How Justin Kan fundraises

> Sure: but let's dig in. I'm interested. Out of those 65 investments, how many did you explicitly lead?

Our first fund wrote $200k-$300k checks and made 40+ investments. Those checks were small parts of seed rounds, and we only led about 10% of the time.

The current fund writes ~$750k checks and has done 20+ investments, and we've led (or co-led) about 50% of the time.

> (1) What's a meeting to you? Keep in mind that your Principals and / or Associates conducting meetings and diligence should not qualify as meetings.

They count for my fund :). Generally we do 2 smaller meetings (maybe associate the first time and partner the second time, maybe partner the first time and partner+associate the second time, etc), then a full partnership meeting.

The rough theme of these meetings are Get to know each other (1st meeting), Dig in more deeply (2nd meeting), and Crowdsourced Q&A (3rd meeting).

> If it's not with a GP it's not really a fundraising meeting and no founder should reasonably consider it such.

It's part of our process. If you don't do well with the first meeting -- regardless of whether it's with a partner, associate, or both -- the process ends. If you do well, again regardless of whom it's with, we'll ask to do a 2nd meeting where we can go deeper.

> How many of these investments had a term sheet after only one meeting?

Of the term sheets we've offered, all took at least a couple of meetings. When we participate on someone else's term sheet, we committed once during the first meeting, and I don't think we've ever committed after the first meeting but w/o a second meeting.

> On top of that, is the a correlation between leading an investment round and a fewer number of meetings with a founding team before investing?

Not for us. If anything, the correlation for us is that we tend to do more diligence/meetings when we lead. When we lead, we know other investors will ask us to share diligence, and the founder will send some investors to us so that we can tell them why we're excited, so we want to have even more conviction than usual. We can get that extra conviction through a little more diligence.

> Also, out of the investments that took "2-4 meetings", did the founders ever roadblock you from investing (i.e. it's a meeting but the founder "isn't fundraising"?)

We don't do a great job of outbound tbh, so usually we meet founders because they are already fundraising or about to start. If someone says they're not fundraising, we've rarely preempted, but for companies we really like, we will continue to communicate regularly with the founders until they decide they want to raise. (And we realize they might decide they don't want to raise at all).

> If I were to give advice to new founders (and I do get asked occasionally, but I'm literally nowhere close to a celebrity fundraiser and still a fledgling entrepreneur) it's, "I still don't understand fundraising. Just be yourself and build something you're passionate about, have confidence, be persistent, be kind, and the right people will come along. You'll probably trick yourself into thinking you understand something about the process, but realistically, fundraising is just about people and relationships, and shit is messy. Be humble and thankful, and try not to waste too much time discussing fundraising strategy with investors on Hacker News."

I think this is great advice :)

(FWIW all of these answers are on behalf of my fund, and other funds might be different. But I generally don't see established seed funds committing after a single meeting.)

Great example. Thank you.

I've been in a company like this and know of others — it's a real pain point when those metrics that funding is tied to turned out to be less relevant than you initially thought or distraction more than true traction indicators. For example, measuring the number of sessions a user has in your app vs the amount of engaged time per user.

Asking factual questions isn't just for learning facts, it's also for seeing how someone things.

Example: "During the call you mentioned the market potential for a CRM for plumbers is $3b. When I did some napkin math I came up with $400m. Can I ask how you arrived at the $3b number?"

Bad answers: "Gartner says the market is $3b" or "CRMs are a $100b market overall, and plumbers are 3% of the workforce."

These are factual answers, but pretty weak.

Good answer: "There are 3.3m plumbers in the workforce. 30% of them are solo entrepreneurs, so they are unlikely to need a CRM. The other 2.3m spend 14 hours per month on managing their contact lists [citation]. We surveyed 30 plumbers and saw a willingness to pay $100/mo if we can reduce the 14 hours down to 2 hours. $100/mo x 12mo x 2.3m plumbers = $2.8b."

This is also a factual answer, but you can tell the founder thought about this more, they did customer development to get good data, etc. As an investor, an answer like this gives me a lot more confidence.

I think I'm getting rate-limited by HN so this may be my last response, buuuut:

I think that, unless this was a real example with founders you can name, this is a dangerous example, and even then it's suspect. I have literally not once swayed a "maybe" investor via an email. It's "maybe" and not "yes" for a reason, and the way you've framed it here is as if "maybe" converts to "yes" with enough elbow grease and a cleverly crafted answer. Founders can spend hours writing single e-mails to investors, especially if they're desperate for funding. So what you read as a simple e-mail response may realistically have been half a day of lost fundraising productivity, for, at best, a 10% chance they convert your gut-feeling "maybe" to a "yes."

This is where founders have an intuition about fundraising, especially first-time founders raising early rounds, that investors often just have no way to empathize with because they simply don't know.

I have, however, swayed "maybe" and even outright "no" / "not now" investors by walking away, mentally divesting, and re-engaging particularly helpful ones later with additional proof points. YMMV as a founder but I would recommend this approach 100 times before I ever recommended sinking hours into a clarifying e-mail with an investor who was a "maybe."

Your response may be, "well, just don't spend hours on e-mails then." Sure, tell that to the founder who has literally sunk $20,000 off of their 20% interest credit card and another $20,000 of their lower-middle-class parents' retirement money into their startup. They'll nod and spend the hours anyway. (The cruel irony is that many of the founders insecure enough to spend hours on an e-mail are almost guaranteed to not sway you, meaning that the 10% that do sway you only represent something like 1% of the total time spent on e-mails. This is why this sort of advice exists.)