Four years ago, the startup accelerator published a guide to raise a Seed round.
Without startup funding the vast majority of startups will die. The amount of money needed to take a startup to profitability is usually well beyond the ability of founders and their friends and family to finance. A startup here means a company that is built to grow fast. High growth companies almost always need to burn capital to sustain their growth prior to achieving profitability. A few startup companies do successfully bootstrap (self-fund) themselves, but they are the exception. Of course, there are lots of great companies that aren’t startups. Managing capital needs for such companies is not covered herein.
Cash not only allows startups to live and grow, a war chest is also almost always a competitive advantage in all ways that matter: hiring key staff, public relations, marketing, and sales. Thus, most startups will almost certainly want to raise money. The good news is that there are lots of investors hoping to give the right startup money. The bad news is, “Fundraising is brutal”. The process of raising that money is often long, arduous, complex, and ego deflating. Nevertheless, it is a path almost all companies and founders must walk, but when is the time right to raise?
Last week, they published another guide to raise a Series A round.
This guide is a distillation of everything we know about successfully raising an A. It includes insights learned from watching hundreds of founders succeed in raising, and in watching dozens fail.
We’ve included nearly all of the advice we give to companies in the Series A program, though there’s always a difference between advice on a page and how that advice plays out in real life.We’ve broken this guide down into the following sections:
- Quick Tactical Guide – an overview of to-dos at each stage of the raise. This is a tactically focused orientation to the Series A process from start to finish. We suggest using this section to direct you to the part of the guide that is most relevant to you
- Preparation – the strategy and tactics behind how to prepare for a Series A raise
- Investment Materials – our best practices for creating a compelling pitch, deck and memo for investors
- Process – the theory, strategy, and tactics founders need over the course of a fundraise
- Closing – every successful round eventually closes. We’ve created a plan to ensure that your close is as fast as possible
If you are a startup founder, you should study both guides thoroughly since you will be relying on them when raising additional rounds of capital.
If you’ve succeeded in raising an A, there’s one final challenge: remembering that raising money isn’t the goal. While it is true that raising an A is a significant milestone in the life of a successful startup, it is just that, a milestone. Milestones don’t tell you what to do, or if you did it right. They just tell you that you’ve moved along a bit.
The money you raise during an A isn’t success, it is a tool. Tools can be used to build great things or tear them down.
Some founders use their A as an excuse to ramp burn before they have product market fit. They usually crash their companies. Some founders lose sight of the fact that they, and not their fancy new investor, run the company and are responsible for their own decisions. These founders often get fired. There are quite a lot of ways to fail after raising an A. However, there are also clear ways to succeed.
The founders that succeed don’t rest after raising an A, they start planning for their B. They form a clear plan of what they need to grow well: who they need to hire, what they need to build, how to manage their new board, and how to grow themselves. These founders see the path from their current milestone all the way to their IPO.
Don’t forget Y Combinator’s motto: make something people want.
Post by Marcelino Pantoja