Startup Fundraising Explained by an Investor

0:00 you want to have something in your mind [music] that you can communicate. The problem is you don't know. I see this done so badly so many times. You want to also understand what stage [music] are they most comfortable with. The moment you are actually switching from like cold to hot, you're in a complete power position. And very important, you don't want to like go into a call and hope that this [music] person wants to make an introduction. You want to lead the process. So, I've invested in over 100 companies and I had conversations like we are going to have now with countless founders. This video specifically is hopefully useful to anybody who wants to raise because this is essentially a fundraising crash course. The goal is to put you into the driver's seat of your fundraising round. And please take this to heart.

0:39 Consider not doing VC route. VC kind of sucks for a lot of cases and like you want to have a company that's very successful, makes you and your family very wealthy, makes your children's children very wealthy. You don't need a VC case. An investor needs a VC case because an investor has invested in multiple companies and most of them will fail and the few that succeed need to compensate the others. And then they need to compensate the others so well that it's actually possible to raise your next fund. We're talking like 100x, 1000x of a successful company. So, my recommendation is if if you can, don't even go VC. That being said, watch this video.

1:13 Um I think you want to learn how to fundraise and I generally also think there is good reasons to fundraise. So, let's get going. How to actually fundraise. Number one, if you're not sure if an investor wants to invest, the answer is no. VCs that are interested will do anything they can to invest. There's multiple things you have to do to get to this point of a VC actually being that interested in your deal, but a VC that's interesting will literally like jump on a plane or like Tom Cruise here like like cling on a plane to somehow make this deal possible. So, by default, if it's not a hell yes, assume it's a no.

1:46 And many VCs don't want to close doors. They give you stupid homework like I had as a founder multiple times. They keep you in a weird limbo and so on and so on. Very frustrating. In many cases it's not even because they're like evil or whatever, it's just because early stage investing is so fundamentally like weird. Like in many cases you just don't have the facts, numbers, and everything. And you basically in many cases it's gut feeling. And sometimes they just don't have a strong enough opinion yet, you know?

2:12 Um but one important thing is if an investor says something like, "Come back when you have more traction." And like "We want to see more execution." Blah blah blah. That's effectively a lie. That's not what they're actually saying. What they're actually saying is we don't believe you have enough innovation or enough credentials to make it actually currently worth investing. But if you somehow convince a ton of customers to jump on board and like buy from you or use you or whatever, then like who are we to judge? Like the market validated that you are like obviously interesting. So by default if you're like I I might think that your thing is completely useless and that you are like who the hell are you?

2:53 But if you have a billion dollar in sales, yes of course like that's worth investing. You know what I mean? And let's quickly like establish language here because we will use this framework a few times and I think it's very useful because I always got as a founder like the feedback of like we don't believe in the market or the market size is too small or we look for different blah blah blah founder blah blah blah. All this kind of feedback was absolutely non-actionable and I think this is way more actionable. So number one, credentials. It's basically like who the hell are you and why are you even doing this versus the best founder in this space somehow convinced the best investor to join as a co-founder and the other best investor all of a sudden is backing them first round instantly go.

3:28 That's high credentials, you know? Or the best researchers in this space are doing this like or like a people who did this like previously at Google are now spinning out. That's like insane credentials. Um and that's like an an axis, you know? Like it's not like yes or no, it's like depends, right? Um the same is with execution. Execution is like barely started or has a billion dollar in revenue. And one important thing here, in many cases it doesn't have to be revenue, especially early stage. It just has to be something that you can argue is a traction indicator for your company. And this is actually a way healthier discussion with most investors because you don't want to like hey, we don't have revenue yet not you want to like have a discussion like I believe that this number means something to your business and either like you as an investor now believe me or not like but we can have this discussion.

4:14 It should be meaningful to your business though. Like it shouldn't be newsletter signups. It should be otherwise or design partnerships or something that's a more tangible and like if we have more of that that's an indicator of success and not just of virality or something. Innovation. Is it the same as stuff that already exists but slightly different? You know, like slightly different spin or like slightly different changes there or like you're just doing it better. Or is it so fundamentally new that we need a new language?

