
Startup Fundraising Lessons For The 99% - cornish
http://pando.com/2014/02/26/startup-fundraising-lessons-for-the-99/
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birken
I think this is generally decent advice about the mechanics of fundraising if
you aren't an "in-demand" startup. However, this does gloss over the major
fact that this is a bad situation to find yourself in, and you are much better
off spending energy getting yourself into a good situation than you are
swimming upstream in a bad one. And while I'm sure being in YC does help with
fundraising (extra social proof), you certainly don't need to be in YC to
raise money successfully.

If you don't think you will be good at fundraising (because you don't know a
lot of rich people, you are a first-timer, you aren't good at pitching, etc),
then you should be operating your business in a way where you don't need to
fundraise. Be incredibly incredibly lean, generate revenue from day 1, figure
out how to incrementally achieve ambitious goals, etc. There are a lot more
ways to run a successful business than there are to run a successful
fundraising --- investors are all looking for the same thing, and they could
all be wrong. But if you grow fast enough or make enough money they'll come
around.

There isn't too much reason to get into more details because pg wrote the
canonical piece on fundraising, which certainly applies to non-YC companies as
well: [http://paulgraham.com/fr.html](http://paulgraham.com/fr.html)

But generally, the premise of this whole article is flawed. Most startups
fail. If you want to successfully raise money, you should be in the 1% (or 5%
or 10%, but some suitably small number) of top startups. And if you aren't,
then you should be spending your time getting there instead of raising money.

~~~
DanielRibeiro
Alternatively you can build what Naval, the founder of Angel List, defined as
a _fundable startup_ [1]. Video on more details:
[http://vimeo.com/25392719](http://vimeo.com/25392719)

[1] Summary: [http://andrewchen.co/2011/06/21/video-the-anatomy-of-a-
funda...](http://andrewchen.co/2011/06/21/video-the-anatomy-of-a-fundable-
startup-by-naval-ravikant-of-angellist/)

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larrys
"Create artificial urgency by compressing your meetings."

Urgency. Yes. The above stands out as being true from my experience in any
type of negotiation at all. It's the opposite of the "time kills all deals".
Every negotiation needs a deadline and a reason to get people off the fence
and make a decision (either way). Don't let things drag on. Don't give people
the impression that you will always be around.

Also, don't do obvious telegraphs like "I have the following days opening"
which essentially any person who takes meetings knows actually means "I am
always available".

"Another cheap idea: Create a keyword campaign for the top investors on your
list. Use their names as the keywords. They sure as hell Google themselves,
and when they do, there you are."

My personal feeling is that this is a waste for several reasons. It obviously
assumes that people will google themselves on a regular basis but also assumes
they won't feel they are being stalked by an investee as well. Not to mention
the fact that it's a little cliche, like the billboard that asks for a
marriage proposal.

~~~
lsc
>Also, don't do obvious telegraphs like "I have the following days opening"
which essentially any person who takes meetings knows actually means "I am
always available".

Hang on... explain this, please, in small words. So I'm supposed to pretend I
work on a schedule, and that schedule is super full, I get that.

But, wouldn't saying 'i have the following days available' mean that I'm
working on a schedule and it's not wide open? What are you supposed to say?
"I'm really busy so just call me sometime and I'll see if I can fit you in?"

'cause that's what I do most of the time, not because I'm trying to fool
people into giving me money, but because I'm... deficient when it comes to
scheduling. Let me tell you, outside of trying to get people to give you
money, it works less well than you might guess, and you might guess that it
works pretty poorly.

~~~
chacham15
I think that the ideas is that by giving him an option of multiple times
suggests that there are multiple times. If you instead say "I have some time
tomorrow to discuss this" it sets a deadline as the grandparent suggested.

~~~
larrys
Yeah exactly. It's a nuance thing. Hard to give a one size fits all for this.
But by saying "I have some time open on X" you force the other person to say
"that's no good how about y" at which point, assuming your schedule is open,
you can say "sure" or simply ask the person what other time is good for them
(avoiding sounding like anytime is good for you).

