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No, no, no and no. If you need to meet with 100 investors to raise money you are promoting a shitty deal and you shouldn't be investing your personal time in i

No, no, no and no. If you need to meet with 100 investors to raise money you are promoting a shitty deal and you shouldn't be investing your personal time in it. Conversely, if 500 startups routinely invests in companies where 90+ other investors already said no, you gotta worry about 500 startups. > So, I made up a rule of thumb: 5-100-500. Over 5 weeks, meet with 100 investors to close $500k in your seed round. If you want to close $1m, double all of these numbers.

rdlecler1 10y ago
How many investors turned down Airbnb, Uber, and DropBox? A lot.
- _pmf_ 10y ago
  > How many investors turned down Airbnb, Uber, and DropBox? A lot. Airbnb and Uber barely generate profit domestically and operate at a loss internationally. Every investor not betting on inflated share prices has been smart not investing in those.
  - rdlecler1 10y ago
    By your logic you shouldn't invest in a university education because you're not earning a profit while at University. This is what's important to understanding startup economics: IF: CAC < NPV(LTV) THEN: reinvest your earnings and generate zero to negative profit. Where: CAC: Customer Acquisition Cost LTV: Lifetime Value of the Customer NPV: Net Present Value
  - kenbaylor 10y ago
    Uber brought in close to a billion in profit in it's developed markets (mostly USA) last year
- draugadrotten 10y ago
  > How many investors turned down Airbnb, Uber, and DropBox? A lot. These naysayers may have made great business decisions both for themselves and for these startups companies. Not all investors will make a startup prosperous. Only the right investor will create that spark.
  - jacquesm 10y ago
    Investors influence on where a start-up will end up is overrated. It's mostly up to the founders, luck and the market with investors somewhere near the back of the list of factors.
nostrademons 10y ago
> Conversely, if 500 startups routinely invests in companies where 90+ other investors already said no, you gotta worry about 500 startups. All alpha in financial returns comes from doing things your competitors are not doing. If you do what other investors do, you should expect to get exactly average results. As a commodity product, if you get exactly average results your LPs are going to start wondering what they're paying you for. 500 startups is correct for seeking out startups that the other 90+ investors are ignoring. You may or may not be correct for pitching an idea that 99% of investors will ignore; it's a risk/reward trade-off, where pitching the obvious idea will give the obvious result (getting funded) followed by the other obvious result (landing at a big company in a face-saving aquihire), while pitching the non-obvious idea gives you a 99% chance of ignominious failure and a 1% chance that you're the next Google.
- elizyin 10y ago
  And in fact, it isn't usually the case that 90 people are saying no...more often than not, investors like to wait around and go MIA and not give you a response... Annoying as hell. :)
dredmorbius 10y ago
"No" is almost always the safe answer. Some long shots succeed. Colonel Sauders famously was rejected over 1,000 times with his pitch for Kentucky Fried Chicken. http://theartofapplying.com/rejection-and-fried-chicken/ http://theartofapplying.com/rejection-and-fried-chicken/
- notahacker 10y ago
  I think Sanders would have probably had a higher initial success rate if he'd been pitching a business opportunity to people that make a living from investing in multiple high risk ventures, rather than pitching the opportunity of becoming a franchisee to people whose roadside cafe was doing just fine, thank you very much.
  - rdlecler1 10y ago
    I beg to differ: Most VCs (those investing risk capital) don't invest in capital inefficient businesses like restaurants.
    - notahacker 10y ago
      My point was less about the specifics of the fried chicken restaurant industry and KFC corporate mythology and more about the fact professional investors earn a living trying to pick winning startups; small business owners that decline to become a franchisee or reinvent themselves as a joint venture with you don't. As such, reticence on the part of the latter group to get involved says a lot less about potential weaknesses in your business model than reticence on the part of the investors. (FWIW There are plenty of investors that specialise in investing in restaurant outlets and consumer brand franchises, they just don't tend to be located on Sand Hill Road.)
  - dredmorbius 10y ago
    The story, though I know only bits and pieces, is fairly interesting. In particular, Kentucky Fried Chicken (it wasn't delettered to "KFC" until 1991), like McDonald's and Burger King, capitalised hugely on the building of the Interstate Highway System (begun in 1958), and a sudden interest in familiar food whilst on the road, an experience far more Americans began sharing in the 1960s and 1970s. To that extent, his company and legacy are a very fascinating study of complementary developments and capabilities. And sinking money into the Colonel in the early 1950s would have given extremely strong returns.
elizyin 10y ago
That isn't always the case (though it could be). Here's why it takes so long to pitch to investors: http://blog.elizabethyin.com/post/139303202435/why-fundraising-takes-so-long-for-most http://blog.elizabethyin.com/post/139303202435/why-fundraisi...
morgante 10y ago
> If you need to meet with 100 investors to raise money you are promoting a shitty deal and you shouldn't be investing your personal time in it. Where do you get that from? Many very successful companies had a very hard time raising money at some point. That certainly didn't make them into a "shitty deal." In fact, Fred Wilson just wrote an article about how hard it was for them to raise their first fund at USV—and that fund ended up doing spectacularly well. [0] [0] http://avc.com/2016/10/the-hard-raise/ http://avc.com/2016/10/the-hard-raise/
- paulsutter 10y ago
  Well its right there in Fred's article: > we have seen founders and CEOs get rejected by more than fifty investors during that process. He mentions 50 rejections as an outlier. He's not saying that's the norm, he's saying thats how bad it can get for companies in his portfolio that do raise money. Nor is he saying those are his best performers. In fact, he's saying they need to change their company to raise money. Which is to say, that they started out pitching a shitty deal and had to improve it: > As these expansion stage companies struggle to raise capital, they are forced into a cathartic (and at times painful) process of self reflection... And as a result, these companies are coming out of these hard raises with better businesses, better operating models (lower burn rates!!), and bigger visions to go execute against
jonmc12 10y ago
This study from DocSend in June '15 claims the average seed round is raised in 12 weeks after contacting 58 investors. https://techcrunch.com/2015/06/08/lessons-from-a-study-of-perfect-pitch-decks-vcs-spend-an-average-of-3-minutes-44-seconds-on-them/ https://techcrunch.com/2015/06/08/lessons-from-a-study-of-pe... Conditions for raising seed are a bit tougher today, but even in 2015 contacting 100 investors not outside of norm.

