[HN Gopher] How to Raise Investment
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How to Raise Investment
Author : tomblomfield
Score : 127 points
Date : 2021-09-13 09:23 UTC (13 hours ago)
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(TXT) w3m dump (tomblomfield.com)
| dqpb wrote:
| Be careful going to this website. It doesn't let you go back out.
| smackeyacky wrote:
| This advice is interesting, but almost entirely useless for
| anybody outside the US / Silicon Valley bubble. Exactly how are
| you going to go for coffee with your "VC buddies" if you live
| 8,000km away? The idea is frankly ridiculous for anybody not in a
| tiny circle. edit: apparently London is the same. Only further
| away.
|
| This article really highlights how stupid frauds like Theranos
| get funded. The real answer is between the lines:
|
| To get funded:
|
| a) Be connected, physically close and already in the clique. b)
| Don't be outside the clique.
|
| I mean I get the idea that rich kids giving their rich mates
| money to start yet another dogshit fintech is just how the game
| is played, but what a frustrating time it is for the rest of us.
| fxtentacle wrote:
| With the "open in app" banner on top, the "never miss a post"
| banner in the middle and the cookie banner at the bottom, I can
| see exactly 4 lines of text on my smartphone screen.
|
| Lucky for me, I have the Firefox reader mode. But to every
| regular person, this presentation screams "the actual text is not
| important".
| HWR_14 wrote:
| Safari reader mode also seems to work
| reducesuffering wrote:
| How do you decide between raising money and bootstrapping (like
| Mailchimp acquired for $12b today did)? I think the typical
| response is whether you want to be a bigger $1b+ company or die,
| or just slowly see where it takes you by the revenue of your
| customers. But how do you estimate the eventual potential/TAM of
| your startup/business as something that needs funding to grow
| ASAP? You can't really trust VC's opinions as they're self-
| interested.
| bradvl wrote:
| Thanks for sharing this Tom. Just shared it with my cofounder.
| rememberlenny wrote:
| For anyone interested in raising money soon, but not immediately,
| the best thing you can do is start an weekly update email.
|
| Start sending thing to all the people you interview for advice,
| supporters you know in the same space, and peers/coworkers. If
| you keep a regular email showing your progress, even though you
| may not have traction, potential investors will see the pace at
| which you are developing/iterating, and have a reference point to
| be able to cut a check.
|
| I started this 3 months before I planned on raising any money,
| and it allowed for people who were on the email to confidently
| make recommendations on my behalf to investors they knew, and
| also made our company top of mind.
|
| I have continued this for almost a year now, and its led to
| customer development opportunities, investment inbound, and a
| steam of good relevant advice.
| imraj96 wrote:
| Do you have a structure to your update emails? And from your
| experience, what shouldn't be included in an update email?
| tomblomfield wrote:
| I broadly agree, but weekly seems like the effort outweighs the
| benefit.
|
| It seems like fortnightly or monthly gets the same impact with
| 25-50% effort.
| corry wrote:
| One note of caution. As someone who gets a lot of these kinds
| of update emails, it's also very apparent when or when not a
| company is hitting an inflection point.
|
| Why does that matter?
|
| If things are going well, great - you'll have a much easier
| time fundraising. The potential investors on your list will see
| your progress and realize they have a chance to preempt.
|
| If things are not going well, you're providing a continuous
| stream of proof that you haven't cracked the nut yet. Which
| there is no shame in. But broadcasting that can be harmful.
|
| So what do you do? It's tempting to hype up your updates so it
| looks more positive. Or should you be honest (which your ACTUAL
| investors and advisors need to help you)? Hmmm. Or do you run 2
| update emails, the insider one and outsider one?
|
| OR do you just focus on growth, and realize that none of this
| matters if you're growing 300% YoY at non-trivial revenue?
| Imagine if the time you spent on a weekly email was spent on
| making 5 add'l client calls?
|
| Final thing to be aware of. The most powerful force in
| fundraising is FOMO. Every VC or angel investors has an "oh
| shit" moment when a startup they kind of know (but had kind of
| written off) all of a sudden is doing a hot round, and you feel
| late to the party.
|
| I'm not telling anyone to NOT do update emails like this. Just
| recognize the signal leakage and really evaluate if the time
| spent is worth it.
| shoto_io wrote:
| Thanks for the insights. Makes a ton of sense.
|
| So the main question as a corollary to your statement is: How
| do you effectively create investor FOMO? Do you have any
| experience to share here as well?
| adventured wrote:
| > How do you effectively create investor FOMO?
|
| By succeeding.
|
| That sounds either snarky or obvious, however, I mean it
| quite literally. The absolute single best way to create
| investor fear of missing out, is to actually succeed at
| what you're doing. There's nothing close to that. Succeed
| at whatever stage you're at and be able to demonstrate that
| to the potential investors. If you're the real deal, you
| can build, execute and deliver on what you're attempting
| and claiming. Nothing prompts FOMO from investors like
| actually delivering and building up a demonstrated chain of
| success as you go; they see it, and they want to be part of
| it.
|
| All the other methods are shady, deceitful, disingenuous,
| fake it until you make it types of bullshit cons. Akin to
| attempting to trick someone into funding you (ha! look at
| that! I made myself look more successful than I am, I
| really pulled one over on them; Theranos).
