The Founders' List: 8 Skills Top Founders Master for Startup Fundraising (How VCs Negotiate)
In this episode, NFX explores the art of VC negotiations, discussing how to communicate your valuation and handle low baller offers. They delve into talking in pre-money valuation during startup fundraising, ESOP allocations, and distinguishing leaders from followers. Additionally, they emphasize the power of controlling the deadline and the role of self-awareness in fundraising negotiations.
Key Points
- Fundraising is a nuanced skill where founders must navigate the dynamics of VC negotiations, including managing lowball offers and understanding the implications of post-money versus pre-money valuations.
- Founders should be aware of tactics like the portfolio company opinion trap and the importance of controlling term sheet deadlines, which can influence the outcome of VC negotiations and the long-term relationship with investors.
- Self-awareness is crucial in fundraising; by mastering key skills such as ESOP allocation discussions and discerning genuine investor interest from non-committal language, founders can negotiate more effectively and align their interests with those of VCs.
This is The Founders’ List – audio versions of essays from technology’s most important leaders, selected by the founder community.
Fundraising is a learned skill – and VCs almost always have the upper hand because they deal with it all day, everyday. Over the years of founding, advising, and investing in companies, Gigi has learned that VCs are better at startup fundraising than entrepreneurs. In reality, knowing what to expect from VCs – the negotiation dynamics Founders are likely to encounter – is half the battle.
Before you start communicating with VCs, take the time to learn how to detect and manage these 8 little-known fundraising dynamics. This is what we at NFX call “high leverage fundraising” – it gives you speed & clarity, while still helping cultivate strong, long-term relationships. Let’s dig in.
Read the full NFX Essay - https://www.nfx.com/post/8-top-skills-founders-startup-fundraising/
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Transcript
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