4:44 And in practice you want to be strong on two of these axes. Okay? Or what very very strong on one. So like if you are a second time founder your previous company had like big exit, you can just raise on your credentials with like barely anything. Like I have seen founders raising with nothing or even co-founders. And like no idea what they want to do but they had the credentials already by default. So you want to be strong in two of them and it's also not just that you can raise but that they all can also raise at terms that are useful for you.

5:12 You know, like terms that you actually want. You want to basically get into a power position and you want to get their actionable and we will discuss this in a second. And number one, especially early stage, don't try to raise on execution. Don't try to raise by like hey, we have more and more numbers and bigger and bigger numbers. Especially in frontier tech or anything that's an actual VC case, it's really really hard to judge what is a meaningful revenue number. In default it's easier to convince people with the right credentials about your innovation. You know, so that those people somehow vouch for you. That they get involved and we talk about this in a second, but like that's usually easier than like to like just hustle the execution. Now now the most important one, positioning, okay? In almost all cases, don't try to be better. That's a That's horrible. That's the That's the hardest thing you can do. Try to be different. The simple reason is if like there if there's like a lot of comparisons, like a lot of companies who have done this already previously, I don't expect you to be like multiple times like 10 100 times the outlier to these other companies or because like they have already tried it and also they are Yeah, like it's a very noisy space already. Like you might not even get like to their size. But if you do something fundamentally different, that's like a new angle that might work really well with customers or with current technologies and so on and so on. And keep in mind that early stage is very much on expectation. Like it's it's I always joke it's like not a real market rooted in reality, it's a market rooted in expectations. Because um so much is like the future value. Like like no company early stage is worth 5 million 15 million 50 million. The expectation where it could be and the possibility that you didn't invest in them, that's worth that evaluation. The company itself isn't. So like it's all expectation. And obviously like the the over time like the more established a company gets and so on and so on, the more and more reality comes in. Like if you're raising a series A, you want to show actual numbers, you want to show actual progress, you want to show basically how the money machine works.

7:09 You like money in, money out. Um at D and E and F especially, right? But like it pre-seed first rounds and all this kind of stuff, it's very much focused on expectation. And positioning is usually is there a way that you can just attach it to a bigger trend like to something that anyway goes up. So I might not believe that you have all the answers figured out, that you are like there's so many questions open, there's like so many concerns that I have, but the overall market trend is going so much upwards that by default even if you mess up every day, like most likely you get pulled forward, right? And uh it's something that the customers by default wants. It's something where technology by default gets innovated. It's something where by default the market grows and so on and so on. So, even if you're not like doing everything perfect, I assume you get pulled forward. And that's a very, very good positioning. And and and these like larger vectors, this can be like new tech unlocks. So, like by default, this technology makes now something possible and just like exploring if that actually leads to more customer adoption or like new opportunities is worth doing. Or new patterns, like like new behavior like changes and like how you people use stuff. And for example, like somebody figured out how mobile apps can do something better back in the days and because of that you had all of the Uber for X kind of things, you know?

8:23 Or new platforms, you know, like a mobile, VR, now and and so on and so on, you know? Or new use cases or new niches and and and like rethinking. In many cases, you can sell the same thing and slightly spin it differently and all of a sudden it's 100 times more interesting to customers, to investors and so on and so on. So, by default, like focus more on your positioning than on everything else. How to pitch?

8:48 Number one, don't pitch. >> [laughter] >> And maybe it's just me. I I hate pitches. Uh there's this whole Shark Tank-ification of startups where like, "Hey, if you just like talk 20 minutes at someone and then do the best sales pitch ever and you convince them somehow that they will give you money." This is Jesus Christ, this is not how investing works, especially not early stage, especially not in tech. Like I want to have a proper conversation with this person and I really like I don't know about you, but I really don't care about somebody selling me something for 15 to 20 minutes with me just being there quiet. In like I will stop them, but like if the investor doesn't stop you and while you two talk for 15-20 minutes, assume that they're checking their emails, especially if it's multiple, you know? So, don't do that.

9:30 Um what you actually want to do is you want to send the deck before and like as like just assume that they have like they have skimmed it, they have read it, maybe somebody in the team has read it, but not everybody. So just like make sure they understand the basics and you you want to get to the point where as early as possible they have a mental image of what you actually do, like a pattern, a framing, an understanding that they can like ask reasonably good questions. And your main goal for the whole for the whole meeting is not to make sure that they know everything. Your goal is to make sure that they can afterwards repeat the thing in a way that's exciting. Because the real elevator pitch is not you to an investor in somehow 30 seconds like saying the most amount of words ever any human has ever said.