rdlecler1 10y ago

How many investors turned down Airbnb, Uber, and DropBox? A lot.

_pmf_ 10y ago
> How many investors turned down Airbnb, Uber, and DropBox? A lot. Airbnb and Uber barely generate profit domestically and operate at a loss internationally. Every investor not betting on inflated share prices has been smart not investing in those.
- rdlecler1 10y ago
  By your logic you shouldn't invest in a university education because you're not earning a profit while at University. This is what's important to understanding startup economics: IF: CAC < NPV(LTV) THEN: reinvest your earnings and generate zero to negative profit. Where: CAC: Customer Acquisition Cost LTV: Lifetime Value of the Customer NPV: Net Present Value
- kenbaylor 10y ago
  Uber brought in close to a billion in profit in it's developed markets (mostly USA) last year
draugadrotten 10y ago
> How many investors turned down Airbnb, Uber, and DropBox? A lot. These naysayers may have made great business decisions both for themselves and for these startups companies. Not all investors will make a startup prosperous. Only the right investor will create that spark.
- jacquesm 10y ago
  Investors influence on where a start-up will end up is overrated. It's mostly up to the founders, luck and the market with investors somewhere near the back of the list of factors.

nostrademons 10y ago

> Conversely, if 500 startups routinely invests in companies where 90+ other investors already said no, you gotta worry about 500 startups. All alpha in financial returns comes from doing things your competitors are not doing. If you do what other investors do, you should expect to get exactly average results. As a commodity product, if you get exactly average results your LPs are going to start wondering what they're paying you for. 500 startups is correct for seeking out startups that the other 90+ investors are ignoring. You may or may not be correct for pitching an idea that 99% of investors will ignore; it's a risk/reward trade-off, where pitching the obvious idea will give the obvious result (getting funded) followed by the other obvious result (landing at a big company in a face-saving aquihire), while pitching the non-obvious idea gives you a 99% chance of ignominious failure and a 1% chance that you're the next Google.

