
Ask HN: How to raise a seed round for people with no elite connections? - srameshc
How can someone with a product but no elite connections or degree raise a seed round ?
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patio11
I work in a fashion exposed to thousands of startups worldwide, and can report
that many of them do factually raise money without having pre-existing
connectedness to prestige investors. The only thing required to raise a seed
round is to convince people who have money to give you money. There are a lot
of people in the world with sufficient money to fund startups. Substantially
all of them are on the same Internet you are.

The trend in the industry has been to more openness on this question recently,
in no small part driven by YC, which basically pioneered investing at scale in
companies without requiring a social connection.

Also, quick fact of life in entrepreneurship: there are many ways to skin the
cat, but if you are hypothetically in a situation where the business needs
connections, then the job is going and getting connections. If you e.g. take a
random named person with checkwriting authority in Silicon Valley, and ask
"How many people have social permission to introduce me to this person?", that
answer is likely in the high hundreds to mid single-digit thousands.
Substantially all of those people have an email address. Many of them respond
to emails _very quickly_ , particularly when they're interesting. This
suggests that the immediate problem is less having elite connections and more
organizing your life such that you send an uncomfortably large number of
interesting emails.

~~~
jwilliams
> The only thing required to raise a seed round is to convince people who have
> money to give you money

One of the huge issues I see is experienced (at least a subset "prestige")
investors have the terms best suited to startups succeeding.

I've seen less experienced investors have draconian (almost nonsense) terms --
crazy terms that probably hurt their investments considerably. However, these
investors are less accustomed to managing risk in a technology startup.

This is much, much less common in the SFBA ecosystem. However, if you look
globally the startup investor maturity can be really poor.

~~~
paulsutter
If you’re not willing to walk away, you’re going to pay retail. Good terms
happen when you have multiple interested investors, bad terms happen when you
don’t.

That said, investment is difficult if you’re in a place that has few exits
(anywhere but Silicon Valley or Beijing/Shanghai). Investors are motivated by
the percent chance of an exit, and that chance is higher in the Bay Area than
in most places. The chance for exit drops off a pretty steep curve as you go
down the “top cities” list (I live in Seattle so apologies to the local
scene).

~~~
jwilliams
> The chance for exit drops off a pretty steep curve as you go down the “top
> cities” list.

Exactly.

Which either means you're either: going to get a bad/mixed bag on terms -or-
you need to raise in one of those cities as an outsider.

~~~
paulsutter
Raising as an outsider works just fine if you have traction. As if you don’t,
why would you be trying to raise money?

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GreeniFi
Good question. Before I answer, why do you think you need to raise a round?
Communities like this one (although I’m much indebted to it) create a
presumption that investment is a good thing. And sometimes it ain’t. Think
carefully about your personal objectives. They won’t necessarily be satisfied
by an investment.

That said, the way to raise capital if you need to is: 1\. Work for income and
to fund basic build-out 2\. Look for grants. In some sectors such as green
tech these are widely available. A friend just raised 1m, no loss of equity.
3\. Look for opportunities where big raises are not needed. If your main
advantage is that you have a shit ton of cash to build your business, that’s
going to get competed away pretty quickly, as theirs a lot of cheap money
swilling around.

And remember mo’ money, mo’ problems. It sort of burns a hole in your pocket,
makes you lazy, allows you to take inefficient decisions.

As an addition: I once went to an accelerator where one of the slick VCs said,
“if you want to raise money from me, you’ll need to find me through my
business school network”. What a divot. Would you honestly want to work for an
investor with attitudes like that?

~~~
JumpCrisscross
> _that’s going to get competed away pretty quickly_

There are lots of great businesses with moat characteristics. You spend some
capital to dig the moat ( _i.e._ lock in key suppliers or customers) and then
enjoy a period of imperviousness.

Funding strategy is an important component of a business plan. Bootstrapping a
business that needs scale, or raising venture capital for an idea which can’t
scale, can both be game overs.

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staunch
The reason this is so confusing is that investors outright lie to themselves
and everyone else about it. They pretend to invest based on product vision or
founder traits but it's almost universally untrue.

Investors actually invest based on their ability to justify their investment
to their LPs, peers, and themselves if it fails. The fear of loss drives most
people, and if you have traction they can say "Hey, it's not my fault, they
had traction!" and if you have pedigree "Hey, it's not my fault, they went to
Stanford/MIT/Harvard!"

So, there are essentially just two routes: 1) traction 2) pedigree.

If you don't have pedigree, then you need traction. And even if you have
pedigree, at some point you're going to need traction anyway. Of course it's
usually easier to get traction with funding but there's a reason so many
pedigreed founders fail, and it's because they can't game the system
indefinitely.

There are exceptions to this rule but it's much easier to get traction than it
is to find an investor that has genuine conviction about your startup.

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a13n
Do you need to raise a seed round?

We're bootstrapped. Never took money, never really tried.

At some point in our company's traction, investors started reaching out to us.
You have to remember that their job is to find the best companies, and
convince them to take their money. Make your company one of the best
companies, and investors will find you.