| tnolet wrote:
| Having raised a seed and A-series in the last 1,5 years from top
| tier VC's in the B2B space: this post is 100% spot on.
|
| Will recommend.
|
| We actually used the YC seed and A-series pitchdeck templates the
| OP mentions.
|
| Last thing: everything becomes 1000% easier if you have
| customers. Focus on customers. Raising becomes almost easy after
| that.
| anonymouse008 wrote:
| I've had customers for a bit -- couple K to setup with some
| monthly recurring revenue (#00/month) and have really struggled
| to raise.
|
| Just a weird looking TAM (small as all get out and competitive
| market) is all I can chalk it up to - or I'm a crappy story
| teller
| sjwhitworth wrote:
| I asked Tom for some of this advice earlier this year. Glad to
| see he wrote it up into a blog post -- it's really useful!
| question002 wrote:
| Buy a lot of upvotes on HN... Profit!!!
|
| Look at the comments, it's gamed!
| johnnybaptist wrote:
| "Probably 30% of the rounds I've raised have been "hot" - and
| very fast. 70% have been hard work, slow and stressful."
|
| My favorite part. The ideal scenario is running a tight, targeted
| and short process for a hot deal...but don't be surprised if that
| doesn't happen.
| 0des wrote:
| On a sidenote, I'd be interested in reading an article exploring
| the inverse of this! How to -not- raise investment. Most people
| look at funding like "yeah well I mean that's just the thing you
| do" but it's not for all cases. Sometimes tossing gasoline on
| something is just enough to make it fizzle.
|
| I'm looking forward to the pendulum swinging back around to 2022,
| bring on the slow-biz startups, the organic growth, gimme 2x and
| 3x, bootstrapped on shoestrings, companies run by people who
| created those companies.
|
| I have this reflex every time I see something cool now where I
| can't enjoy new SaaS offerings because I'm always trying to
| imagine the ways in which this new cool thing can backfire and
| frustrate me once it takes funding or goes public. I don't think
| it's a problem in me, either, that model just sucks.
| FinanceAnon wrote:
| I like this article: "Venture capital money kills more
| businesses than it helps"
|
| https://www.vox.com/2019/1/23/18193685/venture-capital-money...
| tomblomfield wrote:
| Author here - happy to answer any questions
| tin7in wrote:
| Thanks for sharing this, Tom!
|
| Should European remote startups re-domicile in the US for
| fundraising (or other) purposes?
|
| We have a London presence/HQ, the team works from 4 European
| countries, and we raised pre-seed during Covid.
| 0des wrote:
| Thanks for sharing with us, I would love to read "How not to
| raise investment", exploring the inverse. As in, not how to
| attract funding in bad ways, but exploring the ways that
| funding or maybe a misaligned partnership can skew the
| trajectory of nascent startups/concepts.
| gethigher wrote:
| AD: great article Tom, covers a lot of questions I've had. One
| I didn't see was in regards to mentors. How important would you
| say having a mentor was to some of your initial raises? If at
| all?
| tomjohnneill wrote:
| Interesting to read those valuation benchmarks. I'd seen this
| article in SeedLegals previously
| https://seedlegals.com/resources/how-to-value-your-company/
| that seem to be quite a lot lower.
|
| It was written at the end of 2019, do you think it's just
| wrong? Or has it changed that much in the past 2 years? Or is
| it a different set of startups?
| DEDLINE wrote:
| Most comprehensive article I have read on fundraising at the
| Seed / Series-A level. Well done and thank you for your
| contribution.
| tomblomfield wrote:
| Thanks for reading :-)
| asien wrote:
| To be very clear , this articles won't help you much if you don't
| fit the criteria's the OP does.
|
| Having discussed with VC a long time ago , it was very HARD to
| raise money without a very strong traction.
|
| Very often VC were convinced with my pitch , and my product but
| would not invest either because they had stuff somewhat similar
| in their portfolio and often because I didn't have a "track
| records" to proof my capability.
|
| If I can recommend one thing to technical founder : don't listen
| to this and build slowly while creating your own community (
| users , customers etc...) and VC will come , don't worry.
|
| VCs are like dogs when they smell money they have the urge to
| come at you, you won't need to call them.
|
| For non-tech founder it's the opposite : don't make anything that
| is complicated or sophisticated, focus 100% on marketing and
| prototyping , I had friends raising 10M+EUR for products that
| didn't exist or couldn't do a tenth of what was promised , but
| because they graduated from the most prestigious schools in Paris
| or London and had invested hundred of thousands in marketing (
| 50KEUR Website , Dozens of Articles in the Press claiming their
| idea was worth billions , Attending Conferences to reach out to
| executives in order to get corporates sponsors etc..)
|
| VCs will prefer a strong team with a stupid idea that a Fortune
| 500 will be naive enough to acquire , rather than a good idea
| with an unproven team that would make money quickly after initial
| build phase.
| dboreham wrote:
| Exactly. Remember also that VC are rich and powerful therefore
| much of what you read and think about investing and startups is
| written for their benefit. Avoid drinking the kool aid.
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