VC Minute – quick advice to help startup founders fundraise better.
Click below to listen. 1m 53s duration.
Subscribe on your podcast platform of choice
So you need to raise enough money to level up on the treadmill. But what is the right amount that you should raise? There’s really no specific answer that I can give to you, and I’m not dancing here. You have to make that calculation based off the information that we’ve already talked about.
Here their runway, hitting your metrics, leveling up all of that. Here’s the catch. The amount you’re telling investors that you want to raise is too high. This is completely counterintuitive, but you actually want to set your fundraising target slightly lower than what you want to hit.
I need to pause here and give homage to the Jedi Master of fundraising advice. David Cohen. I heard David talk about fundraising six or seven years ago, and it blew my mind. Setting a lower fundraising target is straight from his playbook, and I think it’s still relevant today. Here’s why.
If you told me you were raising 2 million and had 750 K committed. You have 37% of the way there. You still have 1.25 to raise and with small checks that could take awhile. I’ve got plenty of time to sit at the edge of the pool and watch the party build.
But if you told me you’re raising 1.5 million have 750 K committed. Wow. You’re halfway there. I’m engaged in leaning in. You may fill out that round. And if I want to hit my target check size, I need to move. That pool might fill up and I need to make sure I’m in there.
This whole process of seed stage fundraising is about getting investors to take action.
And one way to get investors to take action. Is to create scarcity. You can create scarcity by threading the needle between the right amount of runway, hitting the right metrics and having the right slightly lower target raise amount. And then. Oversubscribe it.
Visit the VC Minute homepage for more episodes and mores ways to subscribe.