~~~
rdlecler1
Not all companies/products can be started with an oily rag. Many of the best
companies we see in our sector are drive by entrepreneurs that are able to
marshall significant resources before they build.

~~~
j88439h84
Which sector?

~~~
rdlecler1
Ag and food tech.

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kenrose
A few things:

1\. A lot of advice on here is "Don't raise, just bootstrap". Recognize that
while bootstrapping is an option, it puts 100% of both upside and downside
risk on you. If your business does well, great! If it doesn't, it's all on
you. You've invested (and lost) your own money. Seed funding allows you to
hedge that. If the business does well, your investors get x%, but x is
generally fair. If it doesn't do well (and most don't statistically), both you
and your investors share in the hit.

2\. You've said "someone with a product". How's traction and adoption for that
product? Do you have users? Are they paying you? What's your current growth
rate? If you have strong answers to these questions, don't be shy about
reaching out directly to investors. Warm intros are preferred by investors
(hell, by anyone), but investors are in the business of making investments. If
you have a solid company, you'll get a meeting.

3\. Network like your life depends on it. No elite connections? Start making
some connections. Go to a conference or a meetup. Are there any accelerators
in your area? (e.g., I'm in Toronto and we have MarsDD and CDL here). Get
known in your community. Talk to other entrepreneurs. Entrepreneurs, for the
most part, like to pay it forward. They asked for intros when they were new
and they're generally happy to do the same for newcomers. If you network well,
you can expect to meet with 50+ investors over a period of 2 - 3 months.

~~~
JumpCrisscross
I bootstrapped a business I exited. Would never do it again. There is a reason
most of the world, where bootstrapping is the only option, doesn’t look like
Silicon Valley. Venture capital is a big piece of that.

~~~
tluyben2
That makes sense if you think a world looking like Silicon Valley is a
positive thing; you do, I do not. I am happy most of the world doesn't look
like Silicon Valley or, in most cases, even remotely like it.

~~~
ILikeConemowk
Can you elaborate on why you think that way?

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ghein
To raise you have to talk to lots and lots of people.

To build a company you have to talk to lots and lots and lots of people.

So one reason funders try to make it hard to talk to them is to see if you can
grind out all the conversations you're going to have to have with people that
you have no connection to. Hire staff, lease buildings, sell products, get
more investors, get accountants/lawyers/bankers, develop channel and
consulting relationships....

So make connections with people. Get to know your local angel community
(whether or not they write actual checks there are people who think they are
angels), find people from your school or area that have built a company, find
people that are in your space (customers, competitors, experts...). Meetups,
conferences, twitter, hn, slack channels, youtube+++

I know a firm that got a capital markets fintech funded by pitching a
commercial real estate investment firm (who bought strip malls and such) and
getting $5MM from them. Not someone who would be in your top 1000 prospects
but it worked and it was all just from talking to lots and lots and lots of
people.

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pedalpete
If you decide you really need funding, talk to everyone and everyone they
know.

A guy I had met a few times before asked me for some advice about an offer he
had from a start-up. At the end of our conversation, I mentioned to him that
we were raising a round of financing and were looking for introductions to
angel investors.

This guy is not an "elite connection", but he mentioned that he did know a guy
who had invested in a start-up and offered to do an introduction.

I met his contact for coffee a few days later and he brought on a few of his
other friends and contacts and we closed a seed round.

I learned in the process that you may not be looking for "elite connections".
Our investors are not flashy "elite" types, they are hard-working people who
have managed their money wisely. They don't have the net worth to invest as an
LP, so they invest as angels.

That to me was an interesting realization, that most angels aren't the ones
who have made it to the top, but rather they are still in the fight, and
managing their risk trying to get to the next level.

They are also keen to offer their help and advice.

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jacquesm
What would you like to raise money for?

HN has plenty of people that invest in seed rounds, use the opportunity to
pitch them directly by putting what it is that you are doing and how much you
are looking to raise right here. Also, if you mail me your deck (assuming you
have any) I will look it over and pass it on to parties that may be
interested.

