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Fundraising Survival Guide 🗺
Running out of money is one of, if not THE biggest cause of startup death. It's hard, even in a bull market:
1️⃣ Markets are always rough - Unlike in a job where your boss might be forgiving if you've not done good work; customers don't care unless you've made something they want.
2️⃣ There aren't that many investors out there, it's not an efficient market. So the randomness of one investor can really affect you.
3️⃣ Investors can be wrong - they are always making decisions in areas they don't often know much about.
Lets turn back the clock to 2008 to see how companies coped back in the last big bear market
PG is a legend in the startup scene and here's some advice from his blog back in 2008.
1️⃣ Have low expectations - "The reason raising money destroys so many startups' morale is not simply that it's hard, but that it's so much harder than they expected. What kills you is the disappointment."
2️⃣ Keep working on your startup - "Raising money has a mysterious capacity to suck up all your attention...It sounds obvious to say that you should keep working on your startup while raising money."
3️⃣ Be conservative - "As conditions get worse, the optimal strategy becomes more conservative."
4️⃣ Be flexible - "There are two questions VCs ask that you shouldn't answer: "Who else are you talking to?" and "How much are you trying to raise?"
5️⃣ Be independent - "Investors like it when you're ramen profitable."
6️⃣ Don't take rejection personally - "The way to handle rejection is with precision. You shouldn't simply ignore rejection. It might mean something. But you shouldn't automatically get demoralized either."
7️⃣ Be able to downshift into consulting (if appropriate) - "This works better for some startups than others. It wouldn't have been a natural fit for, say, Google, but if your company was making software for building web sites, you could degrade fairly gracefully into consulting by building sites for clients with it."
8️⃣ Avoid inexperienced investors - "Though novice investors seem unthreatening they can be the most dangerous sort, because they're so nervous."
9️⃣ Know where you stand - "The most dangerous thing about investors is their indecisiveness. The worst case scenario is the long no, the no that comes after months of meetings."
How should you run your company during a bear market? 🐻
"In a bull market, the focus is on top line growth. If you need to spend a lot of money to get there, whether through paid marketing or partnerships, you do it…"
"But in a bear market, the answer changes: No. It turns out, you won’t be able to just raise more money to keep going. No, you can’t just expect to hire dozens of engineers, regardless of progress"
"What are some ways you should be rethinking your growth strategy? Here’s some things every team should be thinking about: Embrace the new normal, Cut your marketing spend, Laser focus on your engaged, high LTV users, Live to fight another day"
Some of the greatest companies of all time were moulded by bear markets 🏆
As the bear market grinds onward, a historic wave of innovation is happening. Stock prices are a trailing indicator.
— Paul Graham (@paulg)
Dec 1, 2022
2008-2010 yielded Uber, Pinterest, Airbnb, WhatsApp and plenty more. Last crypto cycle yielded the biggest winners of this cycle. Whilst it may feel like a slog - the winners of tomorrow are being built today.
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