The interwebs will give entrepreneurs a lot of advice when it comes to raising money, but much of this literature is written by investors rather than founders, and some popular resources are from a decade ago. My cofounder (Eric Lu) and I raised a $1.7M seed round for our video and image editing company, Kapwing, in 2018, so I have some relatively recent insight into what it’s like to raise an institutional seed round in Silicon Valley. I wanted to share some of these learnings with other entrepreneurs who are considering raising a seed round for their startup. Since these tips come from a founder, they may (or may not) be different than “conventional wisdom” out there on VC blogs. Hence my suggestion that you won’t get these learnings from Twitter.

Note: These comments and stories are based on my experience only. Every founder’s fundraising journey is different, so please note that these learnings come from my subjective perspective and may conflict with others’ opinions.

Here are 13 tips for raising a seed round in 2020:

  1. Flatter the investors you meet with. Read about their recent investments so that you can bring them up and casually chat about how they’re doing. Congratulate the investor on portfolio exits. Read their recent tweets and medium posts to get a feel for their tone and opinions. My cofounder stays up-to-date on HackerNews, so he is exceptionally good at small-talk with investors. Pitch meetings often started out by asking smart questions about a recent investment. This chat-chat created immediate rapport and a feeling of sameness.

cupcakes

Investors flatter the startups they’re courting. You can play that game too.

  1. When it comes to the price, get up-to-date advice from other entrepreneurs. Stay current, because founders who raised even a couple of years ago might have had a different market dynamic. Look for up-to-date blog posts. Talk to entrepreneurs who just raised a similar round. Read funding news. Knowing the current context will help you avoid emotional manipulation and stand your ground during negotiations. Try to find out what’s an amazing valuation (ask VC friends about recent hot startups), what’s the valuation for a “good YC company” (ask founders who are in YC), and what’s the average seed-stage valuation for the current year.

  2. Don’t turn away meetings until the money is in the bank. Even once you have a tentative lead investor, continue fundraising until you’ve totally secured the capital. Having multiple parallel conversations helps you get leverage in late-stage negotiations. Also, many promising deals fall through unexpectedly, so it's smart not to rely on any one conversation. For example, I nearly turned down a meeting with CRV when it looked like two of our seed-stage investors would make us an offer to lead the Series A. I’m so glad that my cofounder convinced me to take the meeting, because one of the two offers fell through and CRV ended up being an incredible Series A lead. Because there was pressure from other firms, CRV moved fast and gave us a term sheet within days of the initial pitch.

  3. Negotiations happen in the final hour. If your round is oversubscribed (you have offers for more money than you planned to raise), it’s likely underpriced. In this case, founders can and should return to the committed investors and tell them that the valuation has increased given the interest. Investors may act wounded, shocked, or offended when you reneg on a past agreement, but it’s perfectly acceptable to ask the new investors to pay a higher price if the round becomes oversubscribed. I was too timid to push back on what I now realize was low-key emotional manipulation, but other founders should be prepared for these late-stage negotiations. CEOs need to stand their ground to defend the market value of the company, and ultimately investors respect that.

  4. You don’t need an expensive lawyer to close a seed round. Instead of drawing up custom contracts, founders can use standard contracts to seal the deal with investors. We basically didn’t pay for a lawyer at the seed round, except for small consultations and to learn about fundraising vocabulary. Instead, we insisted on standard SAFE documents (the short, readable versions on the YC website). This helped us keep burn low as we avoided exorbitant legal fees.

Greylock
Scrappy entrepreneurs walk into fancy VCs

  1. Once you’ve settled on the price, don’t give away more than you intend to. When a round is oversubscribed, Investors often push entrepreneurs to “raise more.” It’s good to raise more, but you should also raise the price. Don’t be bullied into giving away more control than you intend to.

