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I think you should take a step back and personally consider it a red flag if, after strong exposure through an accelerator, you're unable to get substantial int

I think you should take a step back and personally consider it a red flag if, after strong exposure through an accelerator, you're unable to get substantial interest from institutional investors. That's what accelerators are for. The "checks too big" problem doesn't really fly IMO. If some strangers really want to give you a check for $X million for something that is currently worth $0 million, you should do it. Worrying about maintaining equity is silly, because you can just think of it as reducing future fundraising needs. Also, if the checks are really too big, surely these professional investors would find another way to make it work with a smaller check, or introduce you to smaller professional investors downstream in their pipeline. Most likely, "checks too big" is their way of letting you down gently. Do you really want to ask F&F to put money into something that professionals are not that enthusiastic about? They are most likely unsophisticated investors and you risk damaging your relationship with them. Accordingly, your confidence in the startup should be quite high to take their money. I think the signaling risk is irrelevant. If you take the F&F money, either it will be enough to get you to the next level needed to raise more or it won't. (Or you won't need to raise more, so again it's irrelevant.)

gnicholas 10y ago
Thanks for the candor. If we were the only startup in our cohort not to raise from VCs, I'd certainly have some concerns. I think the accelerator had some flaws (it was their first cohort), and we ended up not actually being exposed to suitable potential investors, which is why no one raised coming out of demo day. You make a good point about introductions to smaller investors — that's certainly something to think about. I agree that in most cases a startup should open to taking large checks, but we're a bit of an anomaly in that we're a licensing business with relatively light expenses. So we're only looking to raise around $300k, which doesn't make sense for most of the VCs we met through the accelerator. I understand that they have to put cash to work, and that if they prefer a 5x return on a $10M check than a 10x return on a $250k check. With such a small investment, there's basically no chance that we materially impact their fund's overall return.

gnicholas 10y ago

Thanks for the candor. If we were the only startup in our cohort not to raise from VCs, I'd certainly have some concerns. I think the accelerator had some flaws (it was their first cohort), and we ended up not actually being exposed to suitable potential investors, which is why no one raised coming out of demo day. You make a good point about introductions to smaller investors — that's certainly something to think about. I agree that in most cases a startup should open to taking large checks, but we're a bit of an anomaly in that we're a licensing business with relatively light expenses. So we're only looking to raise around $300k, which doesn't make sense for most of the VCs we met through the accelerator. I understand that they have to put cash to work, and that if they prefer a 5x return on a $10M check than a 10x return on a $250k check. With such a small investment, there's basically no chance that we materially impact their fund's overall return.