What’s the best way to raise the right amount of money?

Mike Maples Jr (Managing Partner @ FLOODGATE)
Ron Conway, Mike Maples Jr. – Angel Investing Revealed by Stanford eCorner | Free Listening on SoundCloud

I believe that too much money in a startup is not only unnecessary– it’s actually toxic. It causes you to pursue losing strategies for too long to the detriment of winning strategies.

What’s the best way to raise the right amount of money?

Mike Maples Jr (Managing Partner @ FLOODGATE)
Ron Conway, Mike Maples Jr. – Angel Investing Revealed by Stanford eCorner | Free Listening on SoundCloud

Whenever I’m an entreprenuer and I raise money there’s a set of expectations I’m creating. So if I raise $5M from a VC, the option to exit for $100M or less is no longer available to me as an entreprenuer.

What’s the best way to manage your burn-rate?

Mike Maples Jr (Managing Partner @ FLOODGATE)
Ron Conway, Mike Maples Jr. – Angel Investing Revealed by Stanford eCorner | Free Listening on SoundCloud

Companies that have low burn rates buy themselves hugely better probabilities of getting lucky over time. You’ve gotta be willing to be not too formulaic about when it’s time to give up or be persistant.

What’s the best way to make tough decisions?

Mike Maples Jr (Managing Partner @ FLOODGATE)
Ron Conway, Mike Maples Jr. – Angel Investing Revealed by Stanford eCorner | Free Listening on SoundCloud

The way I look at it, most decisions are either 50-50 or obvious and if its 49-51 it almost doesn’t almost doesn’t matter what you pick. Just pick one and execute it with brutal precision and you’ll be ok. When I flip a coin and it comes up heads and I wish it came up tails, I just turn it over and what tails says. If it comes up heads and I say ‘Oh I knew it all along I wanted it to be heads”, then I do what heads says. It’s surprising how you a… (read more)

What’s the best way to create your MVP?

Mike Maples Jr (Managing Partner @ FLOODGATE)
Ron Conway, Mike Maples Jr. – Angel Investing Revealed by Stanford eCorner | Free Listening on SoundCloud

Low burn experimentation, done a lot. Find out the winning answers. Discard the losing answers. But don’t scale until you know it works. Discover the business before you scale the business

What’s the best way to raise the right amount of money?

Mike Maples Jr (Managing Partner @ FLOODGATE)
Ron Conway, Mike Maples Jr. – Angel Investing Revealed by Stanford eCorner | Free Listening on SoundCloud

Whenever I’m an entreprenuer and I raise money there’s a set of expectations I’m creating. So if I raise $5M from a VC, the option to exit for $100M or less is no longer available to me as an entreprenuer.

Jason Calacanis (Founder & CEO @ Inside.com)
How to select your angel round valuation (aka “the $4m rule”) — Medium

If you’re raising over one million dollars at over a four-million dollar valuation, investors in Silicon Valley are going to put on their diligence caps and put your business on the examination table and try to make an “educated decision.” If you’re raising under one million dollars at under a four-million dollar valuation, investors in Silicon Valley are going to put you in one bucket of risk I will call the “gut decision.”

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

Underestimate how much you want. Though you can focus on different plans when talking to different types of investors, you should on the whole err on the side of underestimating the amount you hope to raise. For example, if you’d like to raise $500k, it’s better to say initially that you’re trying to raise $250k. Then when you reach $150k you’re more than half done. That sends two useful signals to investors: that you’re doing well, and that they… (read more)

Jason Calacanis (Founder & CEO @ Inside.com)
How to select your angel round valuation (aka “the $4m rule”) — Medium

Have coffee with the angel you want most in your startup and ask the following question: “Cyan, can I ask you for a favor?” [they will say yes] “Would you candidly tell me at what valuation you would want to invest in my startup? I really want to hear what you think the number is. Even a range is helpful.” Do this five times and you’ll know what the right number is.

