Over the last two decades I have helped many companies raise venture capital rounds. Here are some of the lessons I have learned from this. If your company is growing like crazy you will have an easy time fundraising and you can ignore pretty much everything that follows. Put differently, what I am writing here is for companies where the ability to raise money is somewhat in question. Fundraising is selling. You are literally getting money in return for selling a part of your company. Because...

Over the last two decades I have helped many companies raise venture capital rounds. Here are some of the lessons I have learned from this. If your company is growing like crazy you will have an easy time fundraising and you can ignore pretty much everything that follows. Put differently, what I am writing here is for companies where the ability to raise money is somewhat in question. Fundraising is selling. You are literally getting money in return for selling a part of your company. Because...

Last week I noticed that I had received several cold emails from entrepreneurs that started in exactly the same fashion:Apologies for the cold email, I usually get an introduction, but my network in New York area isn’t so strong. I found Union Square Ventures while I was looking for top class Venture Capital looking to invest in the tech industry.So I decided to tweet about it because it appeared as if people had just copied a template. Sure enough the source for this is a blog post titled “H...

Last week I noticed that I had received several cold emails from entrepreneurs that started in exactly the same fashion:Apologies for the cold email, I usually get an introduction, but my network in New York area isn’t so strong. I found Union Square Ventures while I was looking for top class Venture Capital looking to invest in the tech industry.So I decided to tweet about it because it appeared as if people had just copied a template. Sure enough the source for this is a blog post titled “H...

Ben Horowitz, the co-founder of Andreesen Horowitz has a guest post on All Things Digital titled “The Case for the Fat Startup." In it he makes a case for raising a lot of money and investing it aggressively. Ben’s argument is related to my post from yesterday about ”Winner Take All and Early Stage Valuations.“ He justifies massive fundraising and spending by saying it’s worse to be in "startup purgatory” than to run out of money:What is start-up purgatory, you ask? Start-up purgatory occurs ...

Ben Horowitz, the co-founder of Andreesen Horowitz has a guest post on All Things Digital titled “The Case for the Fat Startup." In it he makes a case for raising a lot of money and investing it aggressively. Ben’s argument is related to my post from yesterday about ”Winner Take All and Early Stage Valuations.“ He justifies massive fundraising and spending by saying it’s worse to be in "startup purgatory” than to run out of money:What is start-up purgatory, you ask? Start-up purgatory occurs ...

Chris Dixon had a great post yesterday about “the importance of investor signaling in venture pricing” that every entrepreneur should read. Leaving aside the classical economics strawman from the first paragraph (does anybody think that classical economics would apply to a small numbers situation with extreme information asymmetry?), the rest of the post is spot on. Here are a couple more reasons why investor signaling plays such a powerful role in the venture market:Most companies need more ...

Chris Dixon had a great post yesterday about “the importance of investor signaling in venture pricing” that every entrepreneur should read. Leaving aside the classical economics strawman from the first paragraph (does anybody think that classical economics would apply to a small numbers situation with extreme information asymmetry?), the rest of the post is spot on. Here are a couple more reasons why investor signaling plays such a powerful role in the venture market:Most companies need more ...

In the current valuation environment many entrepreneurs seem to believe that only two numbers matter in a financing: the amount of the raise and the dilution. This leads them to buy into the idea that more money for the same dilution is always strictly better. Combined with a lot of money being available from investors this is resulting in Series A rounds of $10 million and more. What could possibly go wrong? The number everyone seems to be forgetting about is the post-money valuation. It is ...

In the current valuation environment many entrepreneurs seem to believe that only two numbers matter in a financing: the amount of the raise and the dilution. This leads them to buy into the idea that more money for the same dilution is always strictly better. Combined with a lot of money being available from investors this is resulting in Series A rounds of $10 million and more. What could possibly go wrong? The number everyone seems to be forgetting about is the post-money valuation. It is ...

First time entrepreneurs often ask me what they should do to maximize their chances of raising venture capital. To which I invariably answer: “Not need it.” Why? Because raising capital or selling your company is all about having a credible alternative. If you have a credible alternative you will arrive at a good deal – if you don’t, then bad things will happen. This is true for raising capital and it is true for exits. In both cases the best credible alternative is not needing the capital an...

First time entrepreneurs often ask me what they should do to maximize their chances of raising venture capital. To which I invariably answer: “Not need it.” Why? Because raising capital or selling your company is all about having a credible alternative. If you have a credible alternative you will arrive at a good deal – if you don’t, then bad things will happen. This is true for raising capital and it is true for exits. In both cases the best credible alternative is not needing the capital an...