Fundraising Techniques For Startups

Y Combinator is widely regarded as the most successful startup accelerator in the world and the top choice for world-class entrepreneurs. They've helped incubate more than 90 unicorns, 45% of their companies go on to raise a Series A (higher than the 33% average), and the combined market cap of their startups is currently over $600B. To honor the final day you can apply to Y Combinator’s first-ever Spring batch (i.e. X25), I teamed up with past collaborator Palle Broe on the most in-depth and intriguing analysis you’ll find anywhere of the world’s most successful startup incubator. Palle spent over 100 hours (!!!) digging through all available public data to pull back the magic that is YC—so that others can learn from their success. Key takeaways 1. YC has gone from being a Consumer investor to primarily a B2B investor. Consumer companies have resulted in over $200 billion of market cap, while B2B companies are currently privately valued at some $170 billion and are on the rise. 2. Based on batch profiles, founders are betting on AI (specifically, B2B AI) to be the next big thing. The most promising subcategories include “Engineering, Product, and Design,” Infrastructure, and Sales. 3. Solo founders are at a disadvantage. Although solo founders are encouraged, the data does show a steep decline in the number of them accepted to YC. 4. Success has so far been driven by U.S.-founded companies. More than 70% of the startups have been founded in the U.S., and to date, 99% of returns have come from the U.S. 5. The durability of YC companies is significantly higher than that of the average startup. More than 50% of companies are still alive after 10 years (vs. 30% average). 6. The chances of startup success are higher with YC. 45% secure Series A (vs. 33% average), 4% to 5% become a unicorn (vs. 2.5% average), and 10% achieve an exit. 7. The VC power law also exists at YC. Four companies account for more than 85% of YC’s returns to date: Airbnb, Coinbase, Reddit, and Instacart. 8. The investors in YC companies are the “crème de la crème.” Tier 1 VCs frequently invest in YC companies, and some have made several hundreds of investments. Here's the full post: https://lnkd.in/gR8mr5XT

That VC asked who was picking up my kids. So I started tracking every bias. 165 investor meetings. 73 inappropriate questions. I documented them all. The data will make you angry. Good. 𝗧𝗵𝗲 𝗯𝗶𝗮𝘀 𝗯𝗿𝗲𝗮𝗸𝗱𝗼𝘄𝗻: • 31 asked about childcare arrangements • 19 questioned my "work-life balance" • 14 asked if my husband was "okay with this" • 9 wondered how I'd handle travel with kids 𝗧𝗵𝗲 𝗿𝗲𝗮𝗹 𝗸𝗶𝗰𝗸𝗲𝗿: VCs who asked about my kids? 0% conversion. VCs who asked about unit economics? 23% conversion. Meeting #47: "How does your husband feel about you running the company?" Meeting #48: Pitched to his rival. Got a cheque. 𝗜 𝗯𝘂𝗶𝗹𝘁 𝗮 𝗯𝗶𝗮𝘀 𝘀𝗰𝗼𝗿𝗲𝗰𝗮𝗿𝗱: -10 points for each personal question -20 points for childcare concerns -30 points for "husband" questions -50 points for suggesting I hire a male CEO The worst offender? -140 points. Still took the meeting. Still said no to their offer. 𝗛𝗲𝗿𝗲'𝘀 𝘄𝗵𝗮𝘁 𝗜 𝗹𝗲𝗮𝗿𝗻𝗲𝗱: Bias is predictable. Track it. Your time has value. Protect it. Their questions reveal their thinking. You don't need their approval. The pattern is clear: Investors who focused on my personal life weren't serious about my business. 𝗦𝗼 𝗜 𝗰𝗵𝗮𝗻𝗴𝗲𝗱 𝗺𝘆 𝗮𝗽𝗽𝗿𝗼𝗮𝗰𝗵: Created pre-meeting filters Asked my own screening questions Walked out of 3 meetings (yes, really) Turned down two term sheets (painful but necessary) Only engaged high-conviction investors Your kids aren't a liability. They're watching you build empires. What's the worst bias you've faced in a pitch? #BiasInVC  #FemaleFounders  #FundraisingData

