They had 250+ meetings over ~3 months to raise only $1.5M? Wow. That's a lot of time that could have been spent building a product. Is this what YC money is supposed to be for? You get a few months of runway that you need to turn into a higher raise to have a longer runway on someone else's dime?
Are there any hacker/entrepreneur communities that focus on revenue-funded efforts instead of the self-perpetuating financing cycles?
This is pretty common. I don’t say it’s right, but it’s practically the norm.
The good news is that usually this time is not so impactful in the life of the startup. The founder will plan how much money they’ll need to execute the next ~2 years and will dedicate 2 entire months to fundraiser. After that, they’ll have 22 months of absolute focus and peace of mind to keep building product.
Has there been notable effort around improving the effectiveness of this process? From a distance it appears to be a waste of time. I'm making assumptions--that primarily makes guesses and significant assumptions about the range of those who attempt to raise funds. (Having gone through the seedfund process previously I have similar opinions about that program as well, not that this has much relevance to the question I'm asking. However that program doesn't require as much time which depending on circumstance makes it appear more effective.)
@matijash what was the content of the follow up email you sent, was it updates on WASP, more data on traction, fundraising, ect? What did you say to prompt people to act? And did you ever pre-empt by just sending a SAFE (assuming the round is not priced) on a follow up email?
At that time we were pretty much fundraising full-time, and given there were only 2 of us and the product was at early stage we couldn't really do a meaningful push on traction, so we mostly focused on the updates on the fundraising side.
The basic format of the follow-up was "Hey, you mentioned you'd follow-up in X days so I wanted to check if you are still interested in investing?". Then I would, if applicable, also add a line like e.g. "since we last spoke, we raised another $X from investor Y" or "we almost closed the part of the round dedicated to the angels and have only $X available".
Ok this is very helpful yeah, there's this strange dynamic where people want to come by to take a look ( as if we're a vendor on the side of the street which we kind of are in this context ), but then no one wants to be the first to move. On Zoom everything is extra weird because ... Zoom.
I'm surprised to see the founder describing their company as Deep-Tech, and I wonder if that description hindered their ability to raise. Not saying it isn't a technical product, but as per Wikipedia, deep tech is "based on substantial scientific or engineering challenges".
I think it's the DSL aspect. For anyone who's every try to write a language, it's not trivial. The people who do PL research in academia are typically mathematicians in the comp-sci department, whereas those who do machine learning ( which is "deep-tech") are usually engineers practicing statistics (poorly).
Yeah, it definitely isn't a standardized term. I've also been hearing "hard tech" but then got a feeling it has more and more been used for hardware projects, although I dont think that that was the original idea.
We actually never insisted on being called deep-tech, but we realised that was how others characterized us, especially when talking to investors (building a new programming language sounds pretty scary, although in our case it is a non turing complete DSL).
Fair enough. I was in a similar boat with my metaverse, pre-metaverse start-up https://ayvri.com - but a lot of what we were talking about was building 3D virtual worlds with AI. We didn't go looking for the deep tech label, but it was applied to us.
Thanks! Haha yes, it definitely felt like it at times. Fundraising really took me out of the product pretty much completely, so my co-founder was keeping the fort there and keeping us afloat. At first we were fundraising together, but then we quickly realised it just wasn't feasible.
The next thing was hiring - in many ways similar to fundraising, a lot of lead generation, rejections and also very occupying.
I think and hope now will be a bit easier to get back to the product, but there are definitely things that from time to time completely consume you it seems.
The main idea with this is to build validation by showing that somebody else did similar/analogous thing and succeedeed. E.g. "What Y did for Z, we will do the same but for X". And then the key point is in explaining how it is related and why it makes sense in your case to apply the same strategy.
We learned that innovating on the product is already challenging enough, and if we also innovate on the business model / adoption strategy etc it just sounds too risky. The best thing here is just to follow on somebody else's footsteps, which also makes it much easier (both for investors and ourselves) to imagine what the future will look like.
@matijash congrats on successfully raising. Your blog post is super useful. I am a founder and at an early stage now. I am trying to raise and facing the similar situation. I would like to learn more from you. I sent contact invite to you on LinkedIn. I hope you do not mind connecting.
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Are there any hacker/entrepreneur communities that focus on revenue-funded efforts instead of the self-perpetuating financing cycles?
The good news is that usually this time is not so impactful in the life of the startup. The founder will plan how much money they’ll need to execute the next ~2 years and will dedicate 2 entire months to fundraiser. After that, they’ll have 22 months of absolute focus and peace of mind to keep building product.
Would love to connect and collab on this!
The basic format of the follow-up was "Hey, you mentioned you'd follow-up in X days so I wanted to check if you are still interested in investing?". Then I would, if applicable, also add a line like e.g. "since we last spoke, we raised another $X from investor Y" or "we almost closed the part of the round dedicated to the angels and have only $X available".
I would send over a SAFE only if the investor agreed to invest and had completed the handshake protocol (https://www.ycombinator.com/handshake/).
We actually never insisted on being called deep-tech, but we realised that was how others characterized us, especially when talking to investors (building a new programming language sounds pretty scary, although in our case it is a non turing complete DSL).
What I got out of it (which is known) is that founder+CEO is like politician. Most of your job is fundraising.
The next thing was hiring - in many ways similar to fundraising, a lot of lead generation, rejections and also very occupying.
I think and hope now will be a bit easier to get back to the product, but there are definitely things that from time to time completely consume you it seems.
We learned that innovating on the product is already challenging enough, and if we also innovate on the business model / adoption strategy etc it just sounds too risky. The best thing here is just to follow on somebody else's footsteps, which also makes it much easier (both for investors and ourselves) to imagine what the future will look like.