
Process and Leverage in Fundraising - akharris
https://blog.ycombinator.com/process-and-leverage-in-fundraising/
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akharris
Happy to answer specific tactical questions here. This is the kind of thing
that seems easy until you dig into the details on actually doing it.

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aaavl2821
would be great to hear your thoughts on how to gather info on investor
appetite for a round in advance of formally kicking off the round, ie keeping
a fine line between informal relationship building meetings and formal pitch
meetings. you touch on this a bit in the post but would be great to hear more
details, as you say the details are where the challenge lies!

have heard some people advise taking initial intro meetings specifically for
"advice", then once you start to raise doing "batches" of investor meetings to
learn more about appetite for the round. thoughts on this?

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akharris
I think that you can ask for advice, but do so in specific context with a
clear indication of when you plan to raise. During the meeting, ask the
investor to help you in a concrete way. You learn a lot about interest based
on what the investor does to help you.

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merijn481
Following the advice of this post can make a 10x difference in outcome for
founders. This is because they will sharpen their skill to raise this way in
every round. The reduced dilution compounds. The additional money in each
round can help get you to critical mass first. It’s a powerlaw. One of the
most important things to understand when you’re doing a startup. Growth is
what makes a company a startup:
[http://www.paulgraham.com/growth.html](http://www.paulgraham.com/growth.html).
Process and leverage in fundraising is an absolute condition to get there.
This post should have 1000 points.

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mwseibel
I really wish more first time founders took some time to understand these
points.

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contingencies
Helpful post, thanks.

Prior discussion in the same genre:
[https://news.ycombinator.com/item?id=7858317](https://news.ycombinator.com/item?id=7858317)

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corry
Great article Aaron! This is such an interesting part of fundraising, since
while every founder has "seed round" stories, only a subset have Series A
stories. And even then, it's a further subset of founders who have had
_multiple_ successful Series A. So the vast majority of Series A fundraising
is done by first-timers. Making it hugely valuable for YC and similar groups
to share this kind of advice.

Riffing on this topic, some non-obvious learning for us as Series A "first-
timers":

(1) It was very tough to actually determine which funds would be a good fit.
Funds that we had developed early pre-fundraising relationships with -- and
who seemed to check all the boxes, like great partners, great reputation,
great thesis for what we were doing, etc -- turned out to not be that good of
a fit in the end. But it took getting exposure to truly "great fit" funds to
see the difference - how quickly things moved, how they already knew the
space, already knew our strategy with nuance, etc. Huge difference.

So the learning to me was to not hold too tightly to your initial strategy of
which funds are worth targeting (because you might be wrong). 20 funds is
probably a good number though I'd probably err on the side of being looser /
targeting a few more.

(2) Having experienced advisors helping us was immensely valuable at every
step (defining the strategy, building the deck, getting intro's, refining the
deck, tactical advice on specific funds, and then of course negotiating the
term sheets). We also learned that you actually have to _listen_ to these
advisors. e.g. In reference to my #1 example above, early on in my fundraise,
one of our advisors told me that the funds I was talking to were likely not
the ideal funds... but I didn't really want to hear it... I wanted to believe
I was mostly done. Luckily, the advisor changed my thinking enough that we
kicked off a proper process in earnest.

(3) Some of the best leverage is to just straight be killing it in the
business _during_ the fundraise. If your ARR/MRR is shooting up and to the
right quickly, you're making big hires, signing big logos, etc - you have more
ability to dictate pace. If in the time between your first convo and final
partner meeting you've grown your ARR 100%... that gets a reaction. Adds
momentum and FOMO (the investors know that other investors are seeing the same
momentum... so how long until someone cuts them a check?).

This last point is kind of like the "don't be ugly" dating advice. You gain
leverage by being an awesome company. But it's worth repeating - the antidote
to most startup problems is quickly growing revenues/users.

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portman
Meta: I urge you to post this again in a few days. Very sad to see it never
“got heat” and its reach was limited. I think this is one of the more valuable
posts this year and wish more folks had seen it.

