
How to Raise Money (2013) - munchor
http://paulgraham.com/fr.html
======
ganeshkrishnan
>To founders, the behavior of investors is often opaque — partly because their
motivations are obscure, but partly because they deliberately mislead you.

YC itself is opaque. All their rejection emails are a simple "sorry, we can't
tell you". I don't know if they are afraid of legal liabilities or the reasons
are much more mundane : "It's been 2 years and your revenue is only $2k", "AI
is overhyped", "Too small a market", "You look dodgy" etc.

>Don't raise money unless you want it and it wants you.

I wish I knew this before I went on a wild goose chase for angels.

The only two startup articles I read are either PG or indiehackers and I am
impressed with how clear and lucid this dude is with his words.

~~~
tptacek
No, this isn't a valid comparison. YC gives _an actual answer_. If you don't
get in to a YC batch, you know you're not in. What's more, pretty much
everyone finds out at the same time, on a well-defined schedule.

That's not at all what raising from VC firms is like. VCs rarely tell
companies "no"; in fact, they say the opposite: "we'd love to fund you, let's
keep moving down the path to us funding you, here are some next steps". They
will do this indefinitely, and continue long after the decision not to fund
you has been made.

That's what Paul Graham is talking about.

~~~
jacques_chester
I see fundraising as having the same dynamics as dating or job hunting.

If someone wants to date you or hire you, they will make an effort. They will
respond quickly. They make genuine counter-offers ("How about Monday
instead?").

If they are lukewarm, they will string you along and eventually fade. They
will never make counter-offers, just reject your offers and let you make the
next one ("I can't on Tuesday").

If they are not interested, they won't reply in the first place.

When someone wants you it's obvious. And when they don't, it's obvious by
omission.

It's sad that it took me so much time and heartache to work this out.

~~~
nl
This is true up to a point.

But VCs keep stringing people along because they don't want to miss out at
some point in the future if the business takes off.

That's different to dating or hiring (generally speaking).

~~~
jacques_chester
I take it you've never experienced the sudden reappearance of someone after
their first romantic choice fell through.

~~~
nl
Sure. Hence the "generally speaking".

------
lbriner
Definitely seems like really obvious advice that only really makes sense once
you've been there and done it.

For a newb, it just sounds like quite a few things to remember, lots of
expensive mistakes to make, although the saving grace is that investors are
about money so even if you call them a rude word, I'm sure they'll come back
if you're making enough money!

Does anyone have a fixed link for the Sequoia slide deck?

~~~
tsm
[http://web.archive.org/web/20130911042424/http://www.sequoia...](http://web.archive.org/web/20130911042424/http://www.sequoiacap.com/ideas)

------
browsercoin
are there any crowd funded equity raise out there? whats the overall process
like compared to traditional money raise?

because i feel like that is the best alternative to this 2013 article, it lets
you bypass the whole problem of having to know an investor, mind you, is not
necessarily a rewarding experience.

the fact is any one that has managed a small portfolio with or without wins is
tough to tell apart from each other. when you have certain amount of money it
buys you a comfortable cushion to fall back on despite your failures and still
come across as successful, but in fact you are a horrible fucking money
manager/investor who happened to get lucky in the 90s through ultimately being
exposed to an environment where wealth and poverty divide is particularly wide
in a massive city.

a crowd source equity fund raise, not much different from an ICO apart the
added rigor (one ICO had some Russian dude in a drag posing as HR, switching
gender and hair color for different roles filled by the same person, exit
scammed with an anti-semetic pepe meme), equalizes the power balance between
investor and innovator from what was a master-slave relationship to many
masters-slave that is supposed to be more democratic yet fragility is
questionable. ex. FUD, fake news causing run on bank vs one investor
weathering it out because of #faith

im still not sure what the legality of crowd equity raising is in canada but
this is what i decided to pursue now.

~~~
wslh
Convincing a lot of people to fund your project in a crowdsourcing campaign
could be more difficult than convincing a few investors. This and crowdfunding
for equity is much different that crowdfunding in the kickstarter sense
because you would need to add a lot of paperwork and legal advice.

------
andyidsinga
this:

> Though it sounds slightly paradoxical, if you want to raise money, the best
> thing you can do is get yourself to the point where you don't need to.