  2. Ask people to back channel for you. We were incredibly lucky to be friends with Dylan Field, a fundraising prodigy who coached me and back-channeled for us during the Series A. One seed fund partner, who was still on the fence about his own investment, texted with peers on my behalf and let me know when “people were talking.” One institutional investor told us “no” only to call me back the next day to say that “having a conversation with Niv [Dror]” changed his mind. Investors know each other well, so their opinions influence each other’s and create hype.

  3. Put together a detailed “metrics doc” to follow up with after the initial pitch. Sending a metrics report to an investor after a pitch meeting will demonstrate traction, show off your ability to express data, and remind them to respond to you. It’s an impressive and actionable way to wrap up a meeting: “as a next step, I’ll send you our metrics doc detailing our progress so far.” It also gives you an easy way to defer quantitative questions that you don’t know the answer under later.

  4. Don’t lie. When you’re excited about a potential partnership, optimistic about your business, and eager for cash, it’s easy to drop numbers that aren’t true or over-exaggerate your traction. But lies can come back to bite you in so many ways, and most large rounds include a long period of due diligence designed to catch dishonesty. My cofounder and I made a promise to each other in the early days that we wouldn’t lie or exaggerate in pitch meetings, even when it meant admitting that we didn’t know a key metric.

Note: One successful entrepreneur told me that it’s okay to fib as long as you’re only one step from the truth, like “X gave us a term sheet” when there was only a verbal offer or “X made us a verbal offer” when you’re actually about to have the partner meeting. This seems like a reasonable range to me, as long as you keep the fibbing in check.

Cofounders

  1. Come to the Bay Area. We live and work in San Francisco, and we met all of the people who ended up investing in person, generally over drinks, food, or Blue Bottle. Face-to-face meetings are more casual, warmer, and easier to schedule. Also, the Bay Area is the ideal place for networking. We got dozens of introductions from people we know socially, through parties, events, or friends here in SF.

  2. If it’s not one of the top three firms, brand doesn’t matter. If you can, raise from Sequoia, Andreessen Horowitz, or Kleiner Perkins. KPCB led our $1.7M seed round, and I must admit that Mamoon’s name alone has been extraordinarily helpful with hiring, finding office space, getting press coverage, and raising subsequent rounds. But if you can’t, the brand doesn’t matter (in my opinion). I think that there's a big jump between these three historic firms and other great VC names. Outside of the top firms, I think founders should take money from the people they like and the people who will be the most helpful to them rather than optimizing for brand.

Sequoia

Both Sequoia and a16z passed on Kapwing's seed, but we tried

  1. If possible, don’t meet with your favorite investors first. You will get better at pitch meetings with practice, so your first few handful of meetings will likely be your worst. This is common advice that you can find on Twitter, but for some reason I didn’t take it to heart when we started fundraising. Now, in retrospect, I regret it and wish I hadn't been so eager to meet with my dream investors upfront.

  2. Not all investor advice is good advice. Many investors and Silicon Valley veterans preach that founders should “be careful who they take money from.” But the truth is that most entrepreneurs don’t get to choose who they take money from. If you’re like most first-time founders, you're trying to scrape together a seed round without a long list of investors to choose from. Similarly, many people warned us about “signaling risk,” or the danger of taking money from a VC that could invest at the Series A. However, we didn’t have a choice, since we had to take money from the investors who offered it. Finally, investors told us we should absolutely not do a “party round.” But our only option, in the end, was to accept investment from multiple funds, since no one firm offered to take the majority of the round.

The point is that every founder’s fundraising journey, like the path to growing a business, is unique. Don’t be thrown off by investors’ advice or a fear that you’re doing it wrong. We ignored much of this advice and didn’t have trouble raising a Series A 12 months after our Seed round. Note: We found that raising from Series-A focused firms was actually an advantage at the Series A, since we got an early term sheet from an inside investor.

I hope these practical tips help other entrepreneurs who are setting out on the fundraising journey. Please feel free to reach out to me over Twitter (@JuliaEnthoven) or email for advice!