If you're a founder trying to fundraise right now, it probably feels like the entire venture world has gone quiet. The response times are slow, OOOs are on and it’s easy to feel like you’re losing momentum. Don't stress. The summer slowdown is predictable, and it's not a setback, it's a gift of time if you use it well. I see this every year... The founders who scramble to send frantic emails in July/August are the same ones who struggle in the fall with an over-shopped deal and the fatigue of an endless fundraise. But the founders who use this quiet period for deep, focused preparation are the ones who run a crisp, successful process after Labor Day. The fundraising race is won in the prep lap. Here are a few things you can do right now to prep for a big fundraising push this fall: 1. Build a High-Fidelity Investor Pipeline. Go beyond a simple list of names. Create a comprehensive document that tracks every firm and partner, their specific thesis, your history with them (if any), your connections to them and crucially, the feedback they've given you in the past. This turns your outreach into a strategic campaign. 2. Assemble a "Push-Button" Data Room. Don't wait for an investor to ask. Build your data room now so it's ready to go at a moment's notice. This includes your customer contracts, cohort analyses, deck, references and financial model. A well-organized data room signals professionalism and creates momentum. 3. Craft a "Juicy" Forwardable Blurb. The best introductions are easy to forward. Write a tight, compelling, one-paragraph teaser. It must include a unique insight on the market, why your team is going to win and any key metrics. This makes it effortless for people like me to advocate on your behalf. 4. Pressure-Test Your Narrative. Use this time to pitch trusted advisors, mentors, and other founders. This isn't about memorizing a script, it's about finding the weak spots in your story. Ask them to be ruthless. The tough questions you answer now in a friendly setting will save you in a rapid fire partner meeting later. 5. Get Your "Diligence" in Order. This is the one everyone forgets. Talk to your lawyer now. Make sure your corporate governance is tight and your cap table is accurate (and clean). Uncovering a messy problems during late-stage diligence can kill a deal. Solving it now is a massive de-risking event. 6. "Warm Up" Your References. Your best customers are your most powerful asset. Don't wait until an investor asks for a reference call to talk to them. Re-engage with your top 3-5 champions now. Check in, share your progress, and get them excited about your vision. A reference who is prepped and genuinely enthusiastic is infinitely more impactful. The fall fundraising season will be here before you know it. The work you do in the quiet of August will determine the success you have in the chaos of the fall. We are prepping for our next fundraise as well so this is how I'm spending my time💥

The best founders don't just think about their next funding round. They think about their funding STACK. And honestly? This shift in thinking is the biggest pattern I'm seeing right now across SXSW Sydney - from FKS community chats, partner & investor conversations, coffee catch-ups with Tractor portfolio companies, and pretty much every other startup event I've been to lately too. It's like something clicked for founders in the last 12-18 months. 𝐇𝐞𝐫𝐞'𝐬 𝐰𝐡𝐚𝐭 𝐜𝐡𝐚𝐧𝐠𝐞𝐝: Founders used to see funding as this linear path: raise seed → burn through it → raise Series A. One round after another. Now they're architecting something completely different. They're building mixed funding stacks. 