~~~
RaceWon
>the best thing you can do is get yourself to the point where you don't need
to.

This is akin to being unable to get a credit card when you Really need the
money. Viewing it in these terms, it actually makes a lot of sense.

------
jondubois
This gives a really good insight into the investor mindset and explains why
we're in such a massive bubble now.

It's as though investors don't think at all, they're just following each other
and copying every move. That's the definition of dumb money.

~~~
browsercoin
i feel like we are witnessing it coming to an end. low interest rate fueled
credit bubble we have been in since 9/11

now the music is stopping and there's not enough chairs.

------
sparkzilla
>Before you can talk to investors, you have to be introduced to them.

But how can you get introduced to them when they won't talk to you?

~~~
ganeshkrishnan
Unfortunately if you are in the wrong location ie not in silicon valley or
such you have very little chances of getting introduced.

My recommendation is to get into incubator or even "lift off" programs and
then work your way up.

The current startup culture makes it impossible for us to find "Bill Gates" in
Africa/Asia because they have no visibility, no voice and no money and not
because they are less talented

~~~
nl
I did an accelerator in Australia this year, and they have invested in at
least one company in Nigeria, and multiple companies in Vietnam.

~~~
Lordarminius
Do you mind naming the investor ?

~~~
nl
H2.vc

I believe the next cohort is early next year.

------
njn
How does he get through this article without even mentioning putting on a good
old-fashioned bake sale?

~~~
Uhhrrr
Close enough that it's not really a joke:
[https://medium.com/@austincoleschafer/a-short-story-about-
ho...](https://medium.com/@austincoleschafer/a-short-story-about-how-airbnb-
funded-their-startup-with-cereal-boxes-ac6e62cf4c4c)

------
burtonator
this is interesting but seriously need an update on this for the 2018 ICO
world. Especially Oct 2018..

I'm working on a new social document collaboration platform:

[https://getpolarized.io/](https://getpolarized.io/)

and I'd like to raise funds for it but it's REALLY unclear if I should go ICO,
pre-seed, etc.

------
will_brown
Seems an odd read in the post ICO world.

Why deal with any of that headache when you can just launch a landing
page/white paper and ask for money from the public to fund your idea without
giving up equity or control.

~~~
CPLX
The fact that it’s illegal seems like a good starting point.

~~~
will_brown
That is not a fact.

There is a difference between regulated and illegal.

~~~
travisjungroth
If you're doing a legal ICO it has almost no benefit over traditional
fundraising, and some huge regularity drawbacks (not knowing who owns the
shares).

~~~
will_brown
>If you're doing a legal ICO it has almost no benefit over traditional
fundraising,

The way I read that is there are benefits. Seems to me it’s significantly more
cost effective than a private offering and order of magnitude more cost
effective than a traditional IPO.

>and some huge regularity drawbacks (not knowing who owns the shares).

Not knowing who owns the shares is in fact illegal.

~~~
kaffee
Can you clarify this last statement? Surely it's a question of which
geographic nation-state you plan on working in. Not all of us live or want to
live in North America.

~~~
will_brown
Whether you live in the US or not, the US dictates a lot of things. After 9/11
banking and finance changed radically, and that was global not limited to the
US.

Before 9/11 many states allowed it (as did many countries)...now no States
allow it and as far as I’m aware Panama was the last country to outlaw the
practice.

But if you know of a jurisdiction let me know...

------
graycat
Yes, lots of startups need external funding, say, venture funding.

But the US is awash, from border to border, in successful businesses, say,
_Main Street_ businesses, that never got external funding. They were, say,
_bootstrapped_.

