Behind the scenes of a seed round

http://hippoland.tumblr.com/post/29555433091/part-1-behind-the-scenes-of-a-seed-round

by hippo33 • 14 years ago

54 26 14 years ago

hippoland.tumblr.com

This part was really surprising to me - definitely one of those things you don't learn until you try it yourself:

>I soon learned that lots of investors liked to reschedule meetings at the last minute to meet with other seemingly “hotter” entrepreneurs. Having a full pipeline gave me leverage to say, “Well, we can move our meeting, but my schedule is so booked — I don’t know if our round will still be open by the rescheduled date.” This ultimately caused some investors to un-cancel our meetings.

patio114• 14 years ago

There's also some high-school-with-more-money-attached gamesmanship with that sort of thing.

Generic business lesson, not specific to raising funding: you may be occasionally asked to reschedule a meeting on very short notice, sometimes to a time which could not possibly be convenient. This is occasional used as a test: if you say yes, you're communicating that you really want this deal to go through, which means your other options are likely poor. That can then get used against you in negotiations. If, on the other hand, you say "We can't reschedule", you may find that scheduling conflicts resolve themselves as if by magic.

Having a full pipeline gave me leverage to say

n.b. Truthfully conveying to investors/clients/etc that the market circumstances concerning one's availability can quickly change in a fashion against their interests and that as a consequence they should decide quickly does not require any particular state of one's pipeline.

hippo334• 14 years ago

That may be true, but there is the psychology of people wanting what other people have. By having a full pipeline, you are also conveying that you're "popular" with other investors.

grey-area• 14 years ago

Interesting that so much of negotation comes down to brinkmanship and confidence.

Saying 'We might not be available next week' as you do above is not as convincing as saying 'We have 10 meetings this week with potential investors, and we have a closing date of next Tuesday when we'll decide who to go with' or something similar, if that is a truth which they can then confirm with other contacts. I imagine the more truthful and specific you can be about having interest the more convincing it is going to be as a reason for them to be interested.

samstave• 14 years ago

When I go to raise money, I really want you there as my negotiator. :)

crazygringo• 14 years ago

> He said, “I don’t want to say the wrong thing and call you a “meek Asian woman”, but I wonder how you’ll lead a company of 100 people.”

So much about investing, VC's claim, is investing "in the team", and trying to figure out "what kind of people" the founders are.

After all, you're not being hired for a well-defined position -- your success may depend on your very character as a human being. Your drive, your persistence, and your ability to inspire others.

But since these things can't ever be objectively measured, there's tons of opportunity for stereotypes (conscious and unconscious) to affect the process.

There's a positive side to going with your "gut instinct", and a negative side as well.

danshapiro• 14 years ago

As sickening as comments like his are, there's some comfort that it identifies the people you shouldn't waste time with. The only thing worse than a loud bigot is a silent bigot.

I only wish that I could get this information as well so that I could avoid investors with such poor decision making skills. But naming and shaming isn't in your or your company's best interest, so I can't argue with your decision to keep the person's name to yourself.

Perhaps an anonymous post to TheFunded?

hippo334• 14 years ago

Agree!

I doubt you'll run into this person. He isn't well known and hasn't even made his first angel investment yet. (that in itself should probably have been a clue for me to not waste my time with him...)

jchung• 14 years ago

The Meek Asian Woman comment is outrageous.

davemc500hats2• 14 years ago

perhaps, but also useful information... much better that the person said it, rather than think it and not let her know.

at least now she has information to process about that pattern of interaction behavior.

refurb• 14 years ago

I agree. Maybe not the best choice of words, but it's useful information.

I'm actually impressed by her response. It wasn't to go out and complain about his comment, it was to analyze it and see if it was something useful she could use.

If not, discard. If useful, act on it.

She's not letting a crappy comment slow her down.

drumdance• 14 years ago

Yes, much better he vocalize it rather than some vague platitude about timing or market sector not being good.

nickler• 14 years ago

Dave is spot on. Nothing is more frustrating than a mediocre meeting with no feedback, or polite feedback. When you're funding you need to learn quickly about what's resonating, and where your falling flat.

Tis far kinder to be cruel at this point.

Obviously it was an asshat thing to say, but I've heard lots of stories of VC's pushing sensitive buttons to see how founders will react.

gsibble• 14 years ago

Great article and sounds very similar to my experiences. Raising capital is hard work with very long hours and no guarantee of success. It's also requires a tremendous amount of strategy and gamesmanship (such as the "Well our round might not be open by then").

Overall, I hate the experience. Will always try to avoid it at all costs.

dm8• 14 years ago

I'm curious to know how do investors judge whether given founder has strong or weak personality? Especially in 30-60 minutes meeting? I'm sure it must be gut feeling but good salesman can easily fake it, unlike most of the founders who are geeks.

jchin• 14 years ago

I'm not an investor but I would imagine the answer is in pattern matching. Investors who meet a ton of people inevitably will have longer relationships with some of them and find out in the end whether a founder has a "strong" or "weak" personality.

I think it's reasonable to call this pattern matching a "gut feeling." Eventually, with more data points, I would assume the pattern matching becomes more nuanced and would be able to better distinguish who is faking and who isn't.

AYBABTME• 14 years ago

I'm genuinely interested in this whole process of creating a company and getting funds and stuff. Where could I find some resources on equity/angel investor/VC/seeding and all those buzz words I see here. I'd really like to understand this process better.

Oh and, nice blog post! I'm looking forward to read the next part!

mindcrime• 14 years ago

http://www.venturehacks.com is a good resource. There are a number of good books on the topic as well. And there's a lot of good info on Quora. And, of course, search the historical posts here at HN, there's a TON of good stuff here.

BUT... be aware, fundraising is only one aspect of creating a company, and not all companies even want/need to raise outside funding, and of those that do, not all need institutional funding. If you decide to launch something, make sure your focus is on creating something that creates value and has a valid business model... don't just focus on "how do we raise VC money"?

Behind the scenes of a seed round

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