What are the different types of investors?

On one end of the scale, you have angel investors who, as the name implies, are the angels sent down from heaven, for when you don't have much more than a PowerPoint and an idea in your head. At the other end is either a strategic acquisition or an IPO, which is your ultimate exit and the way you actually monetize all the years of investment of your own personal time and effort and building your startup. In between angel investors and exits, you have seed investors. Beyond seed, you have venture capitalists (VCs), who are looking to make substantial outsized returns. Read more of this answer on the Founder Forum.

What are the differences between series A, series B, and beyond?

At a series B you generally have multiple brand name customers, you have a strong product-market fit, you have a fully fleshed-out team (this means that you have something resembling a CTO and CFO, etc.). You should have good metrics. You need to know the cost to acquire your customers, how long your customers stay on average, how you upsell customers, how many customers leave you every quarter, and what your average customer pays you every month, quarter, and year.

A series A is a step back from that. At this stage, your team is not fully fleshed out, you have a product, and you have some customers. It's unlikely that you have multiple contracts. Either you're invoicing customers without contracts, or maybe you have one or two customer contracts, and you're praying that they believe that you will have a successful business going forward. Read more of this answer on the Founder Forum.

Is there a certain amount of revenue you need to make before raising?

Most VCs look at investment holistically. They will look at the numbers, the amount of money required to reach profitability or to IPO, the team, the revenue, the product markets. Revenue is part of this, but it's not the only part. If you check every single box bar one and they're not that excited about you, they will come back to you and tell you that the missing box is the reason they passed. Read more of this answer on the Founder Forum.

Why is selling your vision so important when talking to VC firms?

During your pitch, not only are VC firms assessing you and your business, but they are also evaluating your ability to sell customers on your idea and your ability to sell your team on the vision. Read more of this answer on the Founder Forum.

What tools can help you find the right VC?

CrunchBase is a fantastic resource that allows you to look up a fund. You can see what the firm has invested in, their average check size, in a lot of cases you can even see the partner that was leading the deal because they're often the nominee from the VC into that particular firm. Read more of this answer on the Founder Forum.

What is the best way to meet a VC?

The best way to meet a VC is through a personal introduction, either from a person that this VC respects or someone that you have worked with closely and knows you in your work life. This can be a challenging thing to achieve. Read more of this answer on the Founder Forum.

How much of my company should I be diluting each time I raise a round?

The general rule of thumb is that you do not want to be diluting more than 20% for each early-stage round, including the after implied value (cap) of a convertible note or a safe. As a founder, you want to have as little dilution as possible. 20% is the maximum number you should be considering as dilution in most cases; it is not a hard and fast rule, but if you’re going beyond that you generally have (or will have) a problem. Read more of this answer on the Founder Forum.

Is there anything I can do if I diluted too much of my company in my first funding round?

If your business is in a strong position to raise a series A round, and the only problem is your Cap Table, there are some ways you can deal with this. Your prospective Series A VC will want the interest of the founders to be aligned with theirs (motivated to build a big company), and for them to get the most from the founders, they'll need them to have enough skin in the game to stay motivated and drive hard to grow the business.

A good investor won't take more than around 20% in a round because they know that the level of equity that the founders have needs to be sufficiently well aligned with the massive commitment they're making to grow the business. Read more of this answer on the Founder Forum.

Should I be raising a single round with an eye towards profitability?

When there's a preference and a need to be conservative, because the world isn't going great, the economy is not doing well, and you are generally unsure of the future, you might want to raise to get yourself to profitability, so you never need to raise again. However, it's also not conventional, and it's probably not a story that a VC wants to hear. Read more of this answer on the Founder Forum.

How much runway should I plan for with each raise?

Expect that a round of funding is going to last between 2-3 years and that it is going to help you achieve a strong headline growth number, greater than 100% year on year. Plan to be able to hit these goals in two years, but know that you have an additional four quarters up your sleeve for things to slip and miss. Knowing this, you plan to raise again in 2-3 years for your next growth milestone. Read more of this answer on the Founder Forum.

Will you struggle to raise funds as a solo founder?

Raising money as a solo founder will be harder. As one key player, you represent a lot of risk to the person writing the check. They'd be questioning why you've not been able to convince anyone else to join you on this journey. Get a team of key players around you who are with you for the journey. They believe in the mission of what you're trying to achieve, are resourceful, resilient, super capable, and will have a significant impact on the business. These people can always join as co-founders and come into shares of the business even if they haven't been with you from the very beginning. Read more of this answer on the Founder Forum.

Are there things I should be changing in my business to help me raise capital?

It's not recommended that an early-stage businesses try to shape their business to fit what they think investors will want. It takes a lot of time and energy, and it's not always going to work out for you. Read more of this answer on the Founder Forum.

Will I need to flip up to be a US company to raise money from US VCs?

The answer historically has been yes. Familiarity is a significant construct for VCs, and anything unfamiliar that requires extra work, energy, and research, and getting legal opinions or advice, requires more time and expenses as part of a diligence process, just makes it harder. If you’re raising from a US VC, you’re going to want to be a Delaware C-Corporation unless you have a VC who is already familiar with Australian company law. Read more of this answer on the Founder Forum.

Will US VCs invest in a company that is not a Delaware corporation?

The startup ecosystem in different countries and states changes over time. As different regions become more familiar to investors, they'll be more likely to invest. If the investors you're pitching don't know that country's system or its rules, the risk of missing out doesn't feel as high as the risk of getting screwed and the effort associated with learning them, so they're more likely to pass. That said, if they have experience investing in those areas, there may be some advantages for them, but you're not going to know until you speak to each VC firm. Read more of this answer on the Founder Forum.

Do you have any tips on getting the most out of a Board meeting?

One of the most important lessons I've learned is that you shouldn't treat a Board meeting like you're giving a report to a boss or a headmaster. Treating it like a one-way process, where you're giving a report and then answering questions is relatively low value. Try and get this part out of the way in the first third of the meeting or less. Circulate your deck ahead of time and get your leaders to put together a short video of 5 minutes. In my experience, if given to them on time, Boards will read the materials provided to them beforehand. Read more of this answer on the Founder Forum.

What should I include in an investor update?

An investor update is usually just an email and should provide commentary on the business's performance, challenges, and the next steps. You should be encouraging that group of people as much as you can to be your cheer squad so that in their own interactions when they're talking with people who could be partners, future investors, customers, employees, etc., they have you in their mind and are excited about the business, and helping serendipitously to move the business forward. Read more of this answer on the Founder Forum.

Is it expected for an investor to have a seat on your Board?

When you raise external capital, it's a common expectation amongst the lead investor that they will get a Board seat. By being on the Board, the investor can really help and has a structured vehicle, a way to contribute and provide advice, and offer all of those things that investors promote as their value add on just writing a check or investing money. Read more of this answer on the Founder Forum.