Maybe if pick an information technology (IT) project carefully, then can
bootstrap it or start it with just own checkbook and no external funding.

Really, an IT startup should need less money to start than a lot of Main
Street businesses. E.g., can quickly need $100,000+ in spending to get to the
first $1 of revenue in an auto body shop, auto repair shop, asphalt driveway
paving company, dentist's office, pizza or Chinese carryout restaurant, etc.
Heck, in my neighborhood, the guys mowing grass show up with $100,000+ in
equipment.

In contrast, for, say, a Web site, can plug together a quite powerful server
for less than $2000 and can get a lot of relevant software tools and
infrastructure software for free or nearly so. Can run ads from ad networks.
If people like the site and keep a $2000 server busy, then in a year can have
more in pre-tax earnings than could get from a venture seed round.

~~~
segmondy
Apple vs Orange. You are comparing startup to a small biz. These are not the
same, a startup might look like a small biz in the beginning. That's it. It
doesn't look like one for long. It has massive and fast growth that tends to
crush it without enough cash

~~~
graycat
Famous, significant, exemplary counterexample -- the Canadian romantic
matchmaking Web site Plenty of Fish, long just one guy, I suspect no equity
funding, two old Dell servers, about $10 million a year in revenue, all just
from Google ads, and later sold for $500+ million.

Another counterexample -- Drudge Report.

Main Point: A carefully conceived and planned sole, solo founder information
technology startup, e.g., a Web site, can be cheaper to start than even a
common Main Street business, e.g., a pizza carryout, even a grass mowing
service. But if the site becomes popular, then quickly it will generate more
cash per year than in a seed round. From there the site might continue to be a
significant business, e.g., Plenty of Fish, Drudge Report, and likely some
more, still without equity funding.

Conclusion: The Web is one heck of an opportunity for startups without equity
funding.

There is a common assumption in your argument, that the startup must have a
period of wildly rapid growth to take the opportunity or lose out. Sometimes
this is true, but as in my counterexamples and, really, just common sense, it
does not have to be true and isn't always true.

Part of this argument about rapid growth and need for equity funding is that
once a startup shows promise, it will be copied by others, and only a startup
that executes well with lots of equity funding can win. This situation need
not always be true: Instead, some startups can have crucial, core, powerful,
valuable, proprietary, protected technology, _secret sauce_ , locked up in a
secure server farm, and difficult to duplicate or equal. That secret sauce can
provide a powerful barrier to entry, "Buffett moat".

For my startup, I am a sole, solo founder. I've done all the work, have the
software apparently running as intended, and am rushing to go live on the
Internet.

From the timings of my software and some Mary Meeker data on ad revenue, the
one server I plugged together, for less than $2000, if users like the site
well enough to keep the server busy, should generate top line revenue and,
essentially the same, pre-tax earnings of about $250,000 a month. I don't need
the equity funding now, and with $250,000 a month in revenue, I will not need
and would not accept equity funding.

My Web site is intended to be of high interest to essentially everyone in the
world with a standard Web browser.

If my site gets to $250,000 a month in revenue, then that will be a
significant _sample_ of what users like from which we could make a projection
to rapid growth to about $10 million a month, all just from my spare bedrooms
and present Internet bandwidth. With such revenue per server dollar, the costs
of the servers, etc. are next to trivial.

Thus, from pleasing a large fraction of everyone on the Internet, we could
reasonably extrapolate the potential of my startup to a company worth $T+.

We have to keep in mind: Successful information technology startups are
unusual things, each one essentially a unique business. So, we have to expect,
at least not reject, some unique aspects.

Moreover, we have to see that the most successful startups were quite
different from anything that went before. So being new and different, even
radically different, are not sufficient for success but are nearly necessary
-- again, we must not reject things just because they are new, different,
unique.

