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> FWIW, my fund has made ~65 investments in the last 5+ years. Exactly one of those investment offers was made during the first meeting while the founder was in

> FWIW, my fund has made ~65 investments in the last 5+ years. Exactly one of those investment offers was made during the first meeting while the founder was in the room. The majority of investments took 2-4 meetings, a few email questions between meetings, and several reference calls. From what I know, most funds that write $250k+ checks work in a similar manner. Sure: but let's dig in. I'm interested. Out of those 65 investments, how many did you explicitly lead? Sure: the majority took 2-4 meetings. But... (1) What's a meeting to you? Keep in mind that your Principals and / or Associates conducting meetings and diligence should not qualify as meetings. If it's not with a GP it's not really a fundraising meeting and no founder should reasonably consider it such. Yes, I'm adding a semantic layer here, but this semantic layer is extremely important to founder psychology and how we classify meetings, fundraising success and more. (2) How many of these investments had a term sheet after only one meeting? Not necessarily with the founder in the room, but this is, for all intents and purposes, functionally equivalent to an investment offer made in the room? On top of that, is the a correlation between leading an investment round and a fewer number of meetings with a founding team before investing? My intuition based on my own experience and anecdotes of other founders would be that there should be a correlation - happy to be wrong, though. Also, out of the investments that took "2-4 meetings", did the founders ever roadblock you from investing (i.e. it's a meeting but the founder "isn't fundraising"?) - because this is pretty common (some use it as a tactic but often it's just flat out true), in which case "2-4 meetings" isn't actually "2-4 fundraising meetings." If a founder is at this stage, they don't need this Medium Article's advice: they've already developed the maturity to execute upon a fundraising strategy, you just might not see it due to selection and / or survivorship bias (seems natural, and just how things are done). In fact, they're executing the latter part of the strategy outlined here (have found a lead via "focus", or relatively confident in their ability to receive a term sheet when they pull the fundraising trigger). We're really pulling apart the fabric at the seams here: there's a reason this article isn't a hundred pages or more, which is realistically the volume of information a founder has to internalize while they're developing their own understanding of the fundraising and investment landscape. They'll also find their experience to be very personal. This advice is meant as a launchpad, and I think it's a good starting point for novice founders. If I were to give advice to new founders (and I do get asked occasionally, but I'm literally nowhere close to a celebrity fundraiser and still a fledgling entrepreneur) it's, "I still don't understand fundraising. Just be yourself and build something you're passionate about, have confidence, be persistent, be kind, and the right people will come along. You'll probably trick yourself into thinking you understand something about the process, but realistically, fundraising is just about people and relationships, and shit is messy. Be humble and thankful, and try not to waste too much time discussing fundraising strategy with investors on Hacker News." Disclaimer: I often don't follow my own advice.

confiscate 9y ago
For what it's worth I think both of you have valid points. The only point I want to add: - the article explicitly mentions it is advice for EARLY STAGE startups (see "No one knows the value of an early stage startup") Yes, if the startup is already Series D, the traction numbers are there, I'd see why you would want to ask lots of quantitative questions to get a yes/no decision. But for an EARLY STAGE startup--would digging in with factual questions really change your decision? At that point everything is just projections and guesswork. The signals are more qualitative than quantitative. Put another way--as an investor, when was the last time you met an Early Stage startup, came out of the meeting with a "default not invest", emailed them a follow up FACTual question, and the FACTual answer they replied back to you, turned you from a "default no" into a "yes"?
- lpolovets 9y ago
  Asking factual questions isn't just for learning facts, it's also for seeing how someone things. Example: "During the call you mentioned the market potential for a CRM for plumbers is $3b. When I did some napkin math I came up with $400m. Can I ask how you arrived at the $3b number?" Bad answers: "Gartner says the market is $3b" or "CRMs are a $100b market overall, and plumbers are 3% of the workforce." These are factual answers, but pretty weak. Good answer: "There are 3.3m plumbers in the workforce. 30% of them are solo entrepreneurs, so they are unlikely to need a CRM. The other 2.3m spend 14 hours per month on managing their contact lists [citation]. We surveyed 30 plumbers and saw a willingness to pay $100/mo if we can reduce the 14 hours down to 2 hours. $100/mo x 12mo x 2.3m plumbers = $2.8b." This is also a factual answer, but you can tell the founder thought about this more, they did customer development to get good data, etc. As an investor, an answer like this gives me a lot more confidence.
  - keithwhor 9y ago
    I think I'm getting rate-limited by HN so this may be my last response, buuuut: I think that, unless this was a real example with founders you can name, this is a dangerous example, and even then it's suspect. I have literally not once swayed a "maybe" investor via an email. It's "maybe" and not "yes" for a reason, and the way you've framed it here is as if "maybe" converts to "yes" with enough elbow grease and a cleverly crafted answer. Founders can spend hours writing single e-mails to investors, especially if they're desperate for funding. So what you read as a simple e-mail response may realistically have been half a day of lost fundraising productivity, for, at best, a 10% chance they convert your gut-feeling "maybe" to a "yes." This is where founders have an intuition about fundraising, especially first-time founders raising early rounds, that investors often just have no way to empathize with because they simply don't know. I have, however, swayed "maybe" and even outright "no" / "not now" investors by walking away, mentally divesting, and re-engaging particularly helpful ones later with additional proof points. YMMV as a founder but I would recommend this approach 100 times before I ever recommended sinking hours into a clarifying e-mail with an investor who was a "maybe." Your response may be, "well, just don't spend hours on e-mails then." Sure, tell that to the founder who has literally sunk $20,000 off of their 20% interest credit card and another $20,000 of their lower-middle-class parents' retirement money into their startup. They'll nod and spend the hours anyway. (The cruel irony is that many of the founders insecure enough to spend hours on an e-mail are almost guaranteed to not sway you, meaning that the 10% that do sway you only represent something like 1% of the total time spent on e-mails. This is why this sort of advice exists.)

