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"It's pretty hard to get more than one [term sheet] because every deal is on its own timeline" - yes, but that's a symptom of a loose/poor/disorganized fundrais

by corry 7y ago

"It's pretty hard to get more than one [term sheet] because every deal is on its own timeline" - yes, but that's a symptom of a loose/poor/disorganized fundraise (IMO), not a hard and fast constraint. To me, the whole point of running a tight and structured Series A process is that you have the various horses crossing the finish line at the same time so that you have multiple interested parties capable of issuing term sheets concurrently. To do that, you need to operate essentially a cohort-based funnel. Which is my understanding of YC's Series A program - it provides the structure, batch-processing, and funnel clarity to help make this happen inorganically in case it doesn't organically. The other big advantage of batch-processing is obviously more efficient use of time.

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rlucas 7y ago
In the very best of circumstances your approach would be optimal. And in fairness at later rounds or M&A this is what you hire an I banker for — To create an auction. But the great majority of firms raising a Series A aren’t so obviously “Fundable” that they can reliably gin up a parallel set of term sheets. Consider that if it takes 30 VC outreaches to average one TS, what would it take to average two within an overlapping two week window (realistically these things expire)? A lot more than 60 I’d bet. Another thing about this is that these aren’t bandits or oracles or black boxes you’re doing some kind of algorithmic search on. Ideally each pitch you do will give you feedback and practice to hone the pitch, market feedback on the actual underlying business, and possibly even introductions to helpful others (customers or rarely investors; VCs tend not to pass along deals they rent investing in because of signaling effects but intros / sharing does happen). So a Series A raise is a path dependent process.
- corry 7y ago
  Good points, but I'm curious if getting multiple TSs is only true in "the very best of circumstances". For instance - is 30 VC outreaches a stretch? Sounds like a day or two of focused efforts - cold outreach, working your network, etc. Heck, a BDR at any startup company is doing more than that outreaches PER DAY to clients - so is it unrealistic to expect CEOs to do that for something that's existentially important? But even then, if 30 gets you 1 TS, why not optimize your effort to get to 60 or 90 instead? Surely it's not perfectly linear... but at least you know the order of magnitude of effort, right? And that still doesn't seem totally crazy to me. BTW - I'm prepared to accept that "it's impossible"; perhaps I'm overly optimistic based on my own experience. Our Series A fundraise resulted in 4 TSs at the same time, not because we were "hot" like Facebook or because I was an amazing CEO/founder, but because I had experienced CEO/founder mentors guiding me in how to execute the process to achieve that exact outcome. So net is I'm just not sure this isn't a "thing is hard and few people do it, therefore it's impossible" versus a "thing is hard, so you need to work backwards and do XYZ very well". And XYZ is just not widely known or even understood by those who do it, and is likely hard too. Net of all of this is that this is why the YC Series A program is a great idea. It can provide best-practices and guidance to achieve "impossible" outcomes, and it is essentially systematizing a process that perhaps is more art than science. That all said, to counter my own points - while there is probably some operational lift by running a perfect process, that effect is likely dwarfed by how compelling the startup is at that time. Is it growing 300%+ YoY with a huge vision? etc.

by corry 7y ago

deleted 7y ago

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rlucas 7y ago

In the very best of circumstances your approach would be optimal. And in fairness at later rounds or M&A this is what you hire an I banker for — To create an auction. But the great majority of firms raising a Series A aren’t so obviously “Fundable” that they can reliably gin up a parallel set of term sheets. Consider that if it takes 30 VC outreaches to average one TS, what would it take to average two within an overlapping two week window (realistically these things expire)? A lot more than 60 I’d bet. Another thing about this is that these aren’t bandits or oracles or black boxes you’re doing some kind of algorithmic search on. Ideally each pitch you do will give you feedback and practice to hone the pitch, market feedback on the actual underlying business, and possibly even introductions to helpful others (customers or rarely investors; VCs tend not to pass along deals they rent investing in because of signaling effects but intros / sharing does happen). So a Series A raise is a path dependent process.

corry 7y ago
Good points, but I'm curious if getting multiple TSs is only true in "the very best of circumstances". For instance - is 30 VC outreaches a stretch? Sounds like a day or two of focused efforts - cold outreach, working your network, etc. Heck, a BDR at any startup company is doing more than that outreaches PER DAY to clients - so is it unrealistic to expect CEOs to do that for something that's existentially important? But even then, if 30 gets you 1 TS, why not optimize your effort to get to 60 or 90 instead? Surely it's not perfectly linear... but at least you know the order of magnitude of effort, right? And that still doesn't seem totally crazy to me. BTW - I'm prepared to accept that "it's impossible"; perhaps I'm overly optimistic based on my own experience. Our Series A fundraise resulted in 4 TSs at the same time, not because we were "hot" like Facebook or because I was an amazing CEO/founder, but because I had experienced CEO/founder mentors guiding me in how to execute the process to achieve that exact outcome. So net is I'm just not sure this isn't a "thing is hard and few people do it, therefore it's impossible" versus a "thing is hard, so you need to work backwards and do XYZ very well". And XYZ is just not widely known or even understood by those who do it, and is likely hard too. Net of all of this is that this is why the YC Series A program is a great idea. It can provide best-practices and guidance to achieve "impossible" outcomes, and it is essentially systematizing a process that perhaps is more art than science. That all said, to counter my own points - while there is probably some operational lift by running a perfect process, that effect is likely dwarfed by how compelling the startup is at that time. Is it growing 300%+ YoY with a huge vision? etc.