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danial
_Always say that you’re raising less than you actually want. If you want to
raise $1 million, tell investors you’re raising $750,000. This tactic will
come in handy when they ask you how much has already been committed. Always
answer in percentages, not actual numbers._

Is this sound advice? Could someone explain the reasoning behind it?

~~~
lpolovets
I'm an investor. I've talked to a number of companies that have done this, and
it seems to work. However, I think the amount you're raising matters.

If you're raising 500k or 700k, then cutting that in half will make investors
wonder why you're raising so little. There's not much runway that you can buy
for $250k.

On the other hand, let's say you're raising $1.5m at a $6m valuation. You can
start by telling people you're raising 750k or 900k. Once you get to, say,
500k, investors will feel pressured to invest if you only have 250k left to
go; they won't feel pressured if you have 1m left. Furthermore, if you're
struggling to get to 750k, you can stop when you're there/almost there, and
not look bad for hoping to raise 1.5m and then quitting. On the other hand, if
you get to 750k quickly, you can use that momentum to get to 1.5m and look
great doing it ("Wow, she only wanted to raise 750k, but she had so much
interest that she ended up taking 1.5m!").

It's kind of silly that this works, but it does seem to work.

~~~
zbruhnke
I get this to an extent, but it also borders on being dishonest when you're
cutting the amount in half and honestly if you're setting out to raise 1.5 but
you have a hard time getting to half of that chances are you're raising too
early.

I don't mean "too early" in the sense of the VC who met with you for five
minutes said it was "too early" since that is a whole different story.

I mean too early in the sense that you probably don't have enough actual
traction yet, which can mean users, technology, or any subset of other things
that matter to show your company has significant growth potential.

We thought we would start raising a few months ago and we were definitely too
early, we thought we could raise based on being smart and a track record, took
a couple of meetings and realized that we needed to put our heads down and get
back to work for a bit.

Fast forward a few months later and we have lots of inbound, some great
outbound leads (I agree with this article in the was that you probably HAVE to
ask for some inbound leads unless you're the hottest deal in the valley, all
the best fit investors probably won't come knocking for you) and it looks like
our round will be able to oversubscribe rather quickly.

That's a product of traction(hello revenue!) and picking the right time to
raise.

While I appreciate Leo's sentiment here, personally I think if you're looking
to raise 1.5 and you struggle to get to 750, put your head down and get back
to work or else you're going to make the next few years of your life really
hard.

Presumably you wanted to raise 1.5 because you have a budget, or a runway
goal(at least I hope you do) so raising half of that will likely end up with
investors wishing they would have passed on the deal, and that's not a win for
anyone!

Just my $.02

~~~
lpolovets
That's a great point. I agree that it's dishonest if you're just changing the
price to put pressure on investors. I do think that if you have an aggressive
growth plan that requires 1.5m, but you can come up with a less aggressive
plan where 750k is enough, then that lets you ask for 750k while hoping for
1.5m and keeping your integrity.

I also agree fully that more traction/progress/revenue is very helpful to
raising more money and raising it more quickly.

~~~
zbruhnke
Aggressive vs non-aggressive growth plan definitely makes sense there,
definitely a better way to define that.

If there is a way you feel you can still significantly grow your business with
a less aggressive plan then that's great, I think what happens too often is
Entrepreneurs settle for what they "can get" and end up tanking a company that
never had a chance from day one because there was not enough money in the bank
to allow time for significant traction outside of a fluke event.

We want to encourage a group of Entrepreneurs who are honest and upfront. In
turn we'll hopefully get VC's that are that way as well ;)

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cornish
Honest question here: I'm the OP, but my original title was, Reaction to “Was
YC Worth It” – Startup Fundraising Lessons for the 99%. Someone changed my
title? Is that normal when YC is mentioned in the headline?

~~~
zaidf
I hope you ask Pando.

~~~
cornish
What do you mean by that? It was my decision to select the title that I did. I
thought it was relevant to the audience. No?