10:17 The real elevator pitch is like this investor afterwards pitching you to others. So for example, you talk to an associate and they are like at the in the kitchen trying to impress the partners about like what they just met, you know, like small talk and you want to like good look good in front of the partners or it's like an angel wanting to like introduce you to other angels or like talk like Look, hey, I I just met this amazing company and so on and so on. So the real elevator pitch is number one, that investor being able to somehow understand well enough what you do to be able to repeat it in a way that makes it clear how is it distinct to the market and all this kind of stuff, you know? And then also which is like everything I like is like being able to say what you're the best at, first at, only at and so on and so on.

11:00 And Roy Bahat has like a whole video on this on YouTube. I will link it in the description below. This is the actual elevator pitch, you know? So so yeah. What I'm trying to say is don't try to anticipate every question they might have, you know, answer the obvious ones that like just to give you like as quickly as possible this mental image, but don't try to fill time with words, you know? Just like let them think about it and ask smart questions. You know, even if these questions you have heard them 50 million times, you know, um the most obvious ones you want to cover, you know, so that it doesn't feel like as quickly as possible like move ahead, but don't try to cover every potential question. This is like a mistake that I've seen so many times and it just leads to you constantly talking and the other person at some point just shutting off.

11:55 And this one is important. And um this makes absolutely no sense to anybody who doesn't currently fund raise, >> [laughter] >> but um there's a current trend in the industry of asking people kind of weird questions because uh a few investors that were very successful basically have this public PR about looking for outlier personalities, which means people with childhood traumas that like overcame came something in their childhood or like were outliers like like Olympians, chess, uh like something insane that started first company at 12 and sold for a million dollar or something, you know. They're looking for these um almost like uh crazy outliers and they make a lot of PR around this and a lot of other investors want to be like them.

12:42 So, they all of a sudden you have this weird industry now where everybody talks about like tell me about your childhood traumas. Tell me how autistic you are towards other people and how offensive you are toward other people and like all of this kind of weird stuff and this is just like fads in the industry like they come and go. Uh but like just be prepared for this. So, so like what what did you do which makes you a complete outlier in in in the world, you know, what what did you do? What did you overcome, you know?

13:08 What did you do in your childhood or like in your youth that's like just impressive, you know? Uh or unique at least, you know, and like have this kind of stuff back of your mind and just expect these kind of questions. It's like Okay. So, how do you actually do a good pitch? And this is the problem especially to to people like me like engineers because you don't want to do this whole VC [ __ ] You don't want to like just like do marketing fluff and like like just tell stuff that's just not true, right? Uh but also, if you just sell what you currently have, you won't be able to actually fund raise properly. So, it's this weird in between, right?

13:44 Um so, the way I think about this is like what you currently have and what you currently are doing or like in the next 6 months are doing, this is your go-to-market. This is like what you or you have like the most clarity where there's like very few question marks where you like you know what you're doing, right? And what you're currently uh building, what you actually want to build, is uh the thing you pitch, you know? Um so, like think of this is like, "Hey, we are currently have this thing.

14:07 It's barely working. We have the first customer interested." And what you're pitching is actually the fact that you want to do this for a whole industry and so on and so on. But always, ideally, have like this dragon case additionally, which is like, "What if this becomes really big? Like what if A B C D? What if like this thing here or that thing here? Like stuff that you don't currently have answers to? That's completely fine, but the big if is what actually makes this a VC case.

14:36 And the first two, like the first one gives you the credibility, the second one is the one where you're like want to pitch so that most of the questions are about this, ideally. And the third one is like this big case uh is like this uh like if this all of like if step one and step two work out, step three can be fundamentally insanely big. And um ideally, this is why I have the Pokémon analogy here, is they shouldn't be fundamentally different. You don't want to like completely pivot every time.

