Category: Fundraising

I’m not sure why people — both investors and entrepreneurs — make things so complicated.

There are only two stages to any company:

1. Will it work?
2. How big could it be?

Once you have at least one person that you don’t know paying you at least $1 for your product, you’ve passed the first stage. Congratulations, you’re not a startup anymore — you’re a business.

The second stage is where investors and entrepreneurs should focus their conversations:

• If there are ~1,000 potential customers, you’ve got a great business… but it’s probably not big enough for investors.
• If there are ~10,000 potential customers, things are starting to get interesting for you and the angel community.
• If there are >100,000 potential customers, you’re on to something that will probably excite venture capital firms.

Pro tip: if you find yourself — both investors and entrepreneurs — spending more than 50% of any given meeting talking about the product, something’s wrong. In VC, we make our money via the growth of the business — not the product itself.

Don’t let your mentors confuse you, business isn’t all that complicated: sell one thing to one person you don’t know, then repeat. Ideally, get faster at it along the way.

There’s an important distinction between desperation and hustle: Desperation reeks of fear. Hustle smells like opportunity.

It’s hard to explain the difference between the two but, as with most things, you know it when you see it.

And, as much as people want you to believe that the world’s a fair place, it’s not. First impressions matter more than ever — actually, every impression matters more than ever.

Don’t screw it up by projecting desperation when you actually know how to hustle.

Everyone does cold emails wrong. Including you. The fix is super simple: switch the order.

Most people’s first email: “Can we get a cup of coffee?” OR “Can we hop on a call?”

Most people’s second email (if they get a response a all): “OK, wow. So you’re saying that the baseline conversion rate should be X?” OR “That’s really good to know. [Insert super crisp question here.]”

And that’s the key: keep your first question to anyone — an investor, an entrepreneur, even your date — crisp. Make it easy for them to answer it.

If you can get someone to give you 30 seconds of their time, you’re more likely to win another 30 minutes with them. The opposite way rarely works.

Just as much as I think entrepreneurs should skip the local investors first, I think entrepreneurs should skip the local accelerators too.

• Aim for the top. I don’t care whether you don’t want to leave your hometown or if you don’t think you’d get into the best accelerators, apply to all of the best ones — YC, 500, Techstars and the others along the coasts. In the worst case, you’ll learn to answer the questions that real investors ask. In the best case, you’ll get in. Either way, you win.
• Apply early. This sounds too easy but, having been involved in a bunch of accelerators over the years, I can tell you that the vast majority of submissions tend to come in during the last week that applications are open and it’s a huge missed opportunity to founders. If you want to increase the likelihood of getting your application reviewed (and your likelihood of getting a meeting), get your application during the first week — before the flood.
• Put in the effort. When you’re answering questions on the application, keep the answer to three sentences or less. Anything longer is usually a sign that you don’t know the answer. Or, worse, that you don’t know how to communicate. Again, having been involved in so many accelerator cohorts, I can’t tell you how often I see a half-assed rambling answer to a simple, crisp question which gets the entire application dumped.
• Look for warm intros. As you’re applying to the accelerator, look up the people running the program, the mentors helping with the program and the founders that have been through the program. You’re looking for a mutual connection to at least one of these people via AngelList, Facebook, Twitter or LinkedIn. Then ask for the intro — and try not to be weird about it.
• The alumni network matters. Following on the last tip, the success of the alumni companies is a pretty good indicator of the accelerator’s quality. Try to avoid being in an accelerator’s first cohort unless the people running it have some way to prove that they’ve helped other companies grow in the recent past.
• Drop the script. An incredibly large number of founders come in prepared with a pitch deck and a script in the footnotes. It’s uninteresting and, more often than not, you’ll get tripped up the minute you get a question you didn’t expect. It’s better to relax, keep your traction numbers handy and don’t be afraid to say “I don’t know.”
• Maximize the speed of iteration. If you get a “no” from an accelerator, it’s safe to categorize it as a “no for now.” Take the feedback on why they don’t think you’re ready, apply it and reach back out to the interviewer ASAP once you’ve applied that feedback. This is especially important if you apply early.
• Focus on the trajectory. The best accelerators are focused on the growth of your company, not your product. This is a pretty good litmus test of a good founder and a good accelerator.

