Even if you only have one meeting a day with investors, somehow that one meeting will burn up your whole day. It costs not just the time of the actual meeting, but the time getting there and back, and the time preparing for it beforehand and thinking about it afterward. The best way to survive the distraction of meeting with investors is probably to partition the company: to pick one founder to deal with investors while the others keep the company going. This works better when a startup has 3 founders than 2, and better when the leader of the company is not also the lead developer. In the best case, the company keeps moving forward at about half speed. That's the best case, though.
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When it comes to deals, you have to consciously turn them off and become pathologically cynical. This is harder to do than it sounds. It's very flattering when eminent investors seem interested in funding you. It's easy to start to believe that raising money will be quick and straightforward. But it hardly ever. Keep working on your startup. It english sounds obvious to say that you should keep working on your startup while raising money. Actually this is hard. Most startups don't manage. Raising money has a mysterious capacity to suck up all your attention.
You must resist this. Tie yourself to the mast. This is what kills you. Deals do not have a trajectory like most other human interactions, where shared plans solidify linearly over time. Deals often fall through at the last estate moment. Often the other party doesn't really think about what they want till the last moment. So you can't use your everyday intuitions about shared plans as a guide.
And the lower your expectations, the harder it is to be disappointed. Startup founders tend to be optimistic. This can work well in technology, at least some of the time, but it's the wrong way to approach raising money. Better to assume investors will always let you down. Acquirers too, while we're. At biography yc one of our secondary mantras is "Deals fall through." no matter what deal you have going on, assume it will fall through. The predictive power of this simple rule is amazing. There will be a tendency, salon as a deal progresses, to start to believe it will happen, and then to depend on it happening.
Technology tends to get dramatically cheaper, but living expenses don't. The upshot is, you can choose your pain: either the short, sharp pain of raising money, or the chronic ache of consulting. For a given total amount of pain, raising money is the better choice, because new technology is usually more valuable now than later. But although for most startups raising money will be the lesser evil, it's still a pretty big evil—so big that it can easily kill you. Not merely in the obvious sense that if you fail to raise money you might have to shut the company down, but because the process of raising money itself can kill you. To survive it you need a set of techniques mostly orthogonal to the ones used in convincing investors, just as mountain climbers need to know survival techniques that are mostly orthogonal to those used in physically getting up and down mountains. The reason raising money destroys so many startups' morale is not simply that it's hard, but that it's so much harder than they expected. What kills you is the disappointment.
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Consulting is the only option you can count. But consulting is far from free money. It's not as painful as raising money from investors, perhaps, but the pain is spread over a longer period. And for many types of startup, that delay could be fatal. If you're working on something so unusual that no one else is likely to think of it, you can take your time. Joshua schachter gradually built Delicious on the side while working on Wall Street. He got away with it because no one else realized it was a good idea.
But if you were building something as obviously necessary as online store software letter at about the same time as viaweb, and you were working on it on the side while spending most of your time on client work, you were not in a good position. Bootstrapping sounds great in principle, but this apparently verdant territory is one from which few startups emerge alive. The mere fact that bootstrapped startups tend to be famous on that account should set off alarm bells. If it worked so well, it would be the norm. 3 bootstrapping may get easier, because starting a company is getting cheaper. But I don't think we'll ever reach the point where most startups can do without outside funding.
The most important thing is not to let fundraising get you down. Startups live or die on morale. If you let the difficulty of raising money destroy your morale, it will become a self-fulfilling prophecy. Bootstrapping ( Consulting) Some would-be founders may by now be thinking, why deal with investors at all? If raising money is so painful, why do it? One answer to that is obvious: because you need money to live.
It's a fine idea in principle to finance your startup with its own revenues, but you can't create instant customers. Whatever you make, you have to sell a certain amount to break even. It will take time to grow your sales to that point, and it's hard to predict, till you try, how long it will take. We could not have bootstrapped viaweb, for example. We charged quite a lot for our software—about 140 per user per month—but it was at least a year before our revenues would have covered even our paltry costs. We didn't have enough saved to live on for a year. If you factor out the "bootstrapped" companies that were actually funded by their founders through savings or a day job, the remainder either (a) got really lucky, which is hard to do on demand, or (b) began life as consulting companies and gradually transformed themselves.
So the inefficient market you get because there are so few players is exacerbated by the fact that they act less than independently. The result is a system summary like some kind of primitive, multi-celled sea reviews creature, where you irritate one extremity and the whole thing contracts violently. Y combinator is working to fix this. We're trying to increase the number of investors just as we're increasing the number of startups. We hope that as the number of both increases we'll get something more like an efficient market. As t approaches infinity, demo day approaches an auction. Unfortunately, t is still very far from infinity. What does a startup do now, in the imperfect world we currently inhabit?
They're not playing games with you. They just can't make up their minds. 1, if that weren't bad enough, these wildly fluctuating nodes are all linked together. Startup investors all know one another, and (though they hate to admit it) the biggest factor in their opinion of you is the opinion of other investors. 2 talk about writing a recipe for an unstable system. You get the opposite of the damping that the fear/greed balance usually produces in markets. No one is interested in a startup that's a "bargain" because everyone else hates.
of investors vary from five thousand dollars to fifty million, but the amount usually seems large for whatever type of investor. Investment decisions are big decisions. That combination—making big decisions about things they don't understand—tends to make investors very skittish. VCs are notorious for leading founders. Some of the more unscrupulous do it deliberately. But even the most well-intentioned investors can behave in a way that would seem crazy in everyday life. One day they're full of enthusiasm and seem ready to write you a check on the spot; the next they won't return your phone calls.
Markets are less forgiving. Customers don't care how hard you worked, only whether you solved their problems. Investors evaluate startups the way customers evaluate products, not the way bosses evaluate employees. If you're making a valiant effort and failing, maybe they'll invest in your next startup, but not this one. But raising money from investors is harder than selling to customers, reviews because there are so few of them. There's nothing like an efficient market. You're unlikely to have more than 10 who are interested; it's difficult to talk to more. So the randomness of any one investor's behavior can really affect you. Problem number 3: investors are very random.
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Want to start a startup? Get funded by, y combinator. August 2008, raising money is the second hardest part essay of starting a startup. The hardest part is making something people want: most startups that die, die because they didn't do that. But the second biggest cause of death is probably the difficulty of raising money. One reason it's so brutal is simply the brutality of markets. People who've spent most of their lives in schools or big companies may not have been exposed to that. Professors and bosses usually feel some sense of responsibility toward you; if you make a valiant effort and fail, they'll cut you a break.