15:04 Like I have a lot of companies in robotics that pitch me, "Hey, we do like data acquisition right now, but then we do want to do like a model and ultimately want to do decks." And I don't that that's hard to believe because I basically need to believe you that you're like exceptional in all of these different evolutions. An example company of mine, for example, here is what they like to do in tractors, right? When they first pitched, they had like very very basic prototype. And the whole pitch was basically want to build this tractor and for like like small scale scale production or mid scale production for farming. And we have like we have the right network, we have the right credibility, we have like all of these kind of stuff, right? We have a lot of questions that we still need to figure out in the actual product, but by default we roughly know how to get there. But the big if is what if you're actually able to fully automate a farm with this? If you're able to do hot swap swapping of batteries, if you're able to like actually repair the thing at the farm.

15:51 If that thing can like you have multiple of them and they like automate multiple fields and then all of a sudden you can work on a field overnight and actually get like a little bit more yield out of this because like right now farming is already very like, you know, small margin play. And the big if here is not just them building a tractor, not just that tractor being big, but that tractor actually spawning a whole ecosystem around it and like fully fundamentally rethinking how farming should be done.

16:20 Another one is uh most likely you don't not know yet how much you can raise or what the valuation will be. And like a very common thing that founders say is something like uh we're waiting for the lead and they're currently negotiating blah blah blah blah blah. This basically means to me as investor that you're not far long enough in the discussions. But you want to do instead is you want to have something in your mind that you can communicate. The problem is you don't know. So what you do is you communicate a range. Uh you say I want to raise 500 to 3 million or 1 million to 3 million.

16:48 I want to dilute between uh 15 to 20% or like 8 to 15% or whatever you have in mind, you know? Um and either can challenge you on this like they can say like look dilution means like dilution wise you should like aim a little bit lower or higher at that stage. Uh the round size, have you thought about doing a smaller round to be like faster blah blah blah blah blah. But more importantly, because you communicated this as a range, the valuation becomes an insane range. Like think about it. Like 1 million at 20% versus 3 million at 15%. This is like a huge range of actual potential valuations which can cover like all kinds of funds. And that's a good hack to actually communicate something without being like afterwards in a position where you like communicated something too small, right? And like just as a quick benchmark, like right now you can expect if you do pre-seed, it's like 500 to 3 million, 5 to 18.

17:38 Typical seed is like 3 to 5, 50 to 25 dilution. And if it's a hot round, a repeat founder or the topic is just like hot, like you can easily double those amounts, sometimes even four times the amount. And if you're the the only one being able to do this kind of company in an insanely big space, all bets are off because at that point it's no longer is this like a comparable deal, is this a fair deal? It's much more like this is the only deal, you know? And like being the end of one is always the best situation you can be. Like there's a common saying is like don't try to be don't try to compete, but like be the only one, essentially. Next one. And this is getting a little bit more tactical now because I see this done so badly so many times. Um And let me know in the comments if this is useful to you folks. So, number one, in general assume that your round is either hot or cold. So, basically it's like absolutely nobody, nobody, nobody, something switches and then it's everyone at once. And the the the the weird thing here is like very frequently I I joke to founders is like you basically have to start fundraising three times, like when you actually start, then when you have like your first people actually committing, you know? And then when you oversubscribe because at all three you have to have like a lot of calls all of a sudden and you have to figure out everything out.

18:51 It's almost like a different game at each time. Like first you need to convince people to like to to join your investment round and then you need to convince people to not join your investment round. It's like and it flips, like it can flip literally within a week. Because from an in point of view of an investor, their main job is in reality not to say yes, but to say no and by default they will say to no to almost every company. But this one company that they might miss might be the one that's actually going to get big. That's the potential fund return.

19:17 And if you think about it like power law, basically means like the few companies that will actually very successful will become bonkers successful. And if you don't have those in your portfolio, your whole portfolio construction doesn't work. You don't need a bunch of companies that worked okay. You need like a few that go insane. That's the only way to actually refinance all of those that didn't. So it's all about power law. And in a weird way, like if you don't if you're not in this few companies that become successful, you you you won't be able to return your fund. And this is also like why a lot of investors have in reality a lot of FOMO. So for you as a founder, it appears like they are in a power position. In reality, they are not. The moment you are actually switching from like cold to hot, like you in a complete power position. And they have constant FOMO. And they all in many cases run after the same company to try to invest in this one company because this one company might actually be the large fund returner. Or it might at least be the one where they look good in front of the other investors in their firm and they don't they care. I managed to get us into this one hot company. So by default, it's kind of like all of them pushing like after the same few companies. And this is like what makes it really weird as a founder. And they also start behaving like idiots. So you have this whole train mentality and so on and so on and so on.

