#business #fundraising ## General Advice - Story is crucial. Make sure you get it right. - Set a reasonable cap. You can always raise it if you get oversubscribed. - Momentum is everything. Sign those angels and small checks and try to get handshakes within 2-3 days of calls. ## Raising More vs Raising Less ### Raising More - ✅ Competitor has raised a large amount of money, meaning you need to raise more to stay competitive. - ✅ Allows you to stay alive for much longer without having to fundraise again in the next year. - ❌ Can make it more challenging to be nimble and pivot as a company. - ❌ Can raise your valuation and raise the bar for what your company needs to achieve. ### Raising Less - ✅ You are pre product-market-fit and want to make sure you have the capacity to pivot as needed. - ✅ You might want to keep your valuation a bit lower so that it doesn’t raise the bar too much for when you need to raise your next round. - ❌ Some top investors won’t join a round if it is smaller than a certain size. - ❌ Gives you less runway and can make some spending decisions challenging. ## Ways to Think About Round Size - **Milestones**: Figure out how many resources you will need to accomplish your next major target. - **Competitors**: If you are in a hot market with a lot of competitors, sometimes you need to look at other companies to accurately decide the size of your fundraise. - **Stay Alive**: Certain industries like hard tech and consumer can take years to play out so it is really important to find the right early stage investor who will partner with you until you reach product market fit. ## Ways to Think About Valuation - For early stage rounds, you will look at dilution in the range of 10-20%. If you are a hot company or an experienced founder, you can raise closer to 10% dilution. If you have less leverage, it will be closer to 20% dilution. ## Who to Raise From? - **Angels**: Low risk of them sharing decks or information with other funds, but smaller checks. - **Large Tier 1 Funds**: Very strong research divisions and large teams that can assist you in core areas for building a company, but can add a huge amount of pressure to deliver. - **Early Stage Funds**: Typically more willing to make a founder bet when there is less traction. - **Syndicates**: Tend to be less valuation sensitive and members just want to hop on deals for hot companies. - **Venture DAOs**: No negative signaling risk as investors because they don’t do follow on rounds. - **Corporate VCs**: Less valuation sensitive and write checks of $100k-$300k, but move much more slowly at times. ## Telling Fundraising Stories - **High Growth Company**: If you’re gaining a lot of users or contracts, your numbers will be able to speak for themselves. - **Pre-Launch Company**: If you are pre-launch, sometimes it is better to fundraise first before launching so that there is no negative risk if your launch goes poorly. - **Pivoting Company**: If you haven’t nailed down exactly what you are doing, you still need to pitch something aggressively with confidence. ## Checklist - [ ] Come up with your Plan A, Plan B, and Plan C. - [ ] Build a list of your target investors and how you will get intros to them. - [ ] Practice pitch with friends and angels to get feedback. - [ ] Pitch to the investors you care less about to get an implicit read on valuation and round size. - [ ] Get a few early commits before talking to larger funds to build momentum.