To raise VC, think like a VC first

A lot of people have the wrong idea about fundraising.

They make fundraising a really complex thing, making it seem that you have to change your entire personality, or lie, or somehow try to fool people.

After Solo Founders and Y Combinator, I’ve realized that most of that is overcomplicating things.

There’s really only one thing you have to learn so you can fundraise successfully:

learn to think like a VC

When you have a good mental model of how a VC makes decisions will you be able to leverage that into a successful fundraise. Failing to create the right mental model is the number one problem most early-stage founders make.

Here are some VC-mentality principles, the implication of each, and how it should affect your mindset.

1. Giving money is the VC’s entire job, so never beg

This may sound surprising or obvious, but always remember:

VCs want to give startups money.

They don’t want to sit around and put their money in an index fund. They are just waiting for a founder to come in with incredible energy, a great product.

Because if they find the next Zuckerberg before anyone else, this means they get a share at the lowest valuation, and gain the most in subsequent rounds.

The practical implication is that you never should go into a VC call with a beggar mentality.

You instead want to become the person they believe in, feel inspired by, and want to see succeed (and thus give their money to.)

2. VCs work with incomplete information, so signal competency

Given the speed that VCs need to review and make decisions, they necessarily work based on incomplete information. After a point, every agentic AI startup starts sounding the same.

This means they’re using some common patterns or “signals” to evaluate startups. Here are some of them, in an approximate descending order of importance:

• Accelerators – if you’re accepted into something like Solo Founders or Y Combinator, someone smart has made a bet on you already, and it’s easier to trust you.
• Pedigree Alma Mater – same logic
• Big Tech – their interviews are infamously hard, and if someone can crack that, you have higher chances of building a successful company than the average person
• Warm Referrals – which means their friends like you or you are popular enough to be discussed
• Social media / Github stars / other engagement signals – if a lot of people engage with your content, you have some idea how to distribute a product, and distribution is an important skill.

The implication here is that if your pitch is exclusively focusing on the technology without signalling in other ways, the VC might feel something missing.

3. VCs get 1000s of opportunities to invest, so stand out

Every VC has an inbox full of potential new companies to invest in.

This means that if you’re trying to raise funds by cold emailing VCs, you’re not going to have good chances.

The idea is to make the VC notice you and chase you, rather than the other way around, because chasing a VC will never work.

Now that’s not always simple – but one of the easiest ways is social media.

E.g. if you have all the VCs in your linkedin, it means that whenever you share progress updates, launch videos, or customer testimonials, the investor will notice you.

I have a first-hand experience of this: around demo day, my posts got liked by some VCs, which meant that other VCs in their network also saw my posts, and it became a self-fulfilling circle.

You can set something like that for yourself too. I created a completely free list of all the early stage investors in SF, preseed and seed, 500+ investors just waiting for you to come and wow them.

You can also use my tool to automate this connection to VCs. This is especially powerful for companies currently in an accelerator like YC – since you don’t have much time to do this manually, automating it can significantly increase your fundraise chances at demo day. Just visit gigacatalyst.com/multiplier/yc/investors and type in your company website.

4. VCs like to make you wait, so create urgency and close quick

Even though it seems tempting to go to that VC dinner or talk to that VC early, don’t take the bait.

They want an earlier conversation so they can extract information and make you an earlier deal on less competitive terms.

This actually happened when an investor came to my residence at 11pm in the night to make a shitty lowball offer. Fortunately I was able to call up one of the most legendary VCs in the city, @julianweisser, who helped me say no to that bad deal, otherwise I’d have given up a lot more of my company at a poorer valuation.

The solution is to compress all VC meetings to a span of 7 to 14 days and create a fast-moving competition where every VC feels FOMO to sign quickly or lose out.

Paul Graham famously regards Sam Altman to be one of the best at fundraising, and I had the pleasure of hearing this directly from him when he spoke at YC. Failing to create a competitive environment can truly be the #1 killer to your entire fundraise. He wrote an entire article on this topic, so go and read that one too.

Conclusion

When you start thinking like a VC, you’ll see that there’s genuinely no need for tricks.

Ultimately, it’s two humans making a business decision. VCs cannot exist without startups, but startups existed long before VCs.

So keep your head high and go get that bread.

What are your fundraising secrets (or mistakes) that you’ve made?

Keep shipping, Namanyay