20:33 But how can you use this for yourself? The number one advice that I would do is don't raise for long. And this is an a a picture of uh discounted sushi. I don't know if you notice, but like fish is one of the few things that if you actually put a discount on on it in the supermarket, it will sell less. And uh my main advice is like go out in the market like as compact as possible, like a very efficient raise and then leave, you know? And if you can't raise, then don't then just leave, you know?

21:02 Don't be the one company that uh you know, like I talked to like already 3 months ago and they're still fundraising, you know? Or the other way around, like you talk to somebody and this person knows that I already talked to you like 3 months ago or like did you already have been out there for 3 months? Most likely everybody talked to you at that point and there's something going on. There's something wrong. There's something obviously there's no consensus in the market that you will be like worth investing. So, why should this person even waste time with you, right? So, you don't want to raise for long.

21:31 And and what heck you can do is um, we're not fundraising yet, but um, we want to get advice on this. We're going to get feedback on this. We're trying to establish relationships. We want to like uh, we know that you have connections to these and these. We would love to like talk to you that that maybe be able to introduce us to like these companies, these industry people, whatever. Not fundraising yet, but is a tool that I recommend almost all founder in the beginning, especially if they're not yet sure if they can actually fundraise. And if investor actually is super bullish to invest, they will just anyway make you an offer, right? Like you shouldn't do this for like multiple months, but like this is a good way to test the waters.

22:08 And another thing is you want to raise your fundraising around insights. A very common thing is that people thinking like milestones like in a project that they think like, "Hey, what do we have to achieve to raise a series A? Or what do we have to have now?" And blah blah blah blah blah. This doesn't really work, in my experience at least. What I would do instead is like there's certain insights, moments, inflection points and you are linking your whole narrative around this fundraise, around this.

22:31 Um, and this is also helpful if you have been out there and it didn't work to fundraise and now you come with a new narrative because of a new insight. And the insight can be, "Hey, we we we we we we we did this prototype and we realized A, B, and C or we figured out that we can do the production way more better blah blah blah. We have like all of these customers in the last months we talked to and all of them say A, B, C, D. We have some insight. Ideally you already like you feel like a train that's already starting to move, you know? And because this train is starting to move, you want to fundraise."

23:01 And that's the kind of narrative you want to have. And that's a narrative you can also have if you have been out there for 3 months ago. Like, "Yeah, yeah, we talked like 3 months ago, but actually in the 3 months a lot of things happened, blah blah blah blah blah." Like, that's the start of a good narrative for fundraising. And that's the thing you wanted have. You don't want to have like artificial milestones or benchmarks. You want to have a narrative inflection point, essentially.

23:23 Do you remember this one? Like the the credibility, the innovation, they aren't really sure, they want to like, "Yeah, keep me in the loop." Kind of, right? You want to be in control of all of this. And you want to get the people who have the credentials to vouch for you and your innovation and your approach and your tech and whatever you have, you know? So that afterwards the typical startup investors are like, "Hey, who could I talk to about this topic?" Oh, wait a minute. That person actually already like invested or that person made the introduction and so on and so on. So like, this is a huge credibility boost.

23:50 How do you do this? Like, ideally the perfect person to vouch for you would be your main competitor, but you don't want your main competitor to do like to do that, right? So, what you do instead is you deconstruct your company. Like, what are these four parts that make or break your business? And let's take an example that everybody knows, like Uber. And now go like back in time early this century when Uber raised their first round. They Ideally, you at that round you want to have people involved who are very very have good credibility around building mobile apps because mobile was still very new and building products and good UX for mobile was really new. You wanted like people who are just really really good at like in general like raising money like people who are good in like the whole startup hype, the whole startup growth and all of these kind of stuff because at that point it was clear we need a lot of money.