𝐖𝐡𝐚𝐭 𝐝𝐨𝐞𝐬 𝐭𝐡𝐚𝐭 𝐚𝐜𝐭𝐮𝐚𝐥𝐥𝐲 𝐥𝐨𝐨𝐤 𝐥𝐢𝐤𝐞? Think of it like this: you wouldn't build a tech stack with just one tool, right? You've got your CRM, your analytics, your payment processor, your comms platform. Each one does something specific at the right time. Funding works the same way. 🚜 The founders getting this right are layering different capital types strategically: → Equity capital for the big milestones (seed, Series A, Series B) → Non-dilutive capital for extending runway between rounds → Revenue-based financing when you've got predictable income → Bridge capital when you need 6 months to hit the metrics that'll 2x your valuation It's not about picking one. It's about knowing which lever to pull and when. 𝐈'𝐯𝐞 𝐬𝐞𝐞𝐧 𝐭𝐡𝐢𝐬 𝐩𝐥𝐚𝐲 𝐨𝐮𝐭 𝐝𝐨𝐳𝐞𝐧𝐬 𝐨𝐟 𝐭𝐢𝐦𝐞𝐬 𝐧𝐨𝐰: A founder raises their seed round. Hits $1.5M ARR. Has 8 months of runway left. They COULD raise their Series A now at a $10M pre. Instead, they add $400K of bridge capital. Extend runway by 6 months. Launch their enterprise tier. Hit $2.5M ARR. Then raise their Series A at $18M pre. ̲𝘚𝘢𝘮𝘦 $3𝘔 𝘳𝘢𝘪𝘴𝘦. 𝘉𝘶𝘵 𝘵𝘩𝘦 𝘥𝘪𝘧𝘧𝘦𝘳𝘦𝘯𝘤𝘦? 30% 𝘥𝘪𝘭𝘶𝘵𝘪𝘰𝘯 𝘷𝘴 16% 𝘥𝘪𝘭𝘶𝘵𝘪𝘰𝘯. On a $50M exit, that's $7M more in their pocket. All because they knew when to add a different type of capital to their stack. 𝐇𝐞𝐫𝐞'𝐬 𝐰𝐡𝐚𝐭 𝐈'𝐦 𝐬𝐞𝐞𝐢𝐧𝐠 𝐰𝐨𝐫𝐤: Founders are using non-dilutive capital to: → Buy time to hit the metrics that actually move valuation → Launch revenue-generating features before their next raise → Close enterprise deals they've been nurturing for months → Test profitability without needing to raise at all And the best part? None of this is about avoiding equity funding. Most founders I work with WANT to raise VC. They're building venture-scale businesses. But they're being strategic about when they raise and how much they give up. The mixed funding stack approach gives them options. And options mean you're making decisions from a position of strategy, not desperation. How are you thinking about your funding stack? (send me a DM if you’ve ever got questions on how Tractor Ventures may help!). 🙂

Here’s the actual term sheet I signed when raising my $2M seed round — and what I wish more founders understood. It was late 2011. I was a first-time founder. No product. No revenue. Just a pitch deck… and a tourist visa. A name-brand US VC sent over this convertible note term sheet. After constant rejection in the UK, I was thrilled — and almost signed it blindly. Here’s what was in it: 💸 $4M valuation cap 📉 10% interest ⚠️ 3x liquidation preference 🧾 25% discount on the next round ⏳ 1-year maturity 🛑 No prepayment allowed 👀 Board-level access rights for a $100K note 🧨 MFN clause locking terms for 180 days 🎯 Post-maturity conversion at a board-set price Our (very expensive) lawyers told me it was a good deal. That I was lucky. But then I showed it to a second-time founder — and he called it out immediately: “These terms are full of landmines. You need to push back.” So I did. Reluctantly. And only on three things: 💸 Cap: $4M → $5M 📉 Interest: 10% → 8% ⚠️ Liquidation: 3x → 2x To my surprise, the VC agreed almost instantly. And I walked away thinking: I should’ve pushed harder. 💡 I’m sharing the actual (redacted) term sheet, with the most problematic clauses highlighted — so other founders can see what these deals really look like. All the other terms stayed in. It was too late to ask for more changes. And if my company hadn’t taken off like a rocketship, this document could’ve buried it. Fortunately, we raised a Series A shortly after and got rid of all the bad terms (you can do that when you have leverage). TLDR: Terms > Logos. Own your cap table. Ask the uncomfortable questions. Negotiate like your future depends on it — because it does.