~~~
legionof7
Is there a good way to message people on HN or let them know your interest in
them investing?

~~~
jxub
Try to look for their email on the profile, and if that fails, give them the
yours (it can be a temporary one).

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leesalminen
My product is a business management platform for a niche industry (pet care).
Think CRM+POS+ERP.

We tried the traditional VC route to no avail. The niche was too small for the
big players.

We ended up finding a bigger player within our industry who had some cash to
invest. He got the product his business needed and earned some interest in the
process.

Just my 2c. Good luck!

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fillskills
Two ways:-

1)Ask. Ask everyone. Tell them what you are doing. Take their feedback. Good
or bad. Improve your idea and update the person who made the suggestion.

And be ready for rejection. 99% will say no. Thank them for listening. You
just need 1-2 investors to say yes.

2) Focus on a few people you think will be a good match. Really understand
what their ideas are and how they see the world. Find a way to meet them and
show them how what you are doing fits their ideology. Easier said than done.
But very effective if done right. Lots of work involved in preparation.

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ggg9990
The answer is: make elite connections. It’s entirely possible for someone with
something real to offer but no other connections.

It’s a bit like saying, “How do I become a basketball player?” Answer: get a
ball and start practicing. Sure, it’s easier if you’re 7 feet tall, and
raising a seed riju is easier if your last name is Rockefeller. But you can
get a long way on your own.

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danieltillett
You might want to put some contact information in your HN profile so investors
can get in contact with you.

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erikb
Also contract work in the market you want to approach might bring you the
connections for seed funding.

~~~
sjm-lbm
Or even just contract work in general. Lots of code needs to be written.

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TuN2xT
Aren't there brokers to acquaint you with investors? Scratch that - you need
to be an evangelist for what you're selling and try your f-ing hardest to gain
traction with customers - the angels will then start showing up.

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greglindahl
There are a lot of assets that you can bring to raising a seed round, and
"elite connections" is only one of many. Others include: a great dream, a
great team, a working proof of concept, a working MVP, customer validation,
and customer traction.

I've been a founder at two companies that raised unusually large A rounds. In
both cases, it was because we had an experienced founding team. One was
stuffed with folks with "elite connections", one was not. In both cases, seed
was no problem even though we didn't have even a proof of concept.

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Mahn
The real answer is that you need to get your product noticed by having
spectacular growth. If you have that, no one will care what your background or
connections are.

~~~
ironjunkie
Only a small fraction of the products got that. Almost no product is getting
organic spectacular growth. We overly remember the ones that do, but I would
say 99% of the products are being created and funded without anyone knowing
about it.

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arisAlexis
it's so true that SV is missing out on so many talents because they didn't
graduate from Stanford and don't attend cocktails parties in SF

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Johnny555
_How can someone with a product but no elite connections or degree raise a
seed round ?_

Isn't that what kickstarter is for?

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apsec112
Empirically, at least among people I've met, what seems to work best is
partnering with another person who does have elite connections. Of course,
it's true that it might be hard to find such a person. But you only have to
find one, rather than already having a whole elite social network.

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austinjp
Grants, friends and family, network to find one or two individuals, bootstrap.
These seem to be the realistic options if you're not exposed to VC (if you
even want VC).

The problem is how to do all that on top of everything else when there are
only 7 days in the week.

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abfan1127
you could bootstrap instead. literally and figuratively beat the pavement to
move your product.

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neel8986
Incubators, startup battlefields can be a good place to start

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csh2000
have you considered fundraising on an investment platform that operates under
Regulation Crowdfunding and allows all of your non elite connections (and
everyone else out there) to invest? Check sizes can be small and it gets the
word out there and drives demand for your business while fundraising. Lots of
platforms out there, Republic spun out of AngelList and does that for example.

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paulcnichols
Being in the Bay Area is a big advantage.

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garmaine
Have something actually worth investing in, and pitched well, with a capable
team ready to execute.

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segmondy
Go to where the money is. The Bay.

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ma2rten
Angellist is an option.

~~~
daxorid
Angel List has _never_ been an option. You still need, and always have needed,
"warm introductions" from other connected people to gain even a modicum of
interest. It's effectively Facebook for the already-connected.

As others in this thread have pointed out, just bootstrap. It's what we did,
and as a consequence we don't answer to any of the rent-seeking parasites of
the finance world.

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boling11
Apply to ycombinator?

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asah
product traction

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HNNewer
Try to make elite connections by attending to important events and if you're
without a degree, enroll your team in a online degree