Mike Maples Jr (Managing Partner @ FLOODGATE)
Ron Conway, Mike Maples Jr. – Angel Investing Revealed by Stanford eCorner | Free Listening on SoundCloud

I believe that too much money in a startup is not only unnecessary– it’s actually toxic. It causes you to pursue losing strategies for too long to the detriment of winning strategies.

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

If you’re so fortunate as to have to think about the upper limit on what you should raise, a good rule of thumb is to multiply the number of people you want to hire times $15k times 18 months. In most startups, nearly all the costs are a function of the number of people, and $15k per month is the conventional total cost (including benefits and even office space) per person. $15k per month is high, so don’t actually spend that much.

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

Don’t raise too much. Though only a handful of startups have to worry about this, it is possible to raise too much. The dangers of raising too much are subtle but insidious. One is that it will set impossibly high expectations.

David Jackson (Founder, Seeking Alpha)
Why your VCs want you to raise a large round | A Founder’s Notebook

Since the size of a round is always proportionate to its valuation, this means it’s in your VCs’ interests to have you raise a large round. A large round has many advantages — capital can be used as an offensive strategy. But a large round is not always best for the company, the founder or the team. As Rob Go says, “modest sized rounds focus a team and establish discipline”.

Mark Suster (Managing Partner at Upfront Ventures)
What I’ve Learned About Venture Funding | Bothsides of the Table

I believe firmly in capital efficiency in the early days of a startup. It forces innovation. It forces the founder to spend time in front of customers. It forces teams not to expand too quickly.

Mark Suster (Managing Partner at Upfront Ventures)
What I’ve Learned About Venture Funding | Bothsides of the Table

I’ve seen companies who raise the mega round after they’ve truly started to scale and put scale on steroids. I’ve seen the companies that had they not raised the big round would have evaporated. How can it be that over-funding is bad, bad, bad and then the best possible outcome? And what is the inflection point? It’s subjective. I’ve seen directly just how much capital can separate the winners from the losers when raised at the right time.

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

First, you need to raise the right amount of capital. A small company shouldn’t raise 100 million dollars, even if Great Late Stage Fund is very eager to cut you a check. Raising too much can haunt you. Map out your operating expenses for one year, multiply that figure by 1.5, and ask for that, as a first approximation.

Mark Suster (Managing Partner at Upfront Ventures)
Founder Showcase – Mark Suster Keynote on Vimeo

You should try to raise 18-24 months of capital.

Ryan Howard (Founder @ Practice Fusion)
Transcript: Protecting yourself as the founder; Ryan Howard | VatorNews

Don’t get so excited about the valuation that you’re throwing the baby at the bath water. I did this multiple times at Practice Fusion. I had advisors that wanted a huge valuation because as investors, it might make them look really good. Again, my ego got the best of me, but be willing, if you get a $20 million valuation, be willing to go back to that investor or someone else and go, “What if we do 10% off this and I can maintain a little more c… (read more)

Mark Suster (Managing Partner at Upfront Ventures)
What is the Right Burn Rate at a Startup Company? | Bothsides of the Table

I think every time you raise you should seek to raise 18 months cash if you can. I think you start fund raising when you have 9 months left and begin to panic if you get down below 3.

What’s the best way to manage your burn-rate?

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

Valuations can be fixed. You can do a down round, or three or four flat ones, until you get the price right. But burn rates are exactly that. Burning cash. Losing money. Emphasis on the losing. And they are indeed sky high all over the US startup sector right now. And our portfolio is not immune to it

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Burn Rates: How Much? – AVC

A good rule of thumb is multiply the number of people on the team by $10k to get the monthly burn. That is not the number you pay an employee. That is the “fully burdended” cost of a person including rent and other related costs. So if you use that mutiplier, my suggested team sizes are 5, 10, and 25 respectively for the three development stages listed above.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
How Much To Burn While Building Product – AVC

The first stage is what I called “Building Product Stage” and I suggested that a burn rate of $50k/month was appropriate for that stage.
I got a fair bit of pushback in the comments for that part of the post. My favorite push back came from The Kid, who said: 50k a month?!?!??! maybe it is such in venture world, but if you’re a broke ass fool bootstrapping his/her way, try 5k per founder a month until you have paying customers. if you’re hardcor… (read more)

