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I've been building a company for the last 10 years. For the first 9, no VCs ever contacted us. In the last year, we've gotten pounded with requests, and have th
by andrewljohnson 8y ago
I've been building a company for the last 10 years. For the first 9, no VCs ever contacted us. In the last year, we've gotten pounded with requests, and have thus far declined to talk, but maybe will eventually.
So my tips:
1) If you are going to raise money, decide to do it and go at it hard. Talk to lots of investors, all at once. Until then, I wouldn't meet with any investors. Just thank them for their interest and tell them you'll contact them later if you decide to raise money.
2) To decide whether to raise, start with your goals. Decide what you want to achieve with the company, then analyze your company (business plan, spreadsheets), then choose whether to raise now, later, or maybe never.
What you want to achieve is isn't a simple sort of expected value (EV) question, for a profitable, boot-strapped company. You may prefer to take the option that maximizes the chance of a certain level of return for shareholders, over the option that maximizes the absolute EV. It depends what you want, what your risk tolerance is, what you think your business can achieve, and whether you think VC money helps you get there.
- carimura 8y agoPersonally I'd revise point one -- do meet with some investors, even if you aren't planning to raise. At a minimum the experience is worth it (learn what they ask, how they think, etc.), but beyond that you're cultivating a relationship that may or may not lead to an outcome later. The first date is a lot more awkward if everyone at the table is thinking about marriage.
- andrewljohnson 8y agoI think you're just better off working on the product and talking to customers (though obviously that idea is not original to me). Talking to VCs is a time trap and may further lead you to do the wrong things. I don't think the dating/marriage analogy holds. If VCs are contacting you because your business is booming, you don't really need much of a relationship.
- tyre 8y agoThe absolute best way to raise money (to have leverage in negotiations) is to build a great company. Talking to investors doesn't get you there. While there is a benefit to having relationships and them seeing you execute over time, it's easier to get a meeting if you have great numbers. How many VCs wouldn't take a meeting if your first sentence is, "We have a $150k in MRR and are growing at 20% month-over-month"? Any? I don't know. Build your company.
- Elof 8y agoI don't think taking the time to talk to investors as a hedge is necessary or adds much to business strategy. If you want to build a bootstrapped business and may be open to VC at some unknown point in the future VCs will likely only care about business metrics. If they speak for themselves than most VCs will gladly meet, and it will likely be relatively 'easy' to fundraise. If you aren't looking for early stage capital, don't waste your time talking to investors when you could be building a business... Now, talking to potential acquirers at any point in the lifecycle of the business is a great use of time, in my opinion. If you are open to the idea of eventually selling your company get close to the companies that might be interested in buying your company and stay close. Partnerships, shared customers, deep understanding of their technology and so forth
- whistlerbrk 8y agoWhy... they just want to farm for ideas, understand your execution, use that knowledge to launch a competitor they have a stake in, drive out all the alpha from the business in so doing, and make an exit leaving someone else to hold the bag.
- fxfan 8y agoThey do that? That's slimy!
- muzani 8y agoNobody does this. VCs rely a lot on reputation. The few slimy VCs I see get ostracized from the ecosystem; it's no way to land good deals with good founders. The other paradox is that you can't have a good execution plan without good leaders. The ones who can execute better do something like Rocket Internet, and don't become VCs. VCs are happy to pay someone to do all the work for them.
- melonbar 8y agoJust hopped off my train but this is great. Thanks so much for the feedback. Especially about the focusing on goals Someone else in the post mentioned about life/work balance and this is crucial for me. Life's simply too short, haha.
- logicallee 8y ago>In the last year, we've gotten pounded with requests Any idea what caused the sudden change?
- andrewljohnson 8y agoThe most direct reason is I think we got mentioned in some pitch decks.
- enraged_camel 8y agoAs a counterpoint: the best time to raise money might be when you don’t need to, or want to. It can give you significant leverage in negotiations.