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How to Raise Money
21–30 of 125 posts
Re: How to Raise Money
#22Earlier quoted context omitted.
Your intuitions != what older more experience people say pg and YC has more qualified investing experience than probably any other "experienced person" you could talk to. When you are doing a startup, it's generally a good idea to focus on innovating in your core area of expertise - which would be some combination of product/market/technology - and take the best practices of all the other areas, like financing.
Re-read what I said. I'm not talking about what PG or YC recommends with regards to investing. I'm talking about the general idea that if anyone else said something like this and asked for blanket trust: "you can't trust your intuition....rule number zero is: these rules exist for a reason" Well those other people of course can't be trusted like PG and what they say doesn't matter as much. So if a person with 30 year…
I had to reread your original comment a couple of times to get what you were saying. I think you might be getting down-voted because of writing style and confusion more than anything else.
Re: How to Raise Money
#23Incidentally, 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.
Considering that this essay will be read for years, maybe you might like to fix this little typo: "If you're in a wizard at fundraising". Edited: "equity round valuation might me". PS By the way, thank you so much for all this incredibly valuable free advice!
Re: How to Raise Money
#24Do investors read these essays? You've had some strong words for some of the types, e.g. "contemptible subspecies of investor". Would any of them email you and say, hey man, f u?
Re: How to Raise Money
#25Earlier quoted context omitted.
Your intuitions != what older more experience people say pg and YC has more qualified investing experience than probably any other "experienced person" you could talk to. When you are doing a startup, it's generally a good idea to focus on innovating in your core area of expertise - which would be some combination of product/market/technology - and take the best practices of all the other areas, like financing.
Re-read what I said. I'm not talking about what PG or YC recommends with regards to investing. I'm talking about the general idea that if anyone else said something like this and asked for blanket trust: "you can't trust your intuition....rule number zero is: these rules exist for a reason" Well those other people of course can't be trusted like PG and what they say doesn't matter as much. So if a person with 30 year…
Though I speak with the tongues of men and of angels, and have not charity, I am become as sounding brass, or a tinkling cymbal. And though I have the gift of prophecy, and understand all mysteries and all knowledge, and though I have all faith, so that I could remove mountains, but have not love, I am nothing.
These aren't universal, unqualified rules and I don't understand why you're trying to generalize them beyond fundraising. To use a different and perhaps silly example, I'd be more inclined to trust my intuition with respect to dog kennels than, say, medical or legal advice.
I think pg is saying that fundraising is more like medical or legal advice and less like dog kennels. He's not making a blanket statement about trusting people with prior experience.
If you want to make this more mathy, imagine there some function
I(s) = amount I should trust my intuition in situation s
You're arguing that since pg believes I(s_1) != I(s_2) (as evidenced by his previous writings) then pg must be contradicting himself. The correct line of reasoning is actually "If pg believes I(s_1) != I(s_2) then either pg is contradicting himself or I'm misunderstanding pg."
Given pg's generally fastidious nature with respect to these things, I'd say the prior odds of pg contradicting himself are much lower than you simply misunderstanding him. At the very least this is what most folks believe, so when you jump to the conclusion that pg is contradicting himself you come off as an uncharitable little troll. First stop on the troll tour: Downvote City. :D
Putting on my teacher hat for a second, when you smell a contradiction like that it's often a sign you're misunderstanding something. Rather than point out the apparent contradiction and go all j'accuse on the author, it's more useful to stop and ask yourself, "Assuming the author is intelligent enough to spot a contradiction like this, is there a way to understand what they wrote in a way that isn't contradictory?"
There's really no downside to doing this, even if there is a contradiction. At the very least you'll have developed a more robust argument. Often you'll end up with a way to express the author's argument more clearly than the author did in the first place, since you're probably not the only one confused in the same way. What's more, if there actually is a contradiction, folks will be more inclined to believe you when you demonstrate you've gone out of your way to try to understand the author.
Re: How to Raise Money
#26There's a lot of great advice in this post, and much of it rings true. Specifically, the following tidbits are true ~100% of the time in my limited experience:
- "Investors will try to lure you into fundraising when you're not. It's great for them if they can, because they can thereby get a shot at you before everyone else."
- "What investors would like to do, if they could, is wait. When a startup is only a few months old, every week that passes gives you significantly more information about them."
- "Though you can focus on different plans when talking to different types of investors, you should on the whole err on the side of underestimating the amount you hope to raise."
- "You will be in a much stronger position if your collection of plans includes one for raising zero dollars—i.e. if you can make it to profitability without raising any additional money."
- "If you have multiple founders, pick one to handle fundraising so the other(s) can keep working on the company."
- "It's a mistake to behave arrogantly to investors." (I also think it's a mistake for investors to behave arrogantly to founders)
That said, I wanted to comment on a few of the other points in this (awesome) essay:
"To founders, the behavior of investors is often opaque—partly because their motivations are obscure, but partly because they deliberately mislead you."
