What’s the best way to raise money?

Paul Graham (Co-Founder & Partner at Y Combinator)
How to Raise Money

If you have multiple founders, pick one to handle fundraising so the other(s) can keep working on the company. And since the danger of fundraising is not the time taken up by the actual meetings but that it becomes the top idea in your mind, the founder who handles fundraising should make a conscious effort to insulate the other founder(s) from the details of the process. The founder who handles fundraising should be the CEO, who should in turn b… (read more)

What’s the best way to raise money?

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
The Role Of Personal Chemistry In Investment Selection – AVC

There are four phases to this process. The first impression, Subsequent meetings, Reference checking, The negotiation

Paul Graham (Co-Founder & Partner at Y Combinator)
The Hacker’s Guide to Investors

Investors always say what they really care about is the team. Actually what they care most about is your traffic, then what other investors think, then the team. If you don’t yet have any traffic, they fall back on number 2, what other investors think.

Paul Graham (Co-Founder & Partner at Y Combinator)
Default Alive or Default Dead?

If you have steep revenue growth, say over 6x a year, you can start to count on investors being interested even if you’re not profitable

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
College and Entrepreneurship – AVC

I believe 21 founders out of a total of 72 that we have backed in the history of USV did not graduate from college. That’s about 30%.
However, I believe 17 founders have advanced degrees, including a few PhDs. So roughly a quarter of the founders we’ve backed have invested heavily in their higher education.
There are no specific credentials required to get funded by USV or most other VC firms. You need to be credible as an entrepreneur. That me… (read more)

Bruce Gibney (Former Partner @ Founders Fund)
Peter Thiel’s CS183: Startup – Class 8 Notes Essay

There’s a romantic notion that the only thing that matters is product and that you can devote yourself to that entirely. That is false. In fact, fully half of your job is selling the company because the CEO is the only one who can actually pitch effectively (no VC wants to be pitched by the VP of Sales).

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
What Seed Financing Is For – AVC

The first step you need to climb is building a product, getting it into the market, and finding product market fit. I think that’s what seed financing should be used for. The second step you need to climb is to hire a small team that can help you operate and grow the business you have now birthed by virtue of finding product market fit. That is what Series A money is for.
The third step you need to climb is to scale that team and ramp revenues a… (read more)

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
In Between: The Tough Place To Be – AVC

Entrepreneurs need to understand this. There are a ton of options out there for early stage funding. And if you get to the stage where you need a growth round from a big fund, there are plenty of options for that too. But if you are looking for a Series B round to help you grow from early revenue status to true growth status, you are going to find that challenging.
To put it another way, there are plenty of us who fund hopes and dreams. And plen… (read more)

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Revenue Based Financing – AVC

A revenue-based finance (RBF) investment provides capital to a business by “selling” an ongoing percentage of a company’s future revenues to the investor. For simplicity, you can think of it as a revenue share type of arrangement. Investor gives capital to company in exchange for a small percentage of gross revenues. RBF lives as a hybrid of bank debt and venture capital. This kind of financing has been around for a while in non-tech industries … (read more)

Paul Graham (Co-Founder & Partner at Y Combinator)
How to Raise Money

If you have multiple founders, pick one to handle fundraising so the other(s) can keep working on the company. And since the danger of fundraising is not the time taken up by the actual meetings but that it becomes the top idea in your mind, the founder who handles fundraising should make a conscious effort to insulate the other founder(s) from the details of the process. The founder who handles fundraising should be the CEO, who should in turn b… (read more)

Paul Graham (Co-Founder & Partner at Y Combinator)
How to Raise Money

Most companies in a position to grow rapidly find that (a) taking outside money helps them grow faster, and (b) their growth potential makes it easy to attract such money. It’s so common for both (a) and (b) to be true of a successful startup that practically all do raise outside money. But there may be cases where a startup either wouldn’t want to grow faster, or outside money wouldn’t help them to, and if you’re one of them, don’t raise money.

