Recently I had the honor and pleasure to be invited to discuss the future of AI with e.g. top innovation managers at Bertelsmann, Siemens, KPMG, Steinbeis University, and others at the “The Drift and the Shift” in Münster.
BTW: As an “AI slop” apropos, I noticed and pointed out the official AI forecast report created by KPMG (that they presented at the event) contained an image showing Taiwan as Chinese – and I had to ask if that was also an official (ominous) forecast… or just slop.
Recently I had the honor to be invited as the startup founder perspective alongside the legal (Patrick Müller, Hauking) and VC investor (Jan Linzner, TechVision Fonds) perspectives, at a peer to peer feedback session on startup financing strategy with the current batch of incubated startups at the Ignition+ accelerator (startup support program) in Düsseldorf.
I think it went down ok.
Here are some of the evergreens I remember rattling off in the session:
A sale a day keeps the VC away!
Ask for money, get advice. Ask for advice, get money
Don’t listen to VCs for fundraising advice – you wouldn’t ask casinos in Las Vegas for gambling advice, now would you (please say no)
Traction is the Catnip of investors (AI currently the Fentanyl)
You don’t HAVE to raise money if you don’t need to (if your biz model or private funds allow it)
Mo’ money, mo’ problems – round closed? Congrats – you now have another set of problems added, two business models to serve
There is no formula for pricing (valuation) a pre- to seed stage round; it’s about ownership, what you can get is what you can get, it’s a product of two factors 1. how little % you can get away with selling 2. how much money you can get for said %
Discuss and decide amongst founders the absolute Max % (dilution) is acceptable to you to sell in this round IN ADVANCE, before raising, BEFORE you start pitching to investors
Don’t sell too much too early (pre- /seed, not more than 24% absolute MAX, more like 5-16% in your first round)
in the pitch deck you send to investors, DO NOT STATE % (as that reveals your valuation up front), DO please state how much you are raising – WWW: for exactly WHAT 3-4 valuation-increasing / biz model de-risking activities or experiments as the milestones they are funding, WHY these and not other things, and WHEN can the investor can expect you to share the results of each
Focus on discussing milestones (Do you think these are not the correct ones? Can we add value cheaper? Can we remove risks differently? etc) with investors, never argue for the valuation (red herring!)
Leverage investor interest against next investor, generate FOMO
Most investors like/expect pushback from great founders (they’re into a bit of S&M)
You have to instill the feeling, the fear, that you’ll be able to close the round without them
Fundraising is a numbers game, talk to many, MAAAAAAANY, +100
Fundraising is a game for adults, so lawyer-up (startup lawyer, not your family lawyer)
A SAFE Note is not 1:1 possible in DE, a CLA may be your next best bet (if you or the investor must), please do research and calculate your different dilution scenarios when choosing CLA terms BEFORE you commit to raising on it
Don’t ask for VC-money (unless you can show, at least in vague theory, a road to 100 Million ARR over the next 6-10 years)
IMO, „read decks“ are for lazy investors, requirement for GO grants, and for loser founders that don’t want investor meetings (you want to tease them into a meeting, not give them everything but the kitchen sink before your first date)
KISS, keep it simple stupid; in your terms, reverse vesting (DE), founder splits, cap table, etc
If you have insane traction (or doing something-with-fundamental-AI), you can ignore all previous prompts and probably raise on that fact alone
It’s currently AI or the highway; Over 2/3 of capital allocated exclusively to AI right now
PS: If you have a b2b Green Tech startup, the application for their next batch may still be open! You’ll get 25K non-diluted – and a chance to have me as one of the mentors (if you wish) at no extra cost to you.
PPS: if you are planning to raise a pre-seed, seed, or perhaps even a Series A financing round, check out my Pitching Masterclass to learn all you need to know to successfully raise; Time to get smart, time get funded!
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