How fundraising has changed – 9 Lessons from AngelList founder Naval Ravikant

Here are some great quotes / lessons / extracts that I liked from a recent ‘This week in Startups’ interview with Naval Ravikant. Naval is the founder and CEO of AngeList and started his first company at 23. The interview is about 50 minutes long but well worth a view if you have the time. I think Naval’s advice is spot on and I’m also very excited for how AngelList, and in particular their new syndicates, are disrupting traditional VC.

  1. Premature scaling is a big reason start-ups fail. People writing you checks will want you to ramp up fast. This is a mistake unless you are already killing it in the market. You need to keep it small / super lean for as long as possible.
  2. Accelerators are now your series A (50k), angels are your series B (500k) and VC’s are your series C ($1.5M+)
  3. You should get to escape velocity before you talk to VC’s. You now should be able to do this with Angels. You need to show traction or you need to show you are doing something very unique and difficult. i.e. Dropbox today would need to have 100,000 users with a monthly growth rate of 20% before they would qualify for a VC round.
  4. Valuation is temporary but control is forever. (when you raise VC) You have given up control of your company and it is no longer your company. You are the entrepreneur but you are working for somebody else.
  5. Remember this when negotiating ‘standard’ term sheets. Lawyers will typically have a bias to the VC’s as they spend more time working with them on multiple deals over time. Therefore the VC will always get the benefit of the doubt when you hear phrases like ‘that is standard’ from your lawyer.
  6. Accelerators are the new, better, faster graduate schools. You even get paid to go.
  7. Enterprise or consumer? You need to build the product you are most passionate about. You need to be number one no matter which product you chose. There is no real prize for 2nd.
  8. Chances of success. Consumer less than 1%, Enterprise is probably 10%. You are constantly learning with each startup. Timing and dumb luck are important.
  9. Look at raising with a rolling convertible note round. This means that you can be fund-raising all the time. You are not in the artificial old model of only being open for new funding every 18 months.

Thank you to Jeffrey Char for posting a link to this video and further analysis on Facebook. Jeffrey is a hugely experienced entrepreneur and investor who is based in Japan. More importantly he is a great guy and a big fan of chocolate if you are ever visiting Tokyo :)

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