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How Justin Kan fundraises

121 pointsby lukasschwababout 7 years ago

12 comments

birkenabout 7 years ago
Story time: In early 2012, the startup I was working for, Thumbtack, had struggled for 6-8 months to raise a Series A but finally got to the finish line. Around the same time, Justin Kan co-founded a company called Exec, and within a few months raised a &quot;party round&quot; that was nearly as much as our Series A, with a valuation twice as high. Our company was years old and had serious traction, Kan&#x27;s company had done essentially nothing. At the time it was a quite upsetting turn of events.<p>But there was a valuable lesson... How Justin Kan fundraises is irrelevant for you and me, because we aren&#x27;t Justin Kan. There was no rational basis for Exec to have been worth so much at that time, but when you are Justin Kan that isn&#x27;t relevant. And look, good for the Justin Kans of the world who can take advantage of that, but that doesn&#x27;t mean it is helpful advice for the rest of us.<p>I can say from experience that going into VC meetings with a bunch of false bravado, hoping to &quot;hold the tension&quot; and out-negotiate the VCs is mostly irrelevant advice. By far the most important thing for the average founder is getting the VCs to look up from their phones and care or be interested in your pitch, which isn&#x27;t going to happen unless you&#x27;ve created the right fundraising dynamic for your company.<p>One of my favorite Paul Graham essays of all time, &quot;How To Raise Money&quot; [1], fully captures what my experience was in the fundraising realm, both when it went well and when it went poorly. I&#x27;d point you there for more practical advice.<p>1: <a href="http:&#x2F;&#x2F;paulgraham.com&#x2F;fr.html" rel="nofollow">http:&#x2F;&#x2F;paulgraham.com&#x2F;fr.html</a>
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sethbannonabout 7 years ago
Dangerous advice. From the article: &quot;if a VC sends a follow-up email asking factual questions, they’re already emotionally uninterested. Many entrepreneurs get caught up in this process: they send the VC a fact and citation, which the VC nitpicks, etc., but it’s already too late. The entrepreneur has failed by not creating the type of confidence necessary to de-risk the investment.&quot;<p>If you want investors that actually understand what you do generally, or even better yet understand what you do on a technical level, this is terrible advice to follow. Investors literally become co-owners of your company, and there is no easy way to get rid of them. Raising from the right people slowly is better than raising from just anyone fast. It&#x27;s a positive sign when investors actually dig in with real substantive questions after thinking things over, and an indication of how thoughtful they&#x27;ll be as co-owners.
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mfringelabout 7 years ago
How much of this is relevant to other people who are not Justin Kan?
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kyleschillerabout 7 years ago
It&#x27;s worth noting that Atrium&#x27;s Series A had a mind-boggling 92 investors [0].<p>Read the article out of curiosity, but understand that this was in no way a normal process.<p>[0] <a href="https:&#x2F;&#x2F;www.crunchbase.com&#x2F;funding_round&#x2F;atrium-lts-series-a--8f3868a1#section-overview" rel="nofollow">https:&#x2F;&#x2F;www.crunchbase.com&#x2F;funding_round&#x2F;atrium-lts-series-a...</a>
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fatjokesabout 7 years ago
Still an interesting read, but should be framed less as advice and more as a day-in-the-life piece on a rockstar founder with a lot of cred.
philfrastyabout 7 years ago
Klaus raised the money, Justin is just the mascot
keithwhorabout 7 years ago
&gt; Consistently, if a VC sends a follow-up email asking factual questions, they’re already emotionally uninterested. Many entrepreneurs get caught up in this process: they send the VC a fact and citation, which the VC nitpicks, etc., but it’s already too late.<p>One million times this. Especially for entrepreneurs (like myself) with an engineering background, this is something that’s hard to grasp intuitively at first. If you’re asked for financial projections, for example, it’s already over. You can win that investor over more reliably by following up a month later with, “[famous Angel investor] joined our round,” than responding with a spreadsheet.<p>I’m nowhere near Justin Kan’s level of experience and expertise, but another favorite piece of advice it can take some time to internalize is: “if you didn’t get a term sheet, it wasn’t a good meeting.”<p>This doesn’t mean investors dislike you or won’t invest if you don’t get a term sheet right away. It’s that when you find an investor highly aligned and &#x2F; or motivated to invest, they will move quickly, like sub-24h quickly. The easiest way to burn yourself out as an entrepreneur is getting too attached to “not good meetings”, with “but I really like that firm!” Or “and they were so nice and understood our business!” You’ll drive yourself nuts wondering why everybody says nice things and yet nobody wants to invest.<p>The saying is not that it’s a <i>BAD</i> meeting if there’s no term sheet, just that it wasn’t a <i>good</i> meeting. Stay grounded. It can be a long journey.<p>Remember: actions speak louder than words, always, and the fundamental action an investor can take to show support is to invest.<p>[Edit] I will add that, in my own experience, investors can be all over the map and there’s actually no such thing as “one size fits all” fundraising advice. Fundraising is a hyperpersonal activity that’s just as much about relationship building as anything else, if not moreso. You’ll want your first checks from investors that don’t fuck around (see above advice) and who are willing to bet on you. As you grow as an entrepreneur and become more confident in your ability to build relationships and “bullshit detect”, you’ll become more comfortable with long term relationships. In my admittedly limited experience, the people who spend time with you and learn to appreciate you and your business before they invest are <i>the most valuable</i> to both your bottom line and personal psychology.<p>But, hey, the above one size fits all advice is still a good launchpad :). If you’re starting your fundraising journey, good luck, it’s a hell of a ride but if you’re deeply passionate about your business it is more than worth it!
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maxcanabout 7 years ago
Hi everyone, I&#x27;m Max and I run AI at Atrium. @birken&#x27;s point is absolutely correct that having sold a previous startup for nearly 1B really is a big part of what makes this strategy viable.<p>But, on a completely unrelated note, if you&#x27;re an experienced ML engineer and you want to help distrupt one of the most needing-to-be-disrupted-stodgy-old-industries there is as part of a very fast growing team, drop me a note: max &lt;AT&gt; atrium.co.
beambotabout 7 years ago
Justin&#x27;s previous article was much more helpful on SeriesA strategy &amp; tactics: <a href="https:&#x2F;&#x2F;blog.atrium.co&#x2F;the-founders-guide-to-raising-a-series-a-venture-financing-1de4f5aff312" rel="nofollow">https:&#x2F;&#x2F;blog.atrium.co&#x2F;the-founders-guide-to-raising-a-serie...</a>
lisabethhanabout 7 years ago
Hey, I&#x27;m Lisa @ Atrium - here to answer any questions.<p>I run our fundraising bootcamp Atrium Academy w&#x2F;Justin to help founders meet the right investors and raise a great Series A.<p>Check it out&#x2F;Apply here for our next one in March: www.atrium.co&#x2F;academy
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rdlecler1about 7 years ago
As someone who has been on both sides of the table, this article is basically irrelevant for 99.9% of founders. There is an HOV lane for successful entrepreneurs that the rest of us don’t get to take.
sharemywinabout 7 years ago
what if startups got appraisals like real estate. As well as &quot;subject to&quot; appraisals like property that needs repairs.<p>So, I&#x27;d value the company at X but, I&#x27;d value the company at X+Y if you added a new phd in XYZ or a CTO from a fortune 1000 company or if you add this many new accounts in this time frame.
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