Flora says fundraising is mostly one-on-one meetings, not stage pitches like Shark Tank. YC company Freshpaint met 160 investors over four months and 18 days; 39 invested, with checks ranging from $5,000 to $200,000, for a $1.6 million round.
How Startup Fundraising Works
Speaker
Brad Flora, a group partner at Y Combinator and a former founder and investor, explains how startup fundraising works today at Startup School.
Flora recommends making a first version of the product and finding users before seeking funding. Solugen built small working reactors, then sold hydrogen peroxide to hot tub supply stores for $10,000 a month. That progress helped the company raise $4 million.
Flora argues that founders need to convince investors, not impress them with polished pitches or magic words. Retool co-founder David showed Flora an early version of the software and described its customer value; Flora invested. He says investor rejections are a reason to improve the startup and keep explaining it plainly.
Flora describes seed rounds as often smaller and faster than the large rounds covered in the press, and says YC’s SAFE makes early fundraising simpler. He says SAFEs do not give investors board seats, and points to Zapier, which raised over $1 million, chose to operate remotely, and did not raise again. He also argues that relying on revenue indefinitely can create financial stress and distract founders.
Flora says traction can matter more than a founder’s school, past jobs, or connections. Podium’s Utah founders had no Silicon Valley network but built sales momentum and later raised more than $200 million. He also notes that Envision’s founder faced more than 50 rejections before raising its first money, and that Whatnot was initially unable to raise as much as it hoped before later reaching a reported $3.7 billion valuation.
Takeaways
- Build a working first version and find early users before pitching investors.
- Use customer progress to explain why the business could grow.
- Expect fundraising to involve many individual meetings and rejections.
- Early fundraising can use SAFEs, but understand the terms and their effect on control.
- Founder networks may help, but product value and traction can open investor conversations.
Mentioned in this talk
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What was claimed 25
- role atBrad Flora is group partner at
Y Combinator“I'm Brad Flora, a group partner here at YC”
YouTube Unverified1 source· Talk
- acquiredPerfect Audience: Acquired in 2014
“we were acquired in 2014”
YouTube Unverified1 source· Talk
- foundedBrad Flora founded Perfect Audience
“the company I had the most success with was Perfect Audience”
YouTube Verified2 sources· Talk
- invested inBrad Flora invested in
Razorpay“we got into some great companies you may have heard of: Deel, OpenSea, Retool, and Razorpay”
YouTube Unverified1 source· Talk
- invested inBrad Flora invested in
Retool“we got into some great companies you may have heard of: Deel, OpenSea, Retool, and Razorpay”
YouTube Unverified2 sources· Talk
- invested inBrad Flora invested in
OpenSea“we got into some great companies you may have heard of: Deel, OpenSea, Retool, and Razorpay”
YouTube Unverified1 source· Talk
- invested inBrad Flora invested in Deel
“Through that fund, I invested in 150 YC companies”
YouTube Unverified1 source· Talk
- metricFreshpaint: Met with 160 investors; 39 said yes; raised $1.6 million over four months and 18 days
“They met with 160 investors, and 39 of them said yes”
YouTube Unverified1 source· Talk
- metricSolugen: Made $10,000 a month selling hydrogen peroxide
“They were making $10,000 a month selling hydrogen peroxide”
YouTube Unverified1 source· Talk
- metricSolugen: Raised $4 million to get started
“Solugen was able to raise $4 million to get started”
YouTube Unverified1 source· Talk
- metricSolugen: Raised $400 million
“Four hundred million dollars”
YouTube Unverified1 source· Talk
- metricRetool: Four-billion-dollar valuation
“today that company is at a four-billion-dollar valuation”
YouTube Unverified1 source· Talk
- launchedY Combinator launched
SAFEstandard fundraising document for future equity“in 2013, YC created a new standard fundraising document called the SAFE”
YouTube Verified2 sources· Talk
- featureClerky: Lets founders send and sign SAFEs in a few clicks
“lets you send and sign them in just a few clicks”
YouTube Unverified1 source· Talk
- metricAster Bio: Raised over $150 million
“They’ve since raised over $150 million”
YouTube Unverified1 source· Talk
- usesraised an initial million or so from angels using SAFEs
“they were able to quickly raise their first round of funding from angels using SAFEs”
YouTube Unverified1 source· Talk
- featureSAFE: No board seats