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Burn Rates: How Much? – AVC

Building Usage Stage – I would recommend keeping the monthly burn below $100k per month at this stage. This is the stage after release, when you are focused in iterating the product, scaling the system for more users, and marketing the product to new users. This can be done by the same team that built the product with a few more engineers, a community manager, and maybe a few more dollars for this and that.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Burn Rates: How Much? – AVC

Building The Business Stage – This is when you’ve determined that your product market fit has been obtained and you now want to build a business around the product or service. You start to hire a management team, a revenue focused team, and some finance people. This is the time when you are investing in the team that will help you bring in revenues and eventually profits. I would recommend keeping the burn below $250k per month at this stage.

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

If you have a strong lead investor known for backing his or her entrepreneurs in tough times and that investor gives you a sense for her comfort level in writing your next check then you can have a higher burn rate than if you don’t feel you have a strong lead investor. If you have mostly angels or don’t feel your existing investor can support you without new capital from the outside then you might want a smaller burn rate. Remember those party r… (read more)

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

It is also impossible to tell you the right burn rate for your company without knowing your risk tolerance. Quite simply – some people would rather “go hard” and accept the consequence of failure if they don’t succeed. Other people are more cautious and have a lot more at stake if the company doesn’t succeed (like maybe they put in their own money or their family’s money).

Mike Maples Jr (Managing Partner @ FLOODGATE)
Ron Conway, Mike Maples Jr. – Angel Investing Revealed by Stanford eCorner | Free Listening on SoundCloud

Companies that have low burn rates buy themselves hugely better probabilities of getting lucky over time. You’ve gotta be willing to be not too formulaic about when it’s time to give up or be persistant.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Tightening Your Belt – AVC

When the business becomes profitable more quickly, when the cash runway extends by a year or more, when the budget is no longer stretched and new initiatives are now possible, the team understands the value of belt tightening and embraces it as much as the investors do.
If you’ve been a growth spurt for the past few years and have not taken the time to do some belt tightening, it might be a good time to do that.

Eric Ries (Author, The Lean Startup)
The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses

Measuring runway through the lens of pivots rather than that of time suggests another way to extend that runway: get to each pivot faster. In other words, the startup has to find ways to achieve the same amount of validated learning at lower cost or in a shorter time. (p.160)

Ron Conway (Founder & Co-Managing Partner @ SV Angel)
Ron Conway, Mike Maples Jr. – Angel Investing Revealed by Stanford eCorner | Free Listening on SoundCloud

A million bucks better last over a year, roughly.

What’s the best way to make tough decisions?

Sam Gerstenzang (Director of Product at Imgur)
Sam Gerstenzang – Seven things I learned in venture

The best way to become quickly knowledgeable is to find the right people and talk to them. There is no template for success, and no one knows what works. Big things growing really fast get really big, really fast. There is a huge advantage to being right early on.

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

Sunk Costs are time and money (and other resources) you have already spent on a project, investment, or some other effort. They have been sunk into the effort and most likely you cannot get them back.
The important thing about sunk costs is when it comes time to make a decision about the project or investment, you should NOT factor in the sunk costs in that decision. You should treat them as gone already and make the decision based on what is in… (read more)

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

Satisficing is a decision-making strategy or cognitive heuristic that entails searching through the available alternatives until an acceptability threshold is met.This is contrasted with optimal decision making, an approach that specifically attempts to find the best alternative available. I love the concept of satificing instead of optimizing. It is something I have been trying to adopt (changing behavior is hard) for close to twenty years now w… (read more)

Mike Maples Jr (Managing Partner @ FLOODGATE)
Ron Conway, Mike Maples Jr. – Angel Investing Revealed by Stanford eCorner | Free Listening on SoundCloud

The way I look at it, most decisions are either 50-50 or obvious and if its 49-51 it almost doesn’t almost doesn’t matter what you pick. Just pick one and execute it with brutal precision and you’ll be ok. When I flip a coin and it comes up heads and I wish it came up tails, I just turn it over and what tails says. If it comes up heads and I say ‘Oh I knew it all along I wanted it to be heads”, then I do what heads says. It’s surprising how you a… (read more)

