Some more top of mind things..
1) what you say as the size of your raise matters a lot more than you think ESPECIALLY if you can’t raise the amount. for example you say you want to raise $30M, people say it’s too much. you have confidence you can do it. you end up not being able to. and then you go back and say fine we’ll take $20M it doesn’t work that way. it seeds a doubt you weren’t able to fundraise which scares investors even more. more so shows poor judgement on why you needed that money in the first place. this is why i always advise folks to be very thoughtful on the raise amount and aim for a tad bit lower so then you can raise the amount especially in a competitive scenario (multiple term sheets etc). it’s still an art and a hard one.
2) in this era where it’s easier to raise a seed and hard to raise an A, you really got to share your unfair advantages in product, tech or GTM (ideally all three). and you really need to ground it in your company and people and what you’re observing. there’s a competitor probably in every company out there already doing it - you got to share your unique insight and give that VC confidence on why you’ll win.
3) people severely discount HOW much hiring great folks gives you the Mandate of Heaven or at least aura from a fundraise perspective. you should do it from a company perspective anyway but even so if you have great new hires showcase that in your pitch. i’m totally shocked how few companies do this. this severely helps VCs underwrite the downside where at least the company will be bought for the talent.
4) finally don’t give up just because you talked to 15 firms. history has shown time and again how even the best companies had to struggle to raise a round (look at Anthropic). keep trying - if you really believe in your mission, all it takes is one yes. valuation markers will come and go and it’s nice for the ego to get a brand and high valuation - what matters is fuel in the tank to keep your ambition high.
Nikunj Kothari (@nikunj)
Alright August fundraising season is here (got 9 intros this week) so here’s a brain dump of tips that no VC will tell you..
> who you talk to and get to an intro at a VC firm really matters. associates and principals ARE really great. i genuinely mean it BUT you have to see what they have backed recently to understand what kind of leverage they have. what’s their standing in the firm. new, worked on a few great recent deals and understand your space, talk to them. if not, they might be on the way out. always get a warm intro to them as well. understand quickly if the fund will actually be interested vs. lip service. also know once you are assigned to someone in the CRM, you’re stuck with that person. wars have been fought on deal attribution (you think I’m joking but no)
> you got to talk to the GP or capital P partners (these are folks who have actual authority and not just the title, caveat below). and you could cold email, but try to get a warm intro. angels are great for this. ideally from a founder they have already backed. they’ll run on a plane to talk to you with that intro. all schedules vanish and you don’t get passed to an associate (usually).
> on the raise, now here’s where it gets tricky. ask for too much, then they look at you skeptically unless you’re Elon. ask for too little and then you’re not ambitious enough. ask for too little dilution it’s not worth it, ask for too much it’s too good of a deal. and this is the number one thing founders don’t understand: VCs don’t want a “deal”. Like if the price is too good it begets even more questions like why is the price not high. It’s weird but it’s true. there’s no science here.. but be prepared to come up with a resemblance of a plan on why you’re raising that much.
> ok on numbers, no established good lead VC fund will do under 10% dilution. so don’t even ask? obviously there are exceptions and if you have insane leverage go for it. but generally the floor is set since someone is showing how this returns the fund. on valuation, never compare on what your competitor got. it’s the single best way to tank the deal. you have no idea how that deal got done but it’s good to have as a comp.
> don’t lie. the valley and NY especially is insanely small. if you tell them you have a term sheet from someone, it’s literally a text away. it’s a co-opetition so everyone talks to everyone. this is why all decks leak and news spreads like wildfire. and this is why don’t share anything you don’t want to be shared. even if it’s not shared by an upstanding VC, another one will.
> vibes are really important. be you? showcase what you’re excited by and highlight where you need help (we thrive on helping). you can play the silly game of trying to neg and act like someone you’re not - but trust me it works far less then you can think. hype can buy you eyeballs and attention but it’s not the end all be all.
> finally, this is the most consensus market I’ve seen in a while. so if you’re not in a hot sector, strap in. share what makes you a great contrarian bet. everyone is looking to balance their portfolio so you never know where you find champions even if you strike out of the top 100. goes without saying figure out the default alive path.
Good luck to all - and obligatory if you’re raising a seed or series A round - I’d love to meet IRL!
— https://nitter.net/nikunj/status/2085382457457828153#m