Fundraising is hard.
During that summer session, half our batch died after demo day — a day where you get to pitch investors in Silicon Valley. We got a lot of no's — 11, to be precise. Two VCs thought we should get a CEO, and one told me point blank that we would fail. It wasn't really a surprise though: We were right in the middle of an economic recession.
But in 2010, a week away from death, we miraculously raised $500,000 at a $2M pre-valuation.
A lot has changed in ten years.
Since I raised money 10 years ago, valuations became huge and more capital is available. Investment firms are willing to invest at all the different stages of a company's trajectory. It's imperative for firms to be "founder friendly" to stay competitive. Uncapped convertible notes are the norm. People raise so much money at the seed stage now that it's become the new Series A round. And the top firms are now competing against the new juggernaut: Andreeseen Horowitz .
Some things in the fundraising landscape haven't changed: It's still male dominated, and biased as a result. Venture capitalists still struggle to reject a company directly, instead feigning interest and stringing entrepreneurs along. The top five firms are largely the same, and getting in front of a general partner (the person who can cut the check) at a VC firm is still connection based.
And, let's be real, raising money is still a drain.
Here are some lessons I learned the hard way, that still apply today:
There are two major drivers in raising money successfully: Your team and your idea.
Nobody wants to commit to help a company that's boring or has bad founders. (Companies with incredible growth rates are the major exception.)
When you pitch, your deck should not tell your company's story — you should do that. The deck is just the support material. I made this mistake early on and failed to raise money. It's more important to show people how much you know, how committed you are, and how excited you are. A deck alone will never accomplish that.
And for the love of God — don't make graphs look exponential with just six months of data. Stop using hyperbole, and don't make amazing projected growth targets for five years from now. You're pitching to smart people who can sniff the BS from a mile away.
Put your ego aside if you think this part of company building is glamorous. It's not. Fundraising sucks. It's more fun to work on progressing the company than to be turned down each day.
Don't lock yourself into a valuation and a preferred money stack you can't realistically exceed. If you raise $50 million, that means your company has to sell for $50 million for you to make a cent. Your investors will likely get that first $50 million, and then you split everything after that. If you raise too much, it could hurt you in the long-run and you may make $0. Just because an investor thinks you're worth $100 million doesn't mean the rest of the world does.
Look, I know you probably know that already, but internalize it to your core, because everyone will make you feel like you're successful if you fundraise. They may even think you're rich when you're actually poor. Don't have a fundraising party — wait and have a cash flow positive party instead.
One day, someone younger, or a company with a worse product, a worse team, a "celebrity" founder, or a better marketer will raise more money than you at a higher valuation. Ignore it!
Early on in a company, take smart money: money from people who add more value than just cash, like past founders or CEOs. Find people who can empathize with you. It can be the difference between life and death; between a local maxima or a global maxima in terms of impact.
Lastly, try to remember through all the rejections that sometimes you only need one "yes" to survive and continue the journey. Nobody knows your market like you do, so don't get discouraged.
You got this. I believe in you.
(source: Business insider)