Paul Graham (Co-Founder & Partner at Y Combinator)
How to Raise Money

Because fundraising is so distracting, a startup should either be in fundraising mode or not. And when you do decide to raise money, you should focus your whole attention on it so you can get it done quickly and get back to work.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
The Other Benefit Of Fundraising – AVC

Treat your fundraising process as two things. First and foremost, it is about getting the capital you need to operate and grow your business. But it is also a fact finding mission about the things you need to address to make your business better. Don’t forget to do the second thing because it is a fantastic opportunity to improve your business for the long haul.

Henry Ward (Founder & CEO at eShares)
eShares Series A — Medium

And below is five lessons learned (especially for fin-tech startups). Fundraising is a filtering exercise, not a popularity contest. If you are a fintech startup, go East! Ask for feedback other than “the market size isn’t big enough.” Avoid VCs who ask for unit economics. Success is harder than failure.

Paul Graham (Co-Founder & Partner at Y Combinator)
Before the Startup

There are tricks in startups, as there are in any domain, but they are an order of magnitude less important than solving the real problem. A founder who knows nothing about fundraising but has made something users love will have an easier time raising money than one who knows every trick in the book but has a flat usage graph. And more importantly, the founder who has made something users love is the one who will go on to succeed after raising th… (read more)

Paul Graham (Co-Founder & Partner at Y Combinator)
The Hacker’s Guide to Investors

This is how most venture investors operate. They don’t try to look at something and predict whether it will take off. They win by noticing that something is taking off a little sooner than everyone else. That generates almost as good returns as actually being able to pick winners. They may have to pay a little more than they would if they got in at the very beginning, but only a little.

Paul Graham (Co-Founder & Partner at Y Combinator)
Before the Startup

The best way to convince investors [to invest] is to make a startup that’s actually doing well, meaning growing fast, and then simply tell investors so. [Founders] want to know what the tricks are for growing fast. And we have to tell them the best way to do that is simply to make something people want

Reid Hoffman (Partner & Co-Founder at Greylock Partners)
LinkedIn’s Series B Pitch to Greylock: Pitch Advice for Entrepreneurs

Investors see a lot of pitches. In a single year, the classic general partner in a venture firm is exposed to around 5,000 pitches; decides to look more closely at 600 to 800 of them; and ends up doing between 0 and 2 deals. The goal of an entrepreneur is to be one of those deals.

Boris Wertz (Founder of version one ventures)
Nine common things that start-up founders tend to underestimate or overestimate – Version One

No amount of money in the world is going to get you to product-market fit. And raising too much money before you find product-market fit will usually kill your start-up.

Sam Altman (President at Y Combinator)
Startup Playbook

The secret to successfully raising money is to have a good company. Always explain why you could be a huge success. It is a bad idea to try to raise money when your company isn’t in good enough shape to attract capital. You will burn reputation and waste time.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Getting The Deal Done – AVC

Sometimes you just need to get the deal done. When you are burning through cash and need to finance your company, the terms might suck, but the cash doesn’t. So you do the deal and live to fight another day. Marc and Ben did the right thing at LoudCloud and Jack Dorsey did the right thing at Square. If you believe in your business and yourself, take the money and get back to work. A financing is not an exit. The price matters less than the cash m… (read more)

Amir Elaguizy (CEO Cratejoy, YC Alumni)
58 things I learned at YC – Giftshop Scientist

Angels are a LOT easier to get checks from than VCs

Paul Graham (Co-Founder & Partner at Y Combinator)
How to Raise Money

The number one thing you want from [early] fundraising is to get the money you need, so you can get back to focusing on the real test, the success of your company. Number two is good investors. Valuation is at best third.

Paul Graham (Co-Founder & Partner at Y Combinator)
How to Raise Money

Over the past several years, the investment community has evolved from a strategy of anointing a small number of winners early and then supporting them for years to a strategy of spraying money at early stage startups and then ruthlessly culling them at the next stage. This is probably the optimal strategy for investors.

Paul Graham (Co-Founder & Partner at Y Combinator)
Startup Investing Trends

There’s a rule of thumb in the VC business that there are about 15 companies a year that will be really successful. Although a lot of investors unconsciously treat this number as if it were some sort of cosmological constant, I’m certain it isn’t.