confiscate 9y ago

For what it's worth I think both of you have valid points. The only point I want to add: - the article explicitly mentions it is advice for EARLY STAGE startups (see "No one knows the value of an early stage startup") Yes, if the startup is already Series D, the traction numbers are there, I'd see why you would want to ask lots of quantitative questions to get a yes/no decision. But for an EARLY STAGE startup--would digging in with factual questions really change your decision? At that point everything is just projections and guesswork. The signals are more qualitative than quantitative. Put another way--as an investor, when was the last time you met an Early Stage startup, came out of the meeting with a "default not invest", emailed them a follow up FACTual question, and the FACTual answer they replied back to you, turned you from a "default no" into a "yes"?

lpolovets 9y ago
Asking factual questions isn't just for learning facts, it's also for seeing how someone things. Example: "During the call you mentioned the market potential for a CRM for plumbers is $3b. When I did some napkin math I came up with $400m. Can I ask how you arrived at the $3b number?" Bad answers: "Gartner says the market is $3b" or "CRMs are a $100b market overall, and plumbers are 3% of the workforce." These are factual answers, but pretty weak. Good answer: "There are 3.3m plumbers in the workforce. 30% of them are solo entrepreneurs, so they are unlikely to need a CRM. The other 2.3m spend 14 hours per month on managing their contact lists [citation]. We surveyed 30 plumbers and saw a willingness to pay $100/mo if we can reduce the 14 hours down to 2 hours. $100/mo x 12mo x 2.3m plumbers = $2.8b." This is also a factual answer, but you can tell the founder thought about this more, they did customer development to get good data, etc. As an investor, an answer like this gives me a lot more confidence.
- keithwhor 9y ago
  I think I'm getting rate-limited by HN so this may be my last response, buuuut: I think that, unless this was a real example with founders you can name, this is a dangerous example, and even then it's suspect. I have literally not once swayed a "maybe" investor via an email. It's "maybe" and not "yes" for a reason, and the way you've framed it here is as if "maybe" converts to "yes" with enough elbow grease and a cleverly crafted answer. Founders can spend hours writing single e-mails to investors, especially if they're desperate for funding. So what you read as a simple e-mail response may realistically have been half a day of lost fundraising productivity, for, at best, a 10% chance they convert your gut-feeling "maybe" to a "yes." This is where founders have an intuition about fundraising, especially first-time founders raising early rounds, that investors often just have no way to empathize with because they simply don't know. I have, however, swayed "maybe" and even outright "no" / "not now" investors by walking away, mentally divesting, and re-engaging particularly helpful ones later with additional proof points. YMMV as a founder but I would recommend this approach 100 times before I ever recommended sinking hours into a clarifying e-mail with an investor who was a "maybe." Your response may be, "well, just don't spend hours on e-mails then." Sure, tell that to the founder who has literally sunk $20,000 off of their 20% interest credit card and another $20,000 of their lower-middle-class parents' retirement money into their startup. They'll nod and spend the hours anyway. (The cruel irony is that many of the founders insecure enough to spend hours on an e-mail are almost guaranteed to not sway you, meaning that the 10% that do sway you only represent something like 1% of the total time spent on e-mails. This is why this sort of advice exists.)