Notes on How To Raise Money

On the Importance of Convincing Yourself

"Convince yourself that your startup is worth investing in, and then when you explain this to investors they'll believe you."

"You don't have to be a smooth presenter if you understand something well and tell the truth about it."

"But pausing first to convince yourself will do more than save you from wasting your time. It will force you to organize your thoughts. To convince yourself that your startup is worth investing in, you'll have to figure out why it's worth investing in. And if you can do that you'll end up with more than added confidence. You'll also have a provisional roadmap of how to succeed."

On 'Being A Good Bet'

"So to prove you're worth investing in, you don't have to prove you're going to succeed, just that you're a sufficiently good bet."

"The standard of plausibility varies dramatically depending on the age of the startup. A three month old company at Demo Day only needs to be a promising experiment that's worth funding to see how it turns out."

On Getting Rejected

"If instead of seeming evasive and ashamed about having been turned down (and thereby implicitly agreeing with the verdict) you talk candidly about what scared investors about you, you'll seem more confident, which they like, and you'll probably also do a better job of presenting that aspect of your startup. At the very least, that worry will now be out in the open instead of being a gotcha left to be discovered by the investors you're currently talking to, who will be proud of and thus attached to their discovery."

On Using Plain Language

"And when you convince them, use the same matter-of-fact language you used to convince yourself. You wouldn't use vague, grandiose marketing-speak among yourselves. Don't use it with investors either."

"If you're saying something you know is true, you'll seem confident when you're saying it. Conversely, never let pitching draw you into bullshitting. As long as you stay on the territory of truth, you're strong. Make the truth good, then just tell it."

Take-Aways

Summary: "Avoid investors till you decide to raise money, and then when you do, talk to them all in parallel, prioritized by expected value, and accept offers greedily."

On Investors

"Investors are pinched between two kinds of fear: fear of investing in startups that fizzle, and fear of missing out on startups that take off. The cause of all this fear is the very thing that makes startups such attractive investments: the successful ones grow very fast. But that fast growth means investors can't wait around. If you wait till a startup is obviously a success, it's too late. To get the really high returns, you have to invest in startups when it's still unclear how they'll do. But that in turn makes investors nervous they're about to invest in a flop. As indeed they often are."

Commit One Founder - They Are CEO

"The founder who handles fundraising should be the CEO, who should in turn be the most formidable of the founders. Even if the CEO is a programmer and another founder is a salesperson? Yes. If you happen to be that type of founding team, you're effectively a single founder when it comes to fundraising."

Get it over fast!

Executive Summary

"You'll also want an executive summary, which should be no more than a page long and describe in the most matter of fact language what you plan to do, why it's a good idea, and what progress you've made so far. The point of the summary is to remind the investor (who may have met many startups that day) what you talked about."

Sequoia's Deck Outline: http://www.sequoiacap.com/grove/posts/6bzx/writing-a-business-plan

On How To Choose Seed Investors

Seed = $1-2 million

What are we raising exactly? Just enough to give us a chance to get to profitability.

"The best way to get the introductions to the A stage venture firms is to work through the seed investors."

"The most important thing at the seed stage is picking the right seed investors because they are going to lay the foundation for future fundraising events."

Things we need to do:

#simplenote
#work/first
#books
#inbox
#work/notes