Paul Graham (Co-Founder & Partner at Y Combinator)
The Future of Startup Funding

A startup will probably get more attention from investors in a Series A round than an angel round. So if a startup is choosing between an angel round and an A round from a good VC fund, I usually advise them to take the A round.

Rob Go (Co-Founder and Partner at NextView Ventures)
Using Capital as a Weapon – ROBGO.ORG

As seed stage investors, we find that we tend to prefer modest sized rounds early on to focus a team and establish discipline around being excellent at one thing and proving things out efficiently. But beyond the seed stage, capital is primarily about winning and winning big. We look to invest in [high potential] companies with capital efficient beginnings, and usually, those types of companies do take in a fair bit of capital and use that capita… (read more)

Sam Altman (President at Y Combinator)
Fundraising Advice for YC Companies – Y Combinator Posthaven

You should care more about good investors than good valuations. Talk to the founders of the companies that investor has funded (especially in cases when the companies haven’t worked out). You should insist on clean terms (in practice, offering messy terms is a sign of being a bad investor).

Sam Altman (President at Y Combinator)
Fundraising Advice for YC Companies – Y Combinator Posthaven

The best investors know that the most important thing to figure out at [the early] stage is how much your users love you. Great engagement and word of mouth growth are magic for fundraising. Growth is obviously still really helpful.

Sam Altman (President at Y Combinator)
Fundraising Advice for YC Companies – Y Combinator Posthaven

It’s important to articulate why the company will eventually be in a strategically valuable position (i. e. a monopoly). It’s important to articulate your mission. Don’t be arrogant–this is a tactic that somehow does manage to work for fundraising some of the time for some founders, but most of the time it doesn’t.

Sam Altman (President at Y Combinator)
Party rounds – Sam Altman

I think the rising popularity of party rounds is bad for companies. Having at least one investor very focused on your company is valuable. A closely involved investor will help coordinate your next round…

Sam Altman (President at Y Combinator)
Fundraising Mistakes Founders Make – Sam Altman

The process is simple: Get intro’s to investors you want to talk to and reach out to them, in parallel [to set up a competitive environment]. Explain to them why your company is likely to make them a lot of money.

Sean Ellis (CEO at GrowthHackers)
Figuring Out Your Way to Startup Success

It is obvious that the effort required to raise VC funds can be a major distraction from executing the business, but few realize that the repetitive discussions about financial outcomes can also shut down your ability to figure stuff out.

Slava Akhmechet (Founder at RethinkDB)
57 startup lessons

Don’t fall in love with the fundraising process. Get it done and move on.

Mark Suster (Managing Partner at Upfront Ventures)
So What is The Right Level of Burn Rate for a Startup These Days? | Bothsides of the Table

The earlier the round, the less capital you need and the more reasonable your valuation the less time that is needed generally to raise capital. In other words, raising $2 million at a $6 million pre-money valuation has always been easier & quicker than raising $20 million at any valuation.

Mark Suster (Managing Partner at Upfront Ventures)
So What is The Right Level of Burn Rate for a Startup These Days? | Bothsides of the Table

When you raise larger rounds there is more “due diligence,” which includes: calling customers, looking at financial metrics, doing cohort analysis (looking for trends like changes in churn rates), evaluating competitor positioning and understanding more of the competency of your executive team.

Mark Suster (Managing Partner at Upfront Ventures)
So What is The Right Level of Burn Rate for a Startup These Days? | Bothsides of the Table

My advice: be cautious, start early, get to know investors before you need capital, do your research on who is a likely good fit and understand that fund-raising is always part of your job – not something you do in “fund-raising season” for 2-3 months every other year

Mark Suster (Managing Partner at Upfront Ventures)
So What is The Right Level of Burn Rate for a Startup These Days? | Bothsides of the Table

People who think of fund raising as a “distraction away from the core business” fundamentally don’t understand that running a business comprises of: Shipping products, selling to & servicing customers, marketing, HR, recruiting, financial reporting AND making sure you have enough money to support operations.