After bootstrapping 3 startups, here are my 9 DOs and DON'Ts of building a team with very limited resources: 💸 DON'T: 1. Hire a dev shop to go from 0 to 1. Going from nothing to something requires a significant amount of time for trial and error and iterations. Whether the shop bills on time or milestones, values are misaligned with what you need to accomplish. 2. Hire the convenient person you can afford. It's tempting for bootstrapped startups to make an easy hire who's right there instead of the best person for the task. When you compromise on quality, you end up paying for it in some way by needing to do it again. 3. Expect marketing agencies can save you. Money can't buy product market fit. Most agencies are good at taking you from 1 to 2 when you already have a proven product/market, but paying an expensive retainer to test the market is a waste of time and money. 4. Bring on execs who have only worked in big companies. Big companies have trust, credibility, systems, resources, and support in place. Working for startups without those things require scrappiness and agility that people from corporate just don't have. 5. Paying with equity is more expensive. Equity is like toothpaste, once you squeeze it out of the tube, you won't be able to get it back in. If you think you'll sell your company for $10m, 1% is $100k. Do you the math and think thrice before inviting another shareholder. DO: 6. Have a tech lead on your side. I started eWebinar thinking I didn't need a CTO and that turned out to be the most expensive mistake I made. Not having someone on your side who's constantly thinking about how to build a better, scalable product is like having a restaurant without a chef. 7. Optimize burn with contractors. As a remote team, we let go of the idea that we have to hire locally. Which meant we can hire anywhere in the world based on skills, passion, and attitude. We don't have to fight for talent in the west, and can pay above market in the locations we hire in. 8. Pay people what they demand or more. To make sure people have the highest chance of success, they have to feel like they're not compromising. If you can't afford them, consider going fractional until you can. Working with fractional experts is a great way to test talent, build interest, and recruit them over time. 9. Hire the best person or none at all. The best person for the role will be at least 2x more productive than average while the worst person will make you 2x less productive. The quality of people on your team will exponentially increase your output. On S2E4 of ProfitLed Podcast, I talked about "Building a Founding Team with Limited Resources." Find it on your favorite podcast app. ___ I'm Melissa Kwan, Cofounder of eWebinar and Host of ProfitLed. 3x bootstrapper sharing stories & lessons weekly. Follow me + hit 🔔 to stay tuned.

Founders: use this cheatsheet to understand the current market for startup valuations at Seed, Series A, and Series B. Data is from US startups who raised a primary round from Jan-Sept 2024. Usually these sorts of charts just give a median and track it over time - but in this case, I thought it would be useful to split the data into the full range. From the 10th percentile at the low end to the 90th percentile at the high end. 𝗜𝗻𝘁𝗲𝗿𝗲𝘀𝘁𝗶𝗻𝗴 𝗙𝗶𝗻𝗱𝗶𝗻𝗴𝘀 • Energy consistently has the highest or close to highest upper range across the sectors we studied. Maybe in part due to the high capital needs (which pushes valuations up if dilution is to remain manageable).    • The gap between the lower end of the range (say 10th to 25th percentile) is usually much smaller than the gap between the 75th and the 90th. There really are some wild outlier valuations across most industries.    • Industries are fairly close together at the median valuation at Seed, but the differences become much more stark as you move across the alphabet stages.    • Round sizes have been rising at Seed and Series A across the past year (and a little at B as well, though less so). This has in turn pushed those median vals higher.    • Companies that raise at the 90th percentile have no guarantee of staying on that upper pathway through the next round. Many startups will bounce around in the ranges from round to round.    • There are regional variations - the ranges for Silicon Valley startups will typically be higher at each benchmark than for startups in the Midwest or South. Not right answers in these charts - only a snapshot of real deals being completed. Share with a fundraising founder, and here's to a strong deal season to close 2024! #startups #founders #valuations #fundraising #venturecapital Farm-to-table data, prepared fresh every Thursday morning in our data newsletter. Subscribe at the link in graphic.

