm, get an intro to a partner from someone they respect.

It's ok to talk to an associate if you get an intro to a VC firm or they see you at a Demo Day and they begin by having an associate vet you. That's not a promising lead and should therefore get low priority, but it's not as completely worthless as a cold email.

Because the title "associate" has gotten a bad reputation, a few VC firms have started to give their associates the title "partner," which can make things very confusing. If you're a YC startup you can ask us who's who; otherwise you may have to do some research online. There may be a special title for actual partners. If someone speaks for the firm in the press or a blog on the firm's site, they're probably a real partner. If they're on boards of directors they're probably a real partner.

There are titles between "associate" and "partner," including "principal" and "venture partner." The meanings of these titles vary too much to generalize.

Re: How to Raise Money

#110

Post by mathattack »

pg wrote: post #2

Incidentally, this is the actual advice we give startups about fundraising at YC. This batch I finally wrote it all down, and the s2013 startups used it when raising money.

I like "We'll succeed no matter what, but raising money will help us do it faster."

I think this is a great universal negotiating technique. It's also useful for job hunting. Once you have time on your side (cash flow) you can afford to walk away from suboptimal deals.

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