Ben Erez (Product at Breeze)
22 Mistakes I Made as a First Time Founder — Viabilify

[Follow your gut. ] At one point during the first few weeks of starting our company, I had a very strong gut feeling to change the way we were going to tackle the problem we saw (aka in tech lingo a “pivot”). But the three of us weren’t on the same page and after a couple hours of arguing back and forth, we came together as a team and decided that we would not go in the direction in which I was pushing. In hindsight, I wish I stood my ground mor… (read more)

Dharmesh Shah (Co-founder and CTO of HubSpot)
Happy Birthday HubSpot! 9 Lessons From Our First 9 Years

An imperfect decision today is better than a perfect decision some day.

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

There is no shortcut around learning, you just have to learn it. Everything is harder than it looks

David Frankel (Managing Partner at Founder Collective)
7 Deadly Distractions That Can Kill Your Business | Inc.com

Whenever a company strays from its core market, message or mission, the results can be devastating, particularly for small companies and startups. common causes… Waning confidence in current market position or pricing, overreaction to existing competitors or new, “hot” entrants in the market, sudden stagnation or rapid decline in growth, strategic partnerships with no clear metrics for success, pressure from investors or board members to change… (read more)

What’s the best way to create your MVP?

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

But the mistake most entrepreneurs make is the try to ship most or all of their vision in their first product. And that’s a terrible idea. The best companies start with a very narrow product that nails something pretty simple but powerful. And then they go from there. This is true in both enterprise and consumer applications.

Seth Godin (Founder at Yoyodyne Entertainment)
Seth’s Blog: Three elements to go beyond hourly freelancing

Start by focusing on three things (and a bonus): 1. An audience (organizations or individuals) that has money to invest in having you solve their problem. 2. An audience that realizes it has a problem that needs to be solved. 3. A skill, a service, a story, a resource or a technology that only you can provide. 4. (A bonus): An outcome that your customers will choose to tell other people about.

Eric Ries (Author, The Lean Startup)
The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses

As you consider building your own minimum viable product, let this simple rule suffice: remove any feature, process, or effort that does not contribute directly to the learning you seek. (p. 110)

Eric Ries (Author, The Lean Startup)
The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to … – Eric Ries – Google Books

The two most important assumptions entrepreneurs make are what I call the value hypothesis and the growth hypothesis. The value hypothesis tests whether a product or service really delivers value to customers once they are using it.

Seth Godin (Founder at Yoyodyne Entertainment)
Seth’s Blog: Decoding “who is it for?”

Most inventors and marketers start with what they have (the stuff) and try to work backward to the ‘who is it for’ question. It makes a lot more sense to go the other direction. Identify a set of fears, dreams and attitudes and then figure out what sort of story fits that lock in a way that delights the consumer. Then go build that.

Mike Maples Jr (Managing Partner @ FLOODGATE)
Ron Conway, Mike Maples Jr. – Angel Investing Revealed by Stanford eCorner | Free Listening on SoundCloud

Low burn experimentation, done a lot. Find out the winning answers. Discard the losing answers. But don’t scale until you know it works. Discover the business before you scale the business

Jake Knapp (Partner at GV, author of ‘Sprint’)
How to Come Up With Your Next Product Hit in 5 Days | Inc.com

1: Agree on the goal. The first day’s focus isn’t on solving the problem, but defining it. 2: Come up with multiple solutions. Knapp doesn’t like brainstorming. Instead, Knapp prefers what he refers to as parallel individual work. 3: Choose the best option and create a plan of attack. 4: Build a prototype. 5: Test it. Research shows that five is the perfect number of customers on which to test your product–beyond that returns are low, since the … (read more)

Paul Graham (Co-Founder & Partner at Y Combinator)
How to Make Wealth

You’re not just trying to solve problems. You’re trying to solve problems that users care about.

