A few words on fundraising đź’¸

September 25, 2023

Hi friends,

I got the chance to speak to a room full of brilliant entrepreneurs a few mornings ago. And while I’m on paternity leave, I’m still taking the chance as much as I can to speak with founders where they are about the topics they want to learn about when it comes to fundraising, hiring, storytelling, and why VC fund partners say things like, “I’m not sure if that’s venture-scale,” or, “this business might be a little too early for me,” or, “you previously crowdfunded, here’s why that concerns me.”

Ultimately, venture fund managers, like myself, are investing OPM or other people’s money. Our LP’s goal, which makes it our goal, is to at least 3x+ their invested capital. To do this in a portfolio of 40 companies as a seed-stage fund, when you own roughly 10% of each investment (and only 5% post-dilution), is to ensure that every single investment we make can potentially return the fund. Most of our investments will fail or return less than 1x the capital invested.

The winners will return anywhere from 10x-1000x; they must first make up for the 50% that don’t make it and the 30% that return only 1x-10x. Ultimately, the power law curves mean that we need to find companies that can grow 100x from our initial investment. When pitching a VC, you must guide them to the light. Help them to believe that what you’re building can be 100x from their entry point — $10M post to $1B at exit.

Yes, we are early-stage investors. Yes, we have backed companies pre-product, pre-revenue, and even pre-incorporation. But not all founders, ideas, and teams are created equal. When fundraising, make sure you’re helping your potential investors to see how phenomenal your team is, how exceptional an opportunity your idea is, and how massive the market can be. The earlier you are, the bigger a story you need to tell — the bigger the dream has to be.

Jesse

👋 Hi, I’m Jesse, a seed-stage VC at Flybridge. If you find a fast-growing niche or paradigm shift in the future of work, reply to this email with 1-2 short, compelling paragraphs. I answer as many emails as humanly possible.