Some products and services have such coveted utility that customers, users are
really eager. My startup is so intended. Uh, my startup is squeaky clean,
fully "safe for work", actually, say, _culturally uplifting_ , an aid to
better lives, families, communities, countries, and civilization, nothing to
be ashamed of.

While my startup is a Web site, really what's important about it is just some
original applied math I derived. The math is difficult to duplicate or equal
because it is clever and original and exploits some advanced pure math
prerequisites. Users will just get the utility and not be aware of the math.

But it is the math that is the crucial core _secret sauce_ , difficult to
duplicate or equal. In comparison, except for the crucial core, the software
is next to trivial. So the site is not really a computer software development
effort but an applied math effort.

There are not many people who know the math prerequisites and can do good
original applied math, and the people that can nearly never want to do such
applied math, want nothing to do with software, and are not in the information
technology startup community.

There is a way to have a good idea about the promise of my work -- based on
the utility for all the people on the Internet with just a standard Web
browser: While Silicon Valley does not use such means of startup evaluation,
several very important parts of our civilization do, do so routinely and quite
successfully, with batting average far, far above that of Sand Hill Road.

So some parts of our society can look at a serious problem, see clearly that
the problem is important and the first good or much better defensible solution
will be very valuable, and evaluate proposed solutions with high reliability.
Such parts include some internal industrial R&D, Ph.D. committees, editors of
the better STEM field peer reviewed journals of original research, NSF, NIH,
ONR, DARPA, USAF Cambridge, NASA, major engineering firms, etc.

My work would easily pass such filtering. So, I'm confident.

In strong contrast, Sand Hill Road wants to see a minimum viable product with
traction significant and growing rapidly; all the project evaluation
techniques of Ph.D. committees, NSF, ... are ignored and set aside with severe
determination.

Sand Hill Road is not interested in anything from original STEM field
research, maybe is forbidden by their limited partners to consider such
research, and is not practiced in evaluating such research.

But I hold a good Ph.D. in pure and applied math from one of the world's best
research universities. All my career, many times, I've successfully applied
math, sometimes original, to practical problems.

So, I have a solid basis on which to be optimistic. Sand Hill Road can't
understand that.

Sand Hill Road wants nothing to do with me before my business is so good I
will want nothing to do with them.

Yes, my startup is unique, and that's nearly necessary for major success.

It would be short sighted to reject what I'm saying merely because it is
unique or even different.

On crushing it, that's not part of my intentions or planning. The $1T+ is.

I've seen a lot in computing, e.g., in an AI, _artificial intelligence_ ,
project at IBM's Yorktown Heights Watson lab, for US national security, saving
FedEx twice, teaching ugrad computer science at Georgetown University and
graduate computer science at Ohio State University, and I've seen much more in
pure and applied math.

Net, at this point, my considered option is (1) academic computer science has
run out of promising research directions they have the qualifications to
pursue and (2) Sand Hill Road style computing is essentially dead and all but
buried. Routine software will continue, much as routine sheet steel stamping
has continued, but for now the glory days are over. In particular, for AI,
etc., I see 99 44/100% hype and nearly all the rest water or mostly quite old
applied math. We just had an AI spring of hope then a summer of hype and are
now in a fall of failure and soon again in an AI winter. E.g., to me self-
driving cars in current traffic on current roads is obviously an absurdity and
a lot of hype, a bubble about to burst.

Computing remains a major opportunity, but nearly none of the software
development community, academic computer science, or Sand Hill Road know how
to make use of the opportunity.

For exploiting the amazing cycles, bytes, bandwidth, infrastructure software,
etc. some new directions are needed.

IMHO the most promising such new direction is engineering based on very
carefully done theorems and proofs of pure/applied math.

The number of people in the world ready, willing, able, and eager to do this
could have a convention in a $20 a night motel room.

