Fundraising Fundamentals By Geoff Ralston

We're gonna have two lectures on fundraising: the this one, which is going to be a high-level overview, which I'll do, and then next week my partner Kirsty will do a deep dive into the mechanics of fundraising, which are really fun, so you wouldn't want to miss that. Before I start, I will say we have an amazing set of resources in our library on fundraising. You should look at them; you should read Paul Graham's essays on fundraising. They have aged really well, and they will help you a lot. I wrote a guide to seed fundraising as well that I think is pretty useful, but there are lots of other resources: videos from last year's startup school, from 2014, how to start a startup, one of our time I'll reference later, which will be massively helpful when you go out and raise money in early rounds and in later rounds.

So, startups are hard, and fundraising can be one of the hardest parts. Even though fun is bright in the word, it's really not that fun. It's a weird marketplace when you get out there. It seems like kind of an open market, but it's not rational; it’s seldom fair. And yeah, you will hear of founders who tell you, "I found fundraising was easy. I walked out, you know, I started walking down Sand Hill Road, and people showered me with cash." That’s the exception rather than the rule.

So, while you're fundraising, you're going to hear "no" a lot; most of you will hear reasons why your startup will not succeed, why your product is not a good one, why the opportunity you're talking about is not real. Sometimes they'll be right - but you should never believe that because you will survive. The way you survive the multiple times you're going to go fundraise is by being tough and resilient and, above all, by believing. No matter what you hear, no matter how many times you hear "no" or reasons why your startup won't succeed, you need to believe.

Now, I promised I'd go fast, but I'm gonna go so fast I'm gonna give you a complete overview of everything you need to know about fundraising in about a minute or less, and then I'll go deeper after that. And anyone who wants to leave after this minute because you got everything that you needed, I won't feel bad; just walk out.

Okay, so in less than a minute, figure out the story of your startup. This means figuring out why you're going to matter in the future. What is it about your product, your opportunity, that's gonna tell a story about the future that a venture capitalist will care about? So, this might mean getting product-market fit; it might mean growth; it could mean a lot of things.

Then, find the right investors. Do research, talk to other founders; this is where organizations like YC can be a ton of help. Get organized; do your homework, create your spreadsheet, and get a list of everyone you're going to talk to, and you're going to reach out to or you're going to get introductions to. And then you begin.

You will pitch again and again and again. You will find your story again and again, and you will get better at it as you iterate, and eventually, you'll meet the right investors. Sometimes the right investors will be the investors with whom you resonate the best and who you think is going to be the best added value. Sometimes the right investor will be the person who is willing to write you a check first.

So then, you agree on a price; we'll talk about negotiations more later, and then you get the money in the bank. And lastly, you get back to work. That's it; simple, right? I think that was less than a minute. Now you can leave.

Okay, so let's get a little perspective. First, why does VC even exist? Well, there's a market for it, right? You guys need the money; most of you want the money. But there's sort of another reason, too, which is the returns can be really big. It wasn't always that way. Many people tracked the beginning of Silicon Valley to Bill and Dave starting Hewlett-Packard in 1957, and they started with 583 dollars of their own money and never raised venture. It's possible to do that, but it turns out to do a high-growth startup, you usually do need money. In about the same time, this French guy named George Daurio kind of kicked...