I’ve had over 120 meetings with VCs since starting my company. If I were a first-time founder heading into my first VC meeting, here’s exactly how I’d run the call. Remember, your goal isn’t to get a check on the spot. Your ONLY goal is to earn a second meeting. BEFORE THE MEETING 1. Share your pitch deck with the investor as early as possible. 2. Read the fund’s website. Look for check size, stage, and past investments 3. Research the investor to find overlap: alma mater, mutual connections, hometown — something personal 4. Write down a 60-second version of your pitch that covers the problem, solution, market size, and your ask (how much you’re raising) 5. Go to ChatGPT and upload your pitch deck. Ask it to act as a seasoned VC with 20 years experience and draft a list of questions about your company 6. Copy that list of questions and write responses to each in a document 7. (Optional) Send the responses to ChatGPT for one round of follow-up questions to cover any gaps you might have missed 8. Join the call 2–3 minutes early and set up a split screen with your video on one side and the document from step 6 on the other DURING THE MEETING 1. Start with small talk (2–3 mins), and try to loop in anything you found in step 3 2. IMPORTANT: Ask the investor “I shared the deck ahead of this call; would you rather I go through the deck, or do you prefer just to ask questions?” This helps you: 1. know if the investor has read your deck ahead of the meeting (showing genuine interest), and 2. demonstrate confidence. 3. If they say deck, walk through it in under 10 minutes 4. If they say questions, start with your 60-second elevator pitch and then open the convo for their questions 5. During the conversation, refer to the document you made in step 6 if you need to 6. With 3-5 minutes left, ask the investor questions. Three simple questions to ask: - “Do you typically lead rounds?” - “What’s your check size and typical process?” - “What would you need to see to be excited about leading this?” 7. Confirm next steps before ending the call. Ask when you should follow up. AFTER THE MEETING 1. Send a follow-up email within 1 hour (ideally, you have this drafted already) that includes a thank you, data room link, and any additional details you said you would share 2. Update your investor CRM 3. Set a calendar reminder to follow up in 3–5 days if you haven’t heard back 4. Repeat at step 1 for the next meeting Congratulations! You just ran your first VC meeting like a pro. Only 60-100 more meetings to go 😅 - - - Most founders focus on *what* to say. The best founders focus on *how* they show up. That’s how you earn the next meeting. I detailed this whole process in my free CREAM eBook. It’s a 62-page guide that helps first-time founders close their first $1M. Download it by clicking the Visit my store button at the top of this post!

As a founder, I have made a ton of mistakes, but fundraising I (mostly) got right. This includes securing $400 million for my own startups over the years, but also helping fellow founders successfully with their investment rounds. At the same time, I have seen founders run disastrous and failed funding processes. The big difference is a proper process. Running a proper process enabled us to select the best investors to help us most at each stage. I never chased the highest valuation. I focused on finding the investor who could solve our biggest challenges for the next two to three years of growth. That only worked because I ran a proper process. So, what does a proper process look like? Every founder will have a view, but in my experience it includes eight golden rules: 1. Nail the story - Most important, but hardest part. Define a maximum of two to three key messages. Repeat them everywhere, in calls, emails, and on every slide of your deck. 2. Build a tight deck - Every slide reinforces those two to three key messages. Slide titles should summarise the key point, not just say “Market” or “Product”. 3. Raise the minimum - Ask for as little as you need. Far better to oversubscribe than face a never-ending process or failure to hit the target. I much prefer raising to hit the next milestones, prove progress, then raise bigger later at a higher valuation. 4. Do not obsess over valuation - Too often, founders chase the highest valuation, which then bites hard later with a painful down round. Valuation is driven by timing, traction, and demand. Focus instead on your ideal investor, the one(s) who can help solve your biggest challenges over the next two to three years. 5. Kiss a lot of frogs - Build a wide funnel of at least 50 targets for an early-stage raise. Prioritise your ideal investors, but keep optionality until the very end. Use warm intros where possible, ideally at partner level. Do not contact anyone until 100% ready. 6. Craft a killer intro - Short email, four to five bullets on the key pain points and “why now?”. Keep it short and punchy so a warm contact can forward it without rewriting a word. 7. Run a tight process - Hit everyone at the same time to create momentum. Keep competitive tension throughout by trying to move everyone at the same speed. Assume at least six to nine months. Make sure you have cash runway for longer. Show traction and results throughout. It is a big commitment, half of a founder’s time. 8. Prep your data room early - Financials, cap table, corporate structure, FAQs, all ready before serious conversations begin. I will cover how much to raise, capital strategy, investor mix, and specifically what is different for climate tech founders next week. But the foundation is this: fundraising is a process. Run it like one. This is part of a weekly series on scaling lessons from building PropertyGuru to NYSE and backing climate ventures at Wavemaker Impact and Planet Rise. Follow along if useful.

