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Tweetstorm on Seed/A Funding!

Inspired by Danielle Morril of Mattermark, I decided to document some of the things I’ve learned and have been sharing with startup CEOs recently.

Full tweets on twitter w/ some responses.

1/ Thanks so much @DanielleMorrill for the tweetstorm earlier, and @jasonlk and others! Killed the afternoon but great reading!
2/ Will share some notes on our seed and A rounds. Things I wish I could tell myself && || others back in time.
3/ For seed…
4/ Decide if you want a note or priced. If unsure, do note and be open to priced round if you/lead falls in love + passes diligence.
5/ But get going! Don’t wait. Same as YC advises is true, especially as soon as you start talking to investors.
6/ If you want to do a priced round, the race is on for a lead.
7/ If you start w a note, send monthly updates to investors and ask then include firms (for seed or A) you really liked.
8/ We decided to go for priced round, with note as fallback. 68 days to term sheet; came within 45 days of starting note.
9/ Huge pro tip from @DanielleMorrill about the deck. @firstround has a team that made our deck > 10x in a week [for A].
10/ Many seed firms leave room for angels. Even w a priced round, talking to angels can be great (+ for intros to potential leads).
11/ For non-lead, soft circle (note or priced) people in order of handshake commit. Go in that order if oversubscribed.
12/ If you are oversubscribed it’ll be super stressful. 100x problem to have and that’s why they comp you the big equity.
13/ Have good advisors if possible – you’ll need them most when things are not going well or (see 12/) when they go too well.
14/ Don’t make any promises about future rounds to land an investor in an N-1 round. Even if you love them. You can’t control the future.
15/ If you get pro rata for angels in seed, tell them no guarantees past the next round but do your best to keep as long as you can.
16/ Re A raise (what @DanielleMorrill was focusing on)…
17/ We completed our A raise last month. 25 conversations, 60 days of raise, 2 offers at the $ range we were seeking. We were fortunate!
18/ Stop accepting social engagements. Expect to fall behind on non-crit business email for 1-2 days @ a time. Get co-founder temp EA help.
19/ Plan on taking 4 months from start to $ in bank. Have >= 6 months cash in bank. We failed this and had great insiders and got lucky.
20/ Use current investors!!! Ask your current investors who they think you’ll groove with and why. And for honest feedback.
21/ (Semi repeat) Use current investors during the A raise as well for playback and next steps discussions.
22/ Practice practice practice the pitch. If what you do is deeply technical, work on explaining to non domain nerds.
23/ (ctd) Over-simplify every answer about anything technical unless you’re sure it’s digging for detail! Still working on this myself!
24/ Another @firstround tip – use a lower # for raise ask. Get competitive and you’ll get the # you want.
25/ For us would have given 2-3x offers at the end if we had gone as far as they suggested.
26/ One thing I disagree with common wisdom on – do keep engaged, esp w firms you like, between seed and A. Slowly, 1/2 day/mo.
27/ OK to go as CEO only for 1st meeting. Diff from seed where more co-founder(s) may go. Explain other folks are running the business.
28/ Before you take a meeting look at the portfolio for potential competitors and call them out to the partner if they are there.
29/ Have a deck minus customer logos to send for conflict check if you really like the firm and are on the fence re: meeting.
30/ Put people slide up front. 90% of VCs want it there in my experience and it’s where the early stage story starts.
31/ Keep main deck to ~ 12-15 slides. Hard to do 10 for A raise.
32/ Anything yelse ou feel strongly you’ll need, put in supplementals. Have it for briefing even if you send only non-supp in adv
33/ Never had an issue with lack of attention in meeting(s) from sending deck in advance.
34/ Pitching and managing funnel/process: No ‘balls on table’. Every sign of ‘hot’ you give should be based in 100% truth.
35/ If someone is super interested you’ll know. They’ll come to your office, want to meet more of the team, ask more questions.
36/ Again to echo @DanielleMorril, don’t stop until you have 10+ firms you like and they are digging into you or 5-7 /growing partner mtgs
37/ Do have an end date in mind (for us was end of May for term sheets), and if you have “enough” partner meetings, stop at that date.
37a/ Actually re 37: don’t ‘stop’ at that date, slow down/pause new conv at that date.
38/ If you’re not sure if it grabbed them, just let it be a soft pass for this round. Or ping once softly.
39/ For all tunables (what is “enough”; soft ping, no ping, or push w X), use the advisors and investors you respect that have context.
40/ Like w seed, will be stressful then if you are successful, even more stressful. Goal is to have mult offers from people you like→love.
41/ To repeat, having too much interest can feel more stressful than having no interest but it really is 100x better than not.
42/ Some big firms will want to get a ‘commit’ before sending a term sheet. Use judgement. If you behave well too, verbal is prob good.
43/ As @jasonlk says, don’t over-negotiate term sheet details.
44/ Handy rule for term sheet details – if things “market” for B round and all else is good, don’t stress. You’re going to do a B right?
45/ Don’t select firm without diligence! Use crunchbase to find non-optimal-trajectory companies and talk to those CEOs first!
46/ After it’s clear there’s a deal and you’re finalizing (a) term sheet(s), call out anything that would be surprising on diligence.
47/ Agree with @DanielleMorril, Sharon Heights is super pro tip. Diet Pepsi @ CVS :) I pref El Cerrito for food.
48/ I know some disagree re: 46/ but we had rapport with partner both times and it worked for us at seed and A.
49/ Always leave time for car to break down or Uber not to come if going SFO<→Menlo/PAO. Bring 2 phones if relying on Uber.
50/ Have more time? Do a geek tour of Mountain View – Weird Stuff, Digital Guru, Fry’s, Halted, Madhuban [Lawrence] for lunch.
51/ Bring snacks for the day + ride back and for sure Diet {Wild Cherry} Pepsi if you hate Coke products.
52/ To disagree with @jasonlk and agree with @DanielleMorril, I like to show up early and blame it on Uber. 90% there is conf room avail.
53/ Fin for now. Feedback welcome. Blog posts on the biz side of startupland coming in Q4. @kentikinc and I will tweet links.