24:38 The other one is you want ideally people who are good in regional scaling. Like, they have done something similar, maybe not for car rentals, but for any other kind of industry, but they had to go from city to city to city, you know? And ideally somebody who comes out of something adjacent to car rentals. Like, perfect person would be somebody who started like a very big company in the old version of whatever that industry was, you know, ages ago, has left that company ages ago, and like that would be like, "Hey, the founder of X, like of the old school version, is also involved." That would be a really, really interesting mix. And each of them, ideally, is not a typical investor because they get too many pitches. It's like the best founders in that space.

25:19 It's like advisors. It's experts, researchers, like people who are known for that field, people that I as an investor would reach out to to get feedback on this. And together, they're actually a perfect mix where none of them are directly competitive, but together they're like a huge credibility boost for you. And also, likely, it's easier for you to reach out to them because you do something that's interesting to you. They They are working on something adjacent, like somehow related to what you do. So, by default, they are more likely to actually be interested in what you do.

25:47 And also, very important, they can give you useful feedback. They can give you useful introductions, and so on and so on. And maybe at that point you ask them to invest, or maybe later down the line, doesn't matter. Even if they don't invest, the feedback and their network and everything is worth multiple times that that you will get from any generic startup investor. So, go to industry experts, and like I I love this framework, like use this framework if you're not sure who they should be. Have lists for all of them, and then work after that. And very important, you want to lead the process.

26:16 You don't want to like go into a call and be like, "Yeah, yeah, that's great." and hope that this person, or like anybody, wants to make an introduction. Ideally, have like archetypes, you know, of different kinds of people you want to talk to. Ideally, the specific people, the specific person, you know, be like, "Hey, do you know this person? Can you make an introduction?" Or, "I know that you have like you most likely know this person, could you make an introduction to them?"

26:38 Blah, blah, blah. Like you want to actively push and lead the process so that like I don't remember who I know, but if you ask me if I know A, B, C, and D, I'm like, "Of course I know them." you know? This is the process. You want to lead this as as strongly as possible. If If you lead this, you most likely get out of each call with multiple new introductions. Yes, you can reach out to the very first ones if you absolutely have to, you know, because hopefully you do something really interesting to them.

27:01 But afterwards, you want to work as much as possible before more introductions because they basically vouch for you through this introduction. The the interesting aspect here is like if I get an AI founder or like a robotics founder through somebody in the industry in robotics or in AI that deeply respect, I will jump on the call same day. But how do you do this efficiently because very frequently you ask them for introductions and then they never do it because they don't get to it or they forget about it and so on and so on and so on.

27:27 Um don't send a blurb. And if you don't know what a blurb is, it's basically a founder trying to pretend to be me and like writing a copy that I can just copy paste and it never works. It's it's always cringe. Um just send a forwardable. And that's an article by Roy Bahat, the same guy who made the video before. Uh one of the best investors in my opinion in the whole industry, also one of the nicest human beings ever. Tries to help as many people as possible and is kind of like under the radar a bit in my opinion, but like shout out to Roy. Uh amazing person. Uh what he's basically arguing here is um send the investor or the person who makes the introduction or like the expert an email where they in worst case have to do nothing else but like forward it and write one line which is like let me know if you want an introduction.

28:12 And ideally they will pitch you as well and they say why the call was so exciting blah blah but worst case they would just be like let me know if you want an introduction. And that's the whole work they have to do. And do this personalized for each introduction because it's a higher conversion rate and also like that way they actually remember who they should like forward this to. So I can just like press F, forward, send send send send.

28:31 And I recommend this so many times, so freaking many times every day that I have a macro for this. If I type QF WID, it actually pastes the whole text which is like hey, this is great. You mind sending me a quick email that I can just forward with the actual link to the same article. Uh I have like hundreds of these short codes, I call them Q codes, because otherwise I would go crazy. But like keep in mind like how many times I have to recommend this, you know, that I have a macro for this and I even link to the actual article, okay? It's like why like please do this. Anyway.

29:06 Following up. So you had like your first call and everything, you know. Keep in mind again, if they're actually interested, you will know. You will have the same next calls out of follow-up calls like have more questions for email interestedly afterwards, all this kind of stuff. They might even make introductions for you because they want to show you already how useful they are by like introducing you to all kinds of people that you ask for hopefully. And like just like already like work forwards and like be kind of useful to you already. Also like if you get afterwards feedback by them, like if they reject you or anything like that, like never focus in detail like on the actual why. Like if you can go through back channels and so on and so on.

