Finding investors for your first raise is tough. Especially if you’re a first-time founder and especially since this is your first raise. Some sources of capital seem almost too good to be true. In reality, though, you should avoid them or at least approach them with healthy skepticism.
In particular: Grants, Angel Groups, Accelerators, and Equity Crowdfunding. In general, these sources of capital require investing a lot of time for not a lot of money. Time and effort that could instead be spent raising from individual Angels, Micro VCs, and more ‘traditional’ investors.
But, there are certain cases where these sources of capital do make sense. Here’s how to think about and assess these sources of capital. …
A recent article by NFX, a Bay Area-based VC firm, titled “Where to Build Your Startup” got many things right about where to build your startup, but still fell short on a key issue.
Most importantly, arguing that culture was the cause, not the result of Silicon Valley’s success. So the logic goes, replicating Silicon Valley’s culture can replicate Silicon Valley. The article states:
Now that the world is increasingly going remote, we believe that one big opportunity is to find people that share these cultural protocols and this same mindset, independently of location. …
When you’re building a new product, you constantly have to decide which features to build, when to build them and how to build them. However, when it comes to making these decisions, teams often fall into two failure modes — The Never-Ending Debate mode or The “Yes Team” mode. To make matters worse, remote work only exacerbates both failure modes.
First, you should be proud that your team has an open atmosphere where team members are comfortable sharing their opinions. However, you and your team will quickly find yourselves exhausted.
The endless debates are a drain on the team’s energy, and before you know it, the day is done. The backlog hasn’t gotten any smaller. To make matters worse, heated and lengthy debates are difficult to manage. With strong personalities, it’s very easy for discussions to turn into debates, and for debates to turn into arguments that get personal. In a remote work setting, this failure mode can be especially bad because you lack the in-person interaction that humanizes people. …
When I first started my startup, I often used the word just when talking about what we’d accomplished.
We just had five customers.
We just raised a pre-seed round.
It‘s just me and the CTO.
When I meet other founders, I often hear them using the “j word” too.
This is problematic because we’re constantly sub-consciously diminishing our accomplishments by using the word just. Over time, we start to believe that we haven’t accomplished much and get discouraged. Especially when you’re early on, and morale is so important, getting discouraged can kill your startup much faster than running out of money. New businesses do not start from thin air. …
Updated October 2020
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You have an idea and want to make it a reality.
Incubators and other programs like them are often among the first organizations you’ll encounter on your startup journey. As a result, they often seem like a logical place to start. After all, you probably know next to nothing about startups and have many questions:
How do I form a company?
How do I meet a co-founder?
How do I build and sell a product?
How do I raise funding?
If the incubator is well run, incubators can be a great thing for founders. However, they rarely are. We went through several incubator programs and made progress but never really seemed to grow due to their advice. …
One of the things I emphasize with founders the most about but understand the least is over-indexing on price. When it comes to making decisions, I often hear things like:
“It was the cheapest”
“We found a way to get x for free”
“I only had to give up x equity”
“We got x contractor for only x dollars per hour”
I empathize with these statements because when you’re starting a startup you’re strapped for cash. You need to figure out how to make the most happen with the least amount of money. …
Fundraising is one of the most difficult things you’ll do as a founder, especially if you’re a first-time founder and especially for your first raise.
Every company is different, but here are some of my biggest takeaways from raising a pre-seed round that included Micro VCs, Angels, and Family Offices. The vast majority was from people I knew only at arm's length before starting the raise. Friends and family accounted for less than 5% of the raise.
It seems obvious, but it’s so often ignored. This is step one. You need to build something worth investing in and believe that it is worth investing in. The more traction you have, the easier your life will be. If you try to fundraise too early, you risk wasting valuable time that you could have spent building your product or making money. …
For any challenging endeavor, you need to have the right tools, resources, and be able to speak the lingo. Here are some of the tools and resources I found to be most helpful.
Once you get over the feedback hump with your deck and you’ve closed your first check, it’s time to step on the gas and find more investors. You should pursue as many investors simultaneously as possible. This creates interest in the round and pushes investors over Wait-and-See Hill.
It is the interest of other investors that forces investors to act because there is limited room in the raise. Do not take the single-shot approach where you court one or two ‘great’ investors. Closing a round is about a truckload of lead bullets. …