- try to have at least six month cash in the bank whennegotiating for any round of ﬁnancing so that you give yourself the freedom to say“No” to the investors if they offer a deal you don’t want - this includes seed and bythat I mean never pull together a team of founders that couldn’t go six monthswithout money;•
Sell Either the Dream or the Reality, but not in between
- When raising money,you should either raise long enough before you launch to ﬁnd investors willing tobet on the vision, or sell long enough after to sell on your performance. Anythingin between just give investors just too many reasons to wait. Any form of waitingcould bleed you dry;•
Learn About Debt Financing
- debt ﬁnancing from either professional debt lendersor from banks can be an essential tool. It’s super cheap from an equity standpointand give you a ton of freedom if you use it wisely;•
Watch Out for Tranched Deals
- many investors will offer term sheets that specify“business goals” before money is released. Experience founders know that thechances of actually getting the second chance is questionable at best. The reason isthat the way most tanches are written, they give VCs basically the total option ontheir own to give you or not give you the money. So in good times, you may get themoney, and in bad times, you won’t. Many ﬁrst time founders get caughtdepending on the second tranches - don’t.
Fear, Uncertainty and Doubt Tactics. or F.U.D tactics. The enemy to your startup, otherthan mediocrity, is your competitors who are seeking the same capital that you want.Here is how to legitimately F.U.D. them in a way that strangles their ability to raise capital.
. It is actually possible to raise a round of ﬁnancing in such a way that youeither 1) scare would be competitors to quit before they even begin 2) scareinvestors away from investing in your competitors and even 3) scare existing fundedemployees or founders into quitting and joining you. You do this by raising a largeSeries A and claiming the space. We did it at Powerset, and we experienced allthree of the beneﬁts listed above. Of course be