Ben Horowitz (Co-Founder & Partner @ Andreessen Horowitz)
Angels vs. Venture Capitalists – Ben’s Blog

If you are a small team building a product with the hope of “seeing if it takes” (with the implication being that you’ll try something else if it doesn’t), then you don’t need a board or a lot of money and an angel round is likely the best option. On the other hand, if you’ve developed a strong belief in your product or your product idea and you are in a race against time to take the market, then a venture round is more appropriate.

What’s the best way to communicate with potential investors?

Armando Biondi (Cofounder & COO of AdExpresso)
#60 — Why communicate more with your existing investors (and how to do it efficiently) — Medium

There are two key benefits to sending your investors a monthly recap: a) you’ll give them a broad-enough but meaningful-enough perspective on what’s happening, b) you’ll give yourself a forcing function to generate relevant results in a reasonable amount of time. Here’s how: Short & sweet always win. Be numbers-oriented. Think actionable. Design matters. Use bullet points. Attach some multimedia content. Include cash position and burn-rate. Trigg… (read more)

Jason Lemkin (Managing Director at Storm Ventures, SaaStr.com)
How many hours per week does a venture capitalist expect startup founders to work? – Quora

Email responsiveness. Most great CEO respond to key emails with shocking alacrity. Listening. I know VCs sometimes give you terrible advice. But if you don’t at least listen, it creates anxiety that there is no trust.

Paul Graham (Co-Founder & Partner at Y Combinator)
How to Raise Money

Be nice when investors reject you as well. The best investors are not wedded to their initial opinion of you. If they reject you in [seed/Series A] and you end up doing well, they’ll often invest in [the next fundraise]. In fact investors who reject you are some of your warmest leads for future fundraising

Paul Graham (Co-Founder & Partner at Y Combinator)
How to Raise Money

Introducing an investor to your cofounder(s) should be like introducing a girl/boyfriend to your parents—something you do only when things reach a certain stage of seriousness.

Reid Hoffman (Partner & Co-Founder at Greylock Partners)
LinkedIn’s Series B Pitch to Greylock: Pitch Advice for Entrepreneurs

Stay aboveboard so you keep trust with prospective investors. I was forthright with the first venture firm about my intentions, telling them that they received the first look, and that I would talk to a few more firms to put time pressure. And Greylock knew I had gotten a term sheet to accelerate their decision process.

David Cummings (Managing Partner at Shotput Ventures)
Entrepreneurs and Calls from VC Associates | David Cummings on Startups

In the end, most entrepreneurs shouldn’t engage with associates unless they’re going to raise money in the near-term and they’ve pre-qualified the firm to ensure it’s a good fit. If getting ready to raise money, associates can be a good testing ground and opportunity to practice the pitch or make an ask at the end of the call to be introduced to three portfolio companies that might be potential customers.

Jason Calacanis (CEO of Inside.com, Formerly “Entrepreneur in Action” at Sequoia Capital)
How To Demo Your Startup | TechCrunch

If you don’t have an answer be honest and say you don’t. The worst thing to do when you don’t have an answer is to b. s. the person. So, feel free to say you don’t know –- folks find it refreshingly humble and honest. There are many ways to say this including: “I’m not really sure, I’m going to have to think about that for a bit and get back to you,” or “I’m not sure to be honest. What do you think?” “I’ve never really considered that. Perhaps y… (read more)

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
What Do I Wish Entrepreneurs Would Ask? – AVC

Entrepreneurs often feel that they have to be selling when they pitch. And many come in telling a rosy story that is all upside and no challenges. That can come off as naive and can be off putting. It is way better to start with the upside. As I like to say, “take me up the mountain and show me the promised land on the other side.” But after you’ve accomplished that, it is wise to explain where the tough spots will be on the way up the mountain a… (read more)

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Hailo – AVC

Another big factor in our investment process was the “I told you so”. In late 2011 as Hailo was just launching in London, the team came to see us and told us everything they planned to do in 2012. We were impressed by the team, their backgrounds, and their attitude and energy. But we had big concerns about everything they said they were going to do in 2012. A year later, they came back to see us and not only had they done everything they said the… (read more)