How hard is it to raise venture capital?

Q: How hard is it to raise venture capital? If you have solid traction and a great team, are your chances significantly higher than 0.05% and will you find at least one investor if you keep hustling?

This is a case where statistics are misleading. The overall odds of raising venture capital may be 0.05%. And goodness, there are just so, so many start-ups today. So many.

But it’s a story of both privilege but also traction — and bending the odds in your favor.

Let’s look at YCombinator. According to YC, “Each batch of YC companies raises about $250M of seed capital in the weeks following Demo Day.” Investors

Woah. That’s $250,000,000 in seed capital in each YC batch. With 2 batches a year.

>50% of each YC batch does, or can raise capital. It may be much higher.

Also, if you’ve been an investor, you know that certain companies are just hot. They have the right teams, the right metrics, and the right traction. They truly can raise money from VCs in a week. 100% of the time.

So in the end, it’s up to you to bend the odds in your favor. And it is indeed much harder if you aren’t a white male of privilege, from Stanford, with all the right teammates from Google and backgrounds.

But you still need to do what you can to bend the odds in your favor:

  • Join a top-tier accelerator if you can get it. The top ones are worth it if you want to raise VC money. VCs go to their demo days just to find companies to invest in.
  • Build the very best team you can. The stronger the team, the higher the chance you can raise capital.
  • Find a way to go 24+ months without VC capital. If you aren’t fundable today, you may well be in 12–24–36 months. Atlassian went a decade or so before raising VC capital 🙂 If you want to raise but can’t now, keep at it.
  • Build relationships. VCs and angels that aren’t ready to fund you now may be in 6 months when you have more to show.
  • Traction helps. Traction cures all. Zoom had trouble raising its seed round. And today — it’s the most successful of the current generation of SaaS companies.

View original question on quora

Published on January 5, 2020

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