VC Minute – quick advice to help startup founders fundraise better.
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When you’re talking about the reasons why you’re fundraising. I want to be sure that you have the right reasons. The wrong reasons to fundraise are to make hires, to extend your runway and to get to a Series A.
You might be shouting at me right now, then what the hell am I fundraising for?
You are fundraising for growth.
If you’re a seed stage company, you go out to fundraise in order to supercharge your company. Yes, you are going to hire with this money. Yes, you are going to extend your runway. Yes, if you do all of these things, you are going to raise a Series A. But that’s not the reason you’re fundraising.
The number one reason to fundraise is because you are going to grow your revenue. Everything else follows behind that.
How you get, there is part of the plan. You’re going to grow users, grow ACV, increase the contracts, grow your pipeline, expand the product offerings. All of these are reasons to fundraise.
Now, I’m not saying rip out the chart of the use of funds. I’m not saying that you should not be talking about this. I just want to be very clear, when an investor asks you, tell me about this fundraise, what are you going to use it for?
We’re going to use it for hitting business metrics. We are fundraising because with this money, we can go out and hit X revenue in Y number of months. The way we’re going to do that, is we’re going to hire people A, B and C. And the result of hiring those people and hitting those numbers will be that we will have further runway, and then we’ll be able to raise that Series A.
Don’t put the cart before the horse. You are fundraising. To hit business metrics.
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