[confiscate]

For what it's worth I think both of you have valid points.

The only point I want to add:

- the article explicitly mentions it is advice for EARLY STAGE startups (see "No one knows the value of an early stage startup")

Yes, if the startup is already Series D, the traction numbers are there, I'd see why you would want to ask lots of quantitative questions to get a yes/no decision.

But for an EARLY STAGE startup--would digging in with factual questions really change your decision? At that point everything is just projections and guesswork. The signals are more qualitative than quantitative.

Put another way--as an investor, when was the last time you met an Early Stage startup, came out of the meeting with a "default not invest", emailed them a follow up FACTual question, and the FACTual answer they replied back to you, turned you from a "default no" into a "yes"?

[lpolovets]

Asking factual questions isn't just for learning facts, it's also for seeing how someone things.

Example: "During the call you mentioned the market potential for a CRM for plumbers is $3b. When I did some napkin math I came up with $400m. Can I ask how you arrived at the $3b number?"

Bad answers: "Gartner says the market is $3b" or "CRMs are a $100b market overall, and plumbers are 3% of the workforce."

These are factual answers, but pretty weak.

Good answer: "There are 3.3m plumbers in the workforce. 30% of them are solo entrepreneurs, so they are unlikely to need a CRM. The other 2.3m spend 14 hours per month on managing their contact lists [citation]. We surveyed 30 plumbers and saw a willingness to pay $100/mo if we can reduce the 14 hours down to 2 hours. $100/mo x 12mo x 2.3m plumbers = $2.8b."

This is also a factual answer, but you can tell the founder thought about this more, they did customer development to get good data, etc. As an investor, an answer like this gives me a lot more confidence.

[keithwhor]

I think I'm getting rate-limited by HN so this may be my last response, buuuut:

I think that, unless this was a real example with founders you can name, this is a dangerous example, and even then it's suspect. I have literally not once swayed a "maybe" investor via an email. It's "maybe" and not "yes" for a reason, and the way you've framed it here is as if "maybe" converts to "yes" with enough elbow grease and a cleverly crafted answer. Founders can spend hours writing single e-mails to investors, especially if they're desperate for funding. So what you read as a simple e-mail response may realistically have been half a day of lost fundraising productivity, for, at best, a 10% chance they convert your gut-feeling "maybe" to a "yes."

This is where founders have an intuition about fundraising, especially first-time founders raising early rounds, that investors often just have no way to empathize with because they simply don't know.

I have, however, swayed "maybe" and even outright "no" / "not now" investors by walking away, mentally divesting, and re-engaging particularly helpful ones later with additional proof points. YMMV as a founder but I would recommend this approach 100 times before I ever recommended sinking hours into a clarifying e-mail with an investor who was a "maybe."

Your response may be, "well, just don't spend hours on e-mails then." Sure, tell that to the founder who has literally sunk $20,000 off of their 20% interest credit card and another $20,000 of their lower-middle-class parents' retirement money into their startup. They'll nod and spend the hours anyway. (The cruel irony is that many of the founders insecure enough to spend hours on an e-mail are almost guaranteed to not sway you, meaning that the 10% that do sway you only represent something like 1% of the total time spent on e-mails. This is why this sort of advice exists.)

[lpolovets]

I can't name specific companies because I don't want to violate their privacy. I will say that just in the last few weeks, I can think of one instance where I asked a few questions over email and the answers made me realize that a company wouldn't be a good fit (so they "wasted" time on the email but "saved" time from a 2nd meeting that would've led to a pass). And another instance where I asked a few questions and got really excited by the depth and clarity of the founder's answers. My fund is still talking to this second company, but I am even more excited about investing than before.

I can empathize with founders at least somewhat because funds have to raise money too. Our first fund required 100+ investor meetings, took about 8-10 months to close, and consisted of a lot of small checks. So I do know what a slog fundraising can be, how frustrating investor signals and behavior can be, how hard it is to change someone's mind if they have a strong bias, etc.

> So what you read as a simple e-mail response may realistically have been half a day of lost fundraising productivity, for, at best, a 10% chance they convert your gut-feeling "maybe" to a "yes."

I hope it's not half a day =(. I do have a different framing of time spent though: if you can invest 30 minutes (or even half a day) into an email that has a 10% chance of converting a Maybe to a Yes, then that's very worth it. If you talk to 10 funds like mine that all write $750k checks, then spending 30 minutes x 10 funds to get a $750k commitment means your time is earning $150k/hour. Even if it's half a day instead of 30 minutes -- and I hope it's not -- that's ~$20k/hour. That's a great ROI when you might be trying to raise $1m or $3m.

[keithwhor]

It’s not simply a per hour cost basis: it’s the psychology of pouring your heart into being rejected when, statistically speaking, the writing was on the wall. I’ve seen founders pushed to breaking (myself included) by absolutely mundane shit investors don’t think twice about. Yeah, the “good ones” get over it and move on. Doesn’t change the impact.

Fundraising, for founders, is not a back-of-the-envelope ROI calculation. It’s purely founder psychology management. You’ve raised multiple funds from LPs and should be insanely proud of that fact. Kudos. I’m sure it’s one of the more, if not most, difficult things you’ve ever done.

However: you did that based on, correct me if I’m wrong, a pre-existing network and a safety net of wealth from previous exits as an employee. I’m not trying to “class shame”, that’s not wrong or bad and it doesn’t diminish you, your abilities, your insights or your fund, but founders’ predicaments are often very different and they have a lot more riding on the success of their startup. (Please - if I’m wrong, correct me! I’m not trying to be an ass here and I am making assumptions. I’m prepared to be very wrong.)

My guess is that Justin Kan’s fundraising style is an emergent result of his initial conditions (circumstances at first fundraise) and intuition, and that it’s designed to minimize psychological risk (harmful self-doubt, second-guessing) as much as it’s designed to optimize for a successful close, because the two are tied hand-in-hand.

My only conclusion is that it shouldn’t be dismissed based on anecdotal evidence from a VCs perspective without considering how wildly different founders’ perspectives can be. Again, probably no objective truth, just a whole ton of things to think about!

[lpolovets]

Good point abot the psychological costs.

Re: safety net -- I had some cash saved up from a previous exit, but certainly not enough to not work again. And the first year of Susa Ventures was pretty stressful because I was taking $0 salary, not sure how successful we'd be at fundraising, and getting staler and staler on the coding side (which makes going back to sw development jobs harder). Having a financial safety net definitely helped though.