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Semil Shah's Advice For Early Stage Fundraising

Practical advice for founders raising Pre-Seed, Seed, and Series A rounds

Hi everyone, Turner back with this Thursday's Split! Today I sat down (figuratively) for a quick Q&A with my friend Semil Shah at Haystack. He was an early investor in companies like DoorDash, Instacart, Figma, Opendoor, and HashiCorp. He's seen founders go from idea to IPO, and I always appreciate his insights into the early stage funding market. He had a great tweet I had him unpack below.

Q&A With Semil Shah

Turner: Hi Semil, thanks for being up for this! The fundraising market has turned upside down over the past few months. I know lots of founders are trying to understand how to think about the new environment. You tweeted something last week I thought was very well-said: 

Can you expand on “they all get done” for us? Is it something particular about these rounds and sizes? Is it the market? 

Semil: My belief is: Founders who are raising “modest” amounts of capital for their technology startup should not be impacted by today’s financial climate. Specifically, a solo founder raising $400,000, or two co-founders raising $1M – both considered “pre-seeds” – shouldn’t have trouble securing this capital, assuming they have one or more of the following attributes: Compelling background; a big vision that generates excitement; a live product that others are using.

Similarly, founders raising a more “typical seed” of, say $2-4M, similarly shouldn’t encounter problems in raising so long as they possess compelling experience and/or a product that folks are already using.

The meta point here is that today’s market pullback and valuation correction doesn’t really impact these initial, small financings. There is plenty of money held by VCs who want to invest. If a round can’t come together, it’s not the macro environment to blame – something is likely inherently wrong in the pitch.

T: You finished your tweet with “if a round doesn’t come together, something else is off”, and then just now mentioned something being inherently wrong in the pitch. Can you expand? Any examples of things you’ve seen that you can point to? 

S: It could be a variety of things. Most common is that the idea and plan is not articulated in a compelling enough way. Investors don’t want good enough – they want to get excited about a market opportunity. That also includes pricing and their ownership. Founders today are very dilution-sensitive. This is a good thing, but many times, founders can turn off investors by not rewarding them for the risk they are taking with the capital.

There are so many variables here, I’ve found the easiest way to sum this up is courtesy of comedian Steve Martin: “Be so good they can’t ignore you.” Investors meet lots of startups every week, every month.

The goal is to stand out among the 20+ pitches they get every month. What makes something stand out? Unique backgrounds, unique insights, clear communication, and evidence of being able to ship.

T: Any other advice you’ve been giving founders lately who are fundraising or thinking about fundraising over the next few months? 

S: If founders are raising a small pre-seed or modest seed round, there is no extra advice needed. Just follow Steve Martin’s advice. The market for early-stage investment is more efficient than most folks want to believe, and there is plenty of money ready to invest early. Plenty.

Any founders raising a pre-seed, or even thinking about possibly starting a company one day, make sure to follow Semil on Twitter to get more of his thoughts on fundraising and more.

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