
A Guide to Preemptive Funding Offers - akharris
https://blog.ycombinator.com/a-strategic-guide-to-preemptive-funding-offers/
======
AndrewKemendo
_To be clear, an offer is only an offer if it is a term sheet. Anything short
of that is an attempt to get a founder to reveal more information._

Good succinct point that I think gets lost in the shuffle of founder optimism
when fundriasing.

That said, my entire mindset around funding a company has shifted after having
gone through the spanking machine a few times.

I'm convinced that the entire process of hot intro > send deck > partner pitch
> term sheet > shop the term sheet > revise deal > do deal > press release
etc... is basically a waste of time if you want to build a massive paradigm
shifting company.

It's just a process for the founders to grow their network and build the
signals for major corporate acquirers. You'll get market standard terms and
have spent a ton of time away from your product. You'll go back to work, build
up the team, get enough traction in a niche need to look good for a
acquisition by FANG.

It's basically the process for being in the feeder league for being a rookie
in the Big Leagues. If that's what you want, then great.

If you intend to completely upend how business is done, there will be a lot of
these preemptive offers, IMO it's the best signal that you're on to something
completely massive.

Said another way, if you aren't getting preemptive offers, your best long term
outcome is likely a middling acquihire.

~~~
akharris
I understand where you're coming from, but don't actually think this is true.
Quite a few of our best companies had difficult times raising their As - they
were often too early or too different or too little of a pattern match to what
investors wanted at that time.

Preemptive offers can be a signal that what you're building is working, or it
might be a signal that you're good at fundraising.

~~~
AndrewKemendo
I think it's important to unpack the briefcase term of "best companies."

As clarification I'm not saying that great companies, with great products and
wonderful teams don't often have a hard time fundraising.

What I'm saying is that market transforming companies, like Docker and
Whatsapp will get good offers without having to "fundraise" in the grinding
format that we all know well and is written about and pored over in thousands
of blogs and bootcamps and all (the one I described).

~~~
nemothekid
Is Docker the best example here? Before Docker built "Docker" they were
dotCloud and doing the fundraising game. Had they not done the fundraising
game, they may have never built Docker.

------
docker_up
I'm generally wary of any advice given by people who inherently need to talk
their book, especially VCs like YC, however blog posts like this are genuinely
helpful. They set the ground rules that appear to be fair for everyone, and if
some unscrupulous VC tries to bully a young founder, she just needs to cut and
paste the URL for this article and it will instantly shut the VC up.

~~~
akharris
I understand the skepticism, but I'd point out that, if I was trying to tilt
the scenario in my favor, I'd have written about how founders should always
take a preemptive deal quickly and secretly. That way, every time I made an
offer, someone would accept it.

I was a founder before I became an investor and, for the most part, that's
still how I approach advising startups. That's been the ethos of YC from the
start, and it seems to work well.

Also, I like your framing - I'm spending quite a lot of time trying to
establish norms and ground rules so that founders (and investors) operate on a
level playing field. That's been the driving force behind much of my work the
Series A Program, and generated resources such as our standardized diligence
checklist and term sheet.

~~~
simonebrunozzi
Noted your work, and greatly appreciated. Keep rocking.

------
gojomo
YC blog's wispy-dark-grey text on a light-grey background is a bit hard to
read. I don't recall noticing this earlier. Is it a recent change?

~~~
chias
Now that you mention it, I agree, and don't recall having this discomfort in
the past. I find it significantly less uncomfortable to read if I disable the
custom font (Avenir Light).