29:41 Many VCs won't tell you look, I don't believe that this founder is actually that good or I believe this founder has what it takes and so on. So they will give you like some [ __ ] reason, you know. Or they give you some like super intellectualized reason and the real reason is like they ran out of money, you know. Like try to get back channel if you can. And but also keep in mind that they might just be currently overwhelmed. So it's like by default if an investor doesn't instantly rush, it doesn't mean necessarily that they have no chance in closing them. They might just be, you know, like they had like many meetings today, they have something going on in the company, in the family, whatever.

30:15 And just like something is happening and there's like too much going on and they might just like little bit like forgot about it, you know. And you want to fix that by just constantly showing momentum. You get the ones you had good relationships with, good calls with. Get the WhatsApp, keep them in the loop. Hey, we just talked to this and this and this. And thank you for this introduction and here's Do you have any introductions to them people? And like by the way, these three advisors, they're like now involved in the round.

30:38 And you kind of want to control the momentum, you know. You want to like hey, I have these experts now being interested in around this expert being interested and so on and so on." Like, you want control the momentum, but also show the momentum. And a framework that I always use to evaluate other VCs is basically So, like, do they use their own conviction or do they use the market conviction? You know, which basically means like, do they have their own opinion or do they watch what everybody else is doing? And then the other one is also like, how much is their public persona the reality? So, how much is when they say they do something they actually do it? When they say they are founder-friendly, do they actually sound founder-friendly and so on and so on? Or if you have like, the public perception is mostly like, the big partners, but in reality you never meet them, you know?

31:21 So, like, what is the what is the spectrum here? And you want to get to the people who are following their own conviction. And ideally, you want to also understand what they look for. Like, you want to understand what stage are they most comfortable with? What is the check size they're most comfortable with? If you are like, just a little bit earlier than they are actually comfortable with, it might just be like, it's worth having this relationship, but like, it's most likely a waste of your time, you know?

31:47 Also like, what kind of companies they look for. So, like, you want to know this and ideally, you can ask them, but ideally, you do this through somebody who makes the introduction. Like, you're like, "Hey, these people who have more experience and know them better or like, just like maybe like an advisor that also does a few of angel checks, they might know all of that and you'll like, figure that out. Like, who has their own conviction?

32:07 Who is actually somebody you want to have on the cap table? But also like, who are they who are they looking for themselves? You know? So, keep that in mind. Which also brings me to the obvious like, next point is like, let's say you have now a bunch of investors interested in you. How do you actually pick the right ones? Because you like, quite frankly, like, the wrong investor invested in you will make your life hell.

32:29 I have friends who got sued by their own investors, you know? For I have one friend that got sued by an investor and like, it's like in a process since 5 years, you know? Like what the hell? This is insane. Like this whole industry there's a lot of mental people in this industry. So, pick your investors very very wisely. And in the beginning, if you can choose, always pick and focus on the ones that have credibility for that industry, for that tech, for whatever they stand for, but they have the credibility. They can have that credibility for having massive network and being very useful. They can have credibility for being very good with media marketing or whatever. They can have a credibility. Doesn't matter. But like pick the people who are known for something and have credibility in that, you know?

33:09 Number two, if you can and this is hard if you can, close the lead first. Because if you close the lead first, you have a term sheet. The moment you have a term sheet, the complete round is de-risked. Because at that point, everybody knows the round will be full. Everybody knows that you will have enough money for the next 18 to 24 months. Everybody knows if they invest now, they won't look like an idiot in 5 months, right? Um once you have the lead, the round is like 50% like 50% de-risked 80% de-risked and so on and so on. Once you have a lead, everybody wants to join, right? Because they they need to do like a lot of due diligence and so on and so on and so on.