So the situation is bad, but the flip side is a grand opportunity. E.g., the
processor I bought is an AMD FX-8350, 64 bit addressing, 8 cores, 4.0 GHz
standard clock speed, now available quantity one, retail for $100-. ECC, error
correcting coding, main memory is available for $10-/GB. The situation on hard
disks, solid state disks, and Internet bandwidth is maybe even more amazing.
So, the need and the opportunity is to make good use of such products.

First step: To heck with Kernighan and Ritchie, Stroustrup, and even with
Knuth. Instead get a copy of W. Rudin, _Principles of Mathematical Analysis,
Third Edition_ , dig in, and work nearly all the exercises.

E.g., again, once again, over again, yet again, one more time, US national
security is going deep long ball, if you prefer, swinging for the fences, into
challenging pure and applied math with the new Space Force. For the role of
math there, trust me!

No, don't trust me: Instead watch the start of the movie about John Nash where
the flat statement is that "mathematics won WWII". Exercise: Discuss with
arguments pro and con. Don't forget that Commander Rochefort's work and advice
to Admiral Nimitz is what sank four Japanese carriers at Midway and turned the
tide of battle in WWII in the Pacific. Uh, the Japanese brought 6 carriers to
Pearl Harbor. Soon they lost one at Coral Sea -- also due to Rochefort. Then
they lost 4 more at Midway. So early in the war, they were already running
short of aircraft carriers. And don't forget much of the reason Rommel lost in
North Africa was because most of his supplies went to the bottom of the
Mediterranean due, right to code breaking. And note the importance of the
cavity magnetron from Maxwell's equations in winning the Battle of Britain.
And there was much more, e.g., from A. Turing. Then we have to count The Bomb,
e.g., the critical mass calculations.

If you regard these views as new or different, then just remember you first
learned them here.

~~~
MakeUsersWant
Can you please name a few example problems that could be solved with maths?

Whenever I found a way to apply research-level mathematics to a business
problem, the solution always was too difficult to sell. Sometimes I can solve
my own problem, e.g. options pricing models known from financial mathematics
can tell you the minimum to accept in a salary negotiation.

~~~
graycat
(1) GPS internals are awash in math.

(2) Solid mechanics modeling, e.g., for jet engine turbine blades -- lots of
math.

(3) Molecular spectroscopy: Some group theory and group representations can
write down the possible spectral lines. That's long been the key to
identifying molecules.

(4) My post mentioned Maxwell's equations for the design of the WWII radar
that helped England win the Battle of Britain.

(5) A good, general purpose curve fitting technique is least squares spline
fitting -- there's some math in there.

(6) Which pharmaceutical salesman goes to which physicians and leaves what
samples to maximize revenue? Can be formulated as min-cost, capacitated
network flows via the network simplex algorithm with a modification of W.
Cunningham.

(7) Given a special scenario of global nuclear war limited to sea, estimate
how long the US SSBN fleet would last.

(8) Given current revenue and planned capacity, project revenue growth --
solution saved FedEx.

(9) Given some ocean wave data, find the power spectrum, with confidence
intervals, and generate sample paths with that power spectrum.

(10) At FedEx, which airplane goes to what cities in what order to carry all
the freight, meet engineering, FAA, and safety constraints, arrive in
specified time windows, and minimize costs.

(11) For an airplane, how to climb, cruise, and descend to arrive on time and
minimize costs. Basically deterministic optimal control.

(12) Blue positions SSBNs and targets missiles in Red areas; Red attacks the
Blue SSBNs; the remaining SSBNs fire. How best to position the SSBNs and
target the missiles?

(13) A missile is chasing an airplane. What flight path should the airplane
follow to evade the missile and what flight path should the missile follow to
hit the airplane? A problem in differential games.

(14) A resource allocation problem in marketing resulted in a 0-1 integer
linear program with 600,000 variables and 40,000 constraints. How to get a
feasible solution optimal or nearly so? Solution involved non-linear duality
theory and yielded a feasible solution bounding showed was within 0.025% of
optimality in 900 seconds on a 90 MHz computer.

(15) My current startup.

