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Raising Money, Some Data and Tactical Advice, Letter #2 to Graduating YC Companies in 2007


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This article is as relevant now as in 2007.

The key is to find ONE investor. The lead investor.

Okay, tree stuff aside, you want to have more than one major investor. If one firm is out of line then the other firm will be there to say This is unreasonable. You’ll get more varied inputs. Having more than one major investor means you’ll take a little more dilution, but I think it’s worthwhile.

Our series A didn’t happen quickly. We excited the people we met with, but we were timid about getting started having recently closed a $100k angel round. One firm had interest, so we thought “We better talk to someone else to make sure we’re getting a good deal.” That incremental approach went on for a few months. We were always in late stages with one investor but just beginning the dialogue with another. Deciding to raise money should be an atomic decision; don’t try to just dip your toe in.

I like this quote from Sam Altman: "Every morning wake up and say to yourself: 'They need me more than I need them.' Entrepreneurs are the limiting reagent in the startup equation, not investors."

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