33:43 Ideally, you want a lead that does like somewhere between 60% to 85% of the round. Um so like a proper lead, you know? Uh and so on and so on and so on. The problem is this is very frequently very very hard for a simple reason that these leads um it's a binary decision for them. They can only invest in so many companies a year. There's funds where like a partner does like one investment per year, two investments per year. This is like um very very binary for them. So, in many cases it's kind of like nothing nothing nothing nothing nothing and then maybe one of them. You know, it's a very hard to control anything in between. Maybe if you feel like the the the the the the the the lead approach doesn't work, you want to stage a round. And you want to use convertibles or you want to use soft commits at least. So, you have like all these experts being like yes, if you like let me know once you have a lead I would like to invest, you know? And then you can use their name and like have them as a soft commit. Ideally, you want to have them even hard committed, which means like, "Hey, uh we're doing like this quick angel advisory round before we start the proper round. Are you interested in investing in this valuation or at this discount?" And so on and so on. And then you have them hard committed. And then also, if you already have like roughly evaluation in mind and you like roughly know where the valuation will end, you can convert some of them as convertibles. Like you can already get them like, "Hey, here's a safe note at this valuation if you're interested." Like, we're going to start closing those safe notes and so on and so on. Like you can just stage that stuff. And the actual round might be 10%, 20%, 50% higher, but that's the incentive for them to move fast, right?

35:10 So, that's the technique that I always recommend because that keeps you in the driving seat, right? And I said it 50 times. And I will say it more times. Talk to the experts first. Get the experts. Get industry experts. They give you the credibility. All the people who just bring money will come if they come. This industry is full of people who have way too high opinion of themselves. Are way too sociopathic. Have way too much money. Um are very formal driven, okay?

35:39 Pick wisely who you actually want to work with because they always say like getting an investor is like getting a marriage into a marriage. It's not true. Like you can't get a divorce. You cannot easily kick out an investor. Um assume that those people will be on their best behavior when they actually want to join the round. Also, assume that if it's like an associate, that that associate will leave in 1 or 2 years. So, you actually want to have a good relationship with the partner. And this person needs to be something somebody who wants to actually work with you. Like in a weird way, they they they they they you cannot like force them to work with you. You know, even if they are like invested in you. And for most investors, it's actually if they feel like a company is going nowhere, it's actually better for them to just completely sideline that company or like, you know, just like, "Keep out of my way so they can focus on the few that are actually successful. But it's a complete [ __ ] behavior, but that's completely normal in this industry. So, do you get along with this partner? Do you like this partner? Does this partner like you? Do Are they actually Do they understand what you do? There's nothing worse than board meetings with people who don't get what you do. Trust me, been there.

36:46 No offense. Um and um also, do they actively want to help you? Like are they like constantly trying to do something for you? And if not, you will never ever ever ever ever change this. And if they are come across weird and you don't like them in the first meetings, you will hate them in the 10th meetings. And sorry, this was a little bit of a crash crash out, but like trust me, I have seen a lot.

37:09 Um and another one that's very important is don't over optimize. Like your goal is not to make the perfect valuation at the perfect round and everything. In case of doubt, focus on velocity in the round. Like you you might raise a round that's like too small at a too low valuation, but you have raised it like this. And everybody's like, wait, what the meant What When did that happen? Like what the hell? Where did this Okay, let me talk to them for the next round because I want to make sure like I'm in the next round at least, you know. Maybe I can just like preempt a round so they don't have to pay the high valuation that like is later down the line, right?

37:39 So, velocity in case of doubt is more important than everything else. Like you don't want to like over optimize and then nothing happens. You want to like quick in quick out. You have done the round, you know? And the best thing that can happen is like, oh wait, I didn't even hear about that company. When Oh [ __ ] And they already invested and like it is already moving, you know? This is mainly because this is one of my personal experiences my personal trauma is don't stop building. Like when I raised for my first company, we basically put everything on hold and focused on fundraising and that took in the end like almost a year because like so many things went wrong and this was like ages ago, but still if you would have just continued building and would have just like got the traction on the market launch and like get customers here and there and there. like investors would have run afterwards. But instead, what we did is we tried to run after them and tried to answer the questions of potential future things that never might or whatever happen, instead of actually just make the future happen. So, if you can focus on shipping, if you ship and you have traction in the market, if you have velocity, if you get like a hype around you or whatever, you know, like mind share, people will run after you. Okay?

38:44 So, in case of doubt, ship. Okay, cool. So, this was a way too long video about fundraising. I hope this was useful to you. If you're not sure what you should work on and if you're not sure what your next startup should be, I I highly recommend getting into robotics and I have a whole video about this right here. And uh yeah, it's the best time ever for robotics. I explain all of this here, why now, what you can do, what are the opportunities, and how you can get started. So, thanks for watching.