David Aycan (Lead, Creative Competitiveness Products / Senior Portfolio Director / D4C Studio @ IDEO)
Don’t Let the Minimum Win Over the Viable

Sketching or mocking up experiential prototypes and then testing them with consumers or potential partners, while also explicitly jotting down your operating and business assumptions and using them to discuss the business with industry experts, allows you both to pick a promising route to invest in the development sprint and to pivot with confidence. For example, by prototyping multiple consumer experiences and business models before investing in… (read more)

Eric Ries (Author, The Lean Startup)
The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses

The first step is to enter the Build phase as quickly as possible with a minimum viable product (MVP). The MVP is that version of the product that enables a full turn of the Build-Measure-Learn loop with a minimum amount of effort and the least amount of development time. The minimum viable product lacks many features that may prove essential later on. However, in some ways, creating a MVP requires extra work: we must be able to measure its impac… (read more)

Eric Ries (Author, The Lean Startup)
The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses

When one is choosing among the many assumptions in a business plan, it makes sense to test the riskiest assumptions first (p.118)

Eric Ries (Author, The Lean Startup)
The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses

…when an entrepreneur has an unclear hypothesis, it’s almost impossible to experience complete failure, and without failure there is usually no impetus to embark on the radical change a pivot requires. As I mentioned earlier, the failure of the “launch it and see what happens” approach should now be evident: you will always succeed—in seeing what happens. Except in rare cases, the early results will be ambiguous, and you won’t know whether to p… (read more)

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Feature Friday: What’s The Atomic Unit Of Your Product/Service? – AVC

When you think about an MVP, it’s really important to identify the atomic unit and make sure you focus the product crisply and cleanly on that object. If you think you have three or four atomic units, you are going to end up with a clunky and bloated experience and that is what you want to avoid at all costs with your MVP (particularly if you are mobile first).

David Jackson (Founder, Seeking Alpha)
MVP or insufficiently viable product? | A Founder’s Notebook

The risks of an insufficiently viable product are more serious in environments where early users rate your product. For example, mobile apps.

Eric Ries (Author, The Lean Startup)
The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses

The products a startup builds are really experiments; the learning about how to build a sustainable business is the outcome of those experiments. (p.75)

Eric Ries (Author, The Lean Startup)
The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses

The first challenge for an entrepreneur is to build an organization that can test these assumptions systematically. The second challenge, as in all entrepreneurial situations, is to perform that rigorous testing without losing sight of the company’s overall vision

Seth Godin (Founder at Yoyodyne Entertainment)
Seth’s Blog: The difference between confidence and arrogance

The difference between confidence and arrogance Confidence is arrogance if the market doesn’t believe the story. When we show up with something great, something generous, well-executed and new, some people will be suspicious. “Is this everything it’s cracked up to be?” The skeptic wonders if we have the standing to back it up. You’re not going to be able to persuade those skeptics. In fact, when you try, you end up dressing up your confident pres… (read more)

Paul Graham (Co-Founder & Partner at Y Combinator)
Do Things that Don’t Scale

You can and should give users an insanely great experience with an early, incomplete, buggy product, if you make up the difference with attentiveness.

Graeham Douglas (Co-founded Runnr.me )
About | Graeham’s Rambling Thoughts

Prototyping is cheaper and easier than ever. In my opinion, a prototype for many Kickstarter-ready design projects could be made for $1000 in parts and materials, some for even $100. Like software development, the larger investment is in time put in by the designers. Of course, several (or sometimes many) stages of prototypes are needed to arrive at a final design. Good user feedback is essential, and this feedback should guide making the next… (read more)

Eric Ries (Author, The Lean Startup)
The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses

…the right way to think about the product development process in a Lean Startup is that it is responding to …experiments that need to be run. As soon as we formulate a hypothesis that we want to test, the product development team should be engineered to design and run this experiment as quickly as possible, using the smallest batch size that will get the job done…our planning really works in the reverse order: we figure out what we need to … (read more)

Eric Ries (Author, The Lean Startup)
The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to … – Eric Ries – Google Books

If the fundamental goal of entrepreneurship is to engage in organization building under conditions of extreme uncertainty, its most vital function is learning.