Actually, that’s a good way to wrap this up: all of these things are a pretty good litmus test of a founder worth backing or an accelerator worth joining.

these things are a pretty good litmus test of a founder worth backing or an accelerator worth joining. Click To Tweet

Say it with me y’all…

👏🏼SHARK.👏🏼TANK.👏🏼IS.👏🏼NOT.👏🏼REAL.👏🏼LIFE.

👏🏼SHARK. 👏🏼TANK. 👏🏼IS. 👏🏼NOT. 👏🏼REAL. 👏🏼LIFE. Click To Tweet

It kills me when the conversation is going so well… and then the entrepreneur drops this little gem into the mix.

“Yeah, so we’re raising $X for Y% of the company.”

NO ONE TALKS LIKE THAT IN REAL LIFE.

If you’re raising money, just talk like a normal human being.

“OK, so we’re raising $X and that’ll give us 18 months of runway. We should be able to hit [MILESTONE] in half that time.”

That’s it. Nothing special. Just be relatable. Have a discussion. See where it goes.

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If you’re looking for more actionable tips on raising money for your company, check out fundraising for startups.

Entrepreneurs often walk into office hours thinking about money.

They’re worried about how much they need to raise, what the terms will look like and how to meet more investors.

Investors walk into those same office hours thinking about sales.

They’re worried about whether the company has sold anything, how many potential customers there might be and who will actually be doing the sales.

And there’s the opportunity for founders: talk, think and do more around your sales. there's the opportunity for founders: talk, think and do more around your sales. Click To Tweet You’ll build a better company and, in some cases, you’ll actually raise the money you want too.

The people we meet along our travels usually guess that the driving is the hardest part of investing everywhere else. The driving, believe it or not, is the easy part.

When you visit new places, meeting people — especially entrepreneurs — is the easy part. The hard part is figuring out who to trust. After all, we’re looking for lines, not dots.

Deal terms are the second hardest part. It’s surprisingly common to see local investors using homebrewed term sheets and often “forgetting” to think about pro rata, information rights and everything else in between. If you’re raising your first round, use something off the shelf: 500 KISS, YC SAFE, Series Seed or Indie.vc.

Stay simple, keep growing and — above all else — don’t be weird.

Stay simple, keep growing and -- above all else -- don't be weird. Click To Tweet

“I have a startup…”

That is quite possibly the worst way to introduce yourself to anyone. And, yet, it’s the most common phrase I’ve heard over the past few years.

Now that we’re in the second year of our tour, we’re meeting many of the same entrepreneurs again. And I love that. Until they introduce themselves the same way they did last year.

• If you’re an entrepreneur, listen to the way other people introduce you. If you don’t like it, start introducing yourself differently. Humblebragging is ok.
• You’re not building a startup, you’re building a business. When someone asks what you do, talk about your customers — not about your startup.
• If you don’t control your own narrative, someone else will create one for you. And it probably won’t help you or your business.

If you don't control your own narrative, someone else will create one for you. Click To Tweet

Dumb ideas don’t get funded. Dumb ideas aren’t getting funded. Dumb ideas aren’t even getting second meetings.

The only people complaining about “dumb investors” and “dumb ideas” are the lazy ones.

The lazy entrepreneurs that would rather complain than try to understand exactly how investment decisions are made.

The lazy community leaders that would rather complain than learn about investor’s fiduciary duty.

The lazy local investors that would rather complain than research the portfolios of the “dumb investors.”

Let me share a little secret I’ve learned about investing over the past few years: in a world where you can’t predict which businesses will be ultimately successful, the business of investing is about listening to the most pitches and investing in the least-worst in any given time period. And then you wait.

the business of investing is about listening to the most pitches and investing in the least-worst Click To Tweet

Seed. Pre-seed. Pre-A. Series A. Bridge. Just stop.

There are so many names given to people’s fundraising these day. And they mean nothing.

If you name your round, you’re unintentionally allowing investors to make some judgements about the status of your company.

Bridge round? Oh, so you’re running out of money?

Pre-seed? WTF is that?

Series A? Ah, so you’re about a $1M run rate?

Seed? I’m going to bet this is going to be a $500K ask.

If you’re raising money, just say that you’re raising money. Don’t put a title on it.

If you're raising money, just say that you're raising money. Don't put a title on it. Click To Tweet

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If you’re looking for more actionable tips on raising money for your company, check out fundraising for startups.