That's a strong statement. First, not all investors mislead -- many are honest people. Second, startups are also often guilty of misdirection, which doesn't mean you shouldn't call out shitty investors, but I do think you should call out both sides instead of making one side sound like the bad guy.
"Do you have to be introduced? In phase 2, yes."
I think this is true 95% of the time, but it's not 100% true. My partners and I get pitch decks emailed to us by random people. Most of the time the pitch decks are subpar, but I think that's because not being able to get a real intro is a sign that your team/idea/traction/something else is subpar. However, this is just a signal, and there is no rule - written or unwritten - that says "if we don't know the sender then the deck goes in the trash." If you email us something that falls within our thesis and looks promising, we'd love to talk to you.
"Never leave a meeting with an investor without asking what happens next. What more do they need in order to decide?"
This is great advice. Most founders we talk to already ask "what's next" at the end of a meeting, but not all of them do.
"And while most investors are influenced by how interested other investors are in you, there are some who have an explicit policy of only investing after other investors have. You can recognize this contemptible subspecies of investor because they often talk about "leads.""
I guess I'm one of the members of that contemptible subspecies. My partners and I are in the middle of raising a fund, but we were investing with our own money for the better part of this year. Our checks were too small to lead, but there were lots of startups that didn't have terms. If you're raising 1m on a 5m pre, then we don't need a lead to invest. If you're raising 1m-2m on a ??? pre, then we would prefer to wait to find out what ??? is. We're not super valuation sensitive, so 7m vs 8m is fine, but there's a big difference between a 6m pre and an 10m pre. What makes this more difficult is that founders will not reveal terms for obvious reasons. They can't say, "we're going to be raising at a 6m-9m pre" because that immediately shows that they would be willing to go to 6m. They may as well not mention 9m. So instead, they say something like, "we'll know terms once we get a lead." Okay, fine.. then we'll wait for the lead. =)
"Sometimes an investor will ask you to send them your deck and/or executive summary before they decide whether to meet with you. I wouldn't do that. It's a sign they're not really interested."
I'm surprised by this advice. As an investor, it saves everyone a ton of time when I can look at a deck before a meeting. I will sit down for 15-45 minutes before a meeting, go through deck, do some internet research, and think of questions I want to ask. This saves time because I can find out answers to the basic questions that I would ask in the deck, and then we can focus on more interesting questions and concerns during the meeting.
Re: How to Raise Money
#27Do investors read these essays? You've had some strong words for some of the types, e.g. "contemptible subspecies of investor". Would any of them email you and say, hey man, f u?
I would imagine not. Not only is PG very influential at many of the companies these investors would want to invest in, but most of these investors are also going to be hesitant to out themselves as being a "contemptible subspecies of investor".
Re: How to Raise Money
#28Earlier quoted context omitted.
Re-read what I said. I'm not talking about what PG or YC recommends with regards to investing. I'm talking about the general idea that if anyone else said something like this and asked for blanket trust: "you can't trust your intuition....rule number zero is: these rules exist for a reason" Well those other people of course can't be trusted like PG and what they say doesn't matter as much. So if a person with 30 year…
I had to reread your original comment a couple of times to get what you were saying. I think you might be getting down-voted because of writing style and confusion more than anything else.
I agree that if my my writing style is not good, and adds to confusion, then that is something that I need to work on.
But I sometimes feel that there is a definite emotionality involved when people hit the vote button and people jump to a quick conclusion depending on either the particular subject or the person who the commenter is making their thoughts known on. It seems that when discussing these "protected" individuals or subjects you have to take extra care to say things in a way to protect against downvotes. And sometimes that is just not worth the effort so you don't say anything.
Re: How to Raise Money
#29Earlier quoted context omitted.
I had to reread your original comment a couple of times to get what you were saying. I think you might be getting down-voted because of writing style and confusion more than anything else.
I agree that if my my writing style is not good, and adds to confusion, then that is something that I need to work on. But I sometimes feel that there is a definite emotionality involved when people hit the vote button and people jump to a quick conclusion depending on either the particular subject or the person who the commenter is making their thoughts known on. It seems that when discussing these "protected" indiv…
> But I sometimes feel that there is a definite emotionality involved when people hit the vote button and people jump to a quick conclusion depending on either the particular subject or the person who the commenter is making their thoughts known on.
I agree with everything you said, although, per my other comment, I think it was you who "jump[ed] to a quick conclusion" in this case. :)
Re: How to Raise Money
#30I have a question. Since I'm nowhere near the valley and the start-up community in my community might as well be non-existent, I was wondering how I might go about meeting and getting introductions to investors. Not being well connected with a very poor local community makes it hard for me to know where to start.