Wondering how much money to raise in a funding round? 💰 Here’s a step-by-step guide to get the right number: Step 1: Define the next major milestone 🎯 Ask yourself: “I’m raising this round to…” Examples: - Reach TRL 7 - Achieve initial commercial traction - Hit $1.5M ARR Why? Hitting these milestones makes your startup attractive for the next funding round. → Tip: Research the metrics your target investors care about. SaaS companies often need strong ARR level. Deep tech startups may focus on advancing technology readiness levels (TRLs). Step 2: Estimate costs to reach these goals 🧮 Break down your costs: 1. Team costs: Salaries, benefits, hiring expenses. 2. Product development: Materials for R&D, third-party services, testing, certifications... 3. Marketing and sales: - Run small test campaigns to get real data. - Talk to customers to understand their buying process. 4. Operations and buffer: Office space, software, legal/accounting fees, and a 20% buffer for surprises. Step 3: Factor in real-world considerations 1. Runway expectations: Investors typically expect 18–24 months of runway. Use this formula: Runway (months) = Total cash on hand ÷ Monthly burn rate 2. Plan for cost increases and working capital - Burn rates often rise over time. Don’t assume costs will stay flat. - Be prepared for delays: You’ll likely pay for sales activities, production, installation and onboarding long before you receive customer payments. 3. Equity dilution: Decide how much equity you’re willing to give up. Typical dilution ranges from 15–25%. Formula: Amount to Raise = Post-Money Valuation × Target Dilution Percentage 4. Include gross profit: Account only for profit from leads you’re confident will close soon. Gross profit = Revenue – Cost of Goods Sold Practical Example 🔍 1. Monthly burn rate: $80,000 2. One-off expenses: $100,000 3. Months to milestone: 12 months Initial fundraising target: $80,000 × 12 + $100,000 = $1,060,000 4. Add a 20% buffer: $1,060,000 × 1.2 = $1,272,000 5. Adjust for investor runway preference (18 months): Add 6 months’ burn, including a 20% buffer: $80,000 × 6 x 1.2= $576,000 6. Factor in gross profit from signed sales: –$250,000 7. Include working capital needs: +$200,000 Adjusted fundraising target: $1,272,000 + $576,000 – $250,000 + $200,000 = $1,798,000 8. Benchmark with dilution: Post-money valuation: $7,500,000 Dilution: 25% Amount to Raise = $7,500,000 × 25% = $1,875,000 Final Check: The Three Rs ✅ 1. Risk Assessment: Identify potential risks: longer sales cycles, higher costs, delays in certifications, or cash flow gaps. 2. Reality Check: Ensure your milestones are achievable within your resources and timeline. 3. Regular Review: Revisit your plan often since costs, market conditions, and investor preferences can change. It’s better to raise slightly more than you think you need to avoid scrambling for a bridge round later. Those can be a nightmare for founders.