elizyin 10y ago
And in fact, it isn't usually the case that 90 people are saying no...more often than not, investors like to wait around and go MIA and not give you a response... Annoying as hell. :)

dredmorbius 10y ago

"No" is almost always the safe answer. Some long shots succeed. Colonel Sauders famously was rejected over 1,000 times with his pitch for Kentucky Fried Chicken. http://theartofapplying.com/rejection-and-fried-chicken/ http://theartofapplying.com/rejection-and-fried-chicken/

notahacker 10y ago
I think Sanders would have probably had a higher initial success rate if he'd been pitching a business opportunity to people that make a living from investing in multiple high risk ventures, rather than pitching the opportunity of becoming a franchisee to people whose roadside cafe was doing just fine, thank you very much.
- rdlecler1 10y ago
  I beg to differ: Most VCs (those investing risk capital) don't invest in capital inefficient businesses like restaurants.
  - notahacker 10y ago
    My point was less about the specifics of the fried chicken restaurant industry and KFC corporate mythology and more about the fact professional investors earn a living trying to pick winning startups; small business owners that decline to become a franchisee or reinvent themselves as a joint venture with you don't. As such, reticence on the part of the latter group to get involved says a lot less about potential weaknesses in your business model than reticence on the part of the investors. (FWIW There are plenty of investors that specialise in investing in restaurant outlets and consumer brand franchises, they just don't tend to be located on Sand Hill Road.)
- dredmorbius 10y ago
  The story, though I know only bits and pieces, is fairly interesting. In particular, Kentucky Fried Chicken (it wasn't delettered to "KFC" until 1991), like McDonald's and Burger King, capitalised hugely on the building of the Interstate Highway System (begun in 1958), and a sudden interest in familiar food whilst on the road, an experience far more Americans began sharing in the 1960s and 1970s. To that extent, his company and legacy are a very fascinating study of complementary developments and capabilities. And sinking money into the Colonel in the early 1950s would have given extremely strong returns.

elizyin 10y ago

That isn't always the case (though it could be). Here's why it takes so long to pitch to investors: http://blog.elizabethyin.com/post/139303202435/why-fundraising-takes-so-long-for-most http://blog.elizabethyin.com/post/139303202435/why-fundraisi...

morgante 10y ago

> If you need to meet with 100 investors to raise money you are promoting a shitty deal and you shouldn't be investing your personal time in it. Where do you get that from? Many very successful companies had a very hard time raising money at some point. That certainly didn't make them into a "shitty deal." In fact, Fred Wilson just wrote an article about how hard it was for them to raise their first fund at USV—and that fund ended up doing spectacularly well. [0] [0] http://avc.com/2016/10/the-hard-raise/ http://avc.com/2016/10/the-hard-raise/

paulsutter 10y ago
Well its right there in Fred's article: > we have seen founders and CEOs get rejected by more than fifty investors during that process. He mentions 50 rejections as an outlier. He's not saying that's the norm, he's saying thats how bad it can get for companies in his portfolio that do raise money. Nor is he saying those are his best performers. In fact, he's saying they need to change their company to raise money. Which is to say, that they started out pitching a shitty deal and had to improve it: > As these expansion stage companies struggle to raise capital, they are forced into a cathartic (and at times painful) process of self reflection... And as a result, these companies are coming out of these hard raises with better businesses, better operating models (lower burn rates!!), and bigger visions to go execute against

jonmc12 10y ago

This study from DocSend in June '15 claims the average seed round is raised in 12 weeks after contacting 58 investors. https://techcrunch.com/2015/06/08/lessons-from-a-study-of-perfect-pitch-decks-vcs-spend-an-average-of-3-minutes-44-seconds-on-them/ https://techcrunch.com/2015/06/08/lessons-from-a-study-of-pe... Conditions for raising seed are a bit tougher today, but even in 2015 contacting 100 investors not outside of norm.