Early-Stage Capital
Before raising investment ask yourself: what phase is my startup in?
Before you raise money for your startup, ask yourself what phase you’re in.
Paul Graham says that, at Y Combinator, founders are advised to raise money in phase 2
This is when the company already has traction but needs to accelerate.
The problem I see with many founders is that they’re trying to raise money in phase 1 – i.e. pre-traction.
It isn’t impossible, but it’s incredibly hard to do, especially if you aren’t:
- A second-time founder with an exit.
- Ex-FAANG (or the equivalent).
- Extremely well connected with the investment community.
- Working in the very hottest sectors (A.I. is the obvious one atm)…
Ask yourself: If you didn’t spend the bulk of the next 6 months raising capital, what could you achieve that would get your business closer to phase 2?
Here are some examples of what investors might consider traction:
Pre-launch:
- Waiting lists.
- Registrations.
- LOIs.
- Partners.
- Other investors.
Post-launch
- Consistent growth (>7% weekly is ideal).
- Low churn (<5% per month). 3) A base of extremely loyal customers (40% still using the product after 6 months). 4) A good LTV to CAC ratio (ideally >3:1).
What else?
