Miles 𓂀

the fundraising market is very hot and very founder-friendly atm, but I'm still seeing a lot of founders make misguided errors that complicate or derail their raises entirely. a non-exhaustive list of own goals to avoid: > don't use exceptional rounds to set expectations for your own raise. i.e. "<famous company X> raised $ X at $ Y valuation so I should do this too". don't do this, exceptions don't make the rule > in same spirit, don't raise your valuation cap because of vibes / don't mechanically start asking for a higher cap because *one* investor converted, but interest in your round remains meager. the "cuck tranche" and rounds with exploding valuation caps are indeed very common, however valuation caps increase as a consequence of excess $$ interest in a company at a certain cap, not because there is a pre-determined mechanic in fundraising that dictates investor 2+ must pay more than investor 1 irrespective of external market conditions and round dynamics. only hot rounds (a spectrum) command increasing valuations, and if its not already hot you're not playing the same game. trying to extort new investors with a higher valuation while your round is not remotely hot is a good way to push interested folks away (and consequently slow your momentum even more) > don't be needlessly greedy about dilution + valuation. to the last point, the way you get hot (thus enabling to raise more capital at more friendly/less dilutive terms) is to by closing capital quickly. thus the beginning of your raise should optimize for speed (i.e. make it easy for an investor to want to give you money), and as your momentum builds, you can increasingly optimize for price and dilution. the mistake here is to be a stickler about dilution from the beginning (too many founders seem to believe they are entitled to 10% dilution no matter what) > don't think you're entitled to a certain investor base. i've met a lot of founders that say some flavor of "I only want X,Y,Z stratetic investors in my round and everyone else is beneath me". this once again misses the reality of how things work: the "hotter" you are, the choosier you get to be. as covered, you get hot by attracting a lot of capital to your round. it's orders of magnitude harder to attract a lot of capital when you're only pitching a small group of investors you consider to be "good enough"

a lot of (good) fundraising advice on the timeline rn, so here is my simple tip for pre-seed/seed raises: if someone offers you money, figure out a way to take it and don't mess about. everyone talks about momentum and fomo in rounds, and the only functional way to create either is money in the bank (and this works in the opposite direction as well); more money in the bank, more fomo. the biggest unforced error I see a lot of first-time fundraisers make that derails their raises is believing dated myths about *how* they ought to raise money, which deters them from taking money when it's on the table (which kills their round momentum). just some recent examples I've encountered (don't do/believe these things): > putting off smaller checks because they "need to find a lead" you're raising a SAFE "round"; legally speaking there is no "round" as SAFEs are async financing instruments which the company enters independently with each investor, unlike a priced round. as such you have no legal need for a "lead", and frankly any reasonable investors that wants to write you check can slap a valuation cap on a YC-standard SAFE. taking the money, anchoring your raise around certain terms, and opening yourself up to more warm network (via the new investors) will help catalyze your raise. all checks move your round forward. > believing the entire round needs to be verbally committed before formally closing everyone once again, since SAFE rounds are not priced rounds and are independent, async instruments you do not 1) need to have your entire round committed to start closing SAFEs and 2) need to have everyone agree to the same terms. On 1), in fact, raising a SAFE round and not having capital hard committed (i.e. signed and wired) is a negative signal to investors (since SAFEs are signed and funded virtually instantaneously), rendering "soft commits" meaningless. On 2), as well documented on the timeline now, it's almost largely expected nowadays that the last investor in a raise will pay a premium over the first investor (and everyone is ostensibly happy with this status quo).

esp if you're a pre-Series A founder, i would highly advise taking 15 minutes once a month (or quarter) to write a company update to your existing investors (doesn't need to be fancy) the non-obvious reason why *not* doing this can actually have unintended negative fallout is that downstream VCs (e.g. multistage firms) often ask downstream VCs (e.g. pre-seed funds) about certain companies in their portfolios (i.e. they source from these funds), and it looks bad (for the company) to prospective investors if existing investors have no updates from the company to share (bad communication is not desirable) e.g. if a downstream investor asks the upstream investor, "hey, <Company X> looks interesting, how have they been doing?" and the upstream investor is forced to say "i'm actually not sure, because I haven't heard anything from them in a while", you (i.e. <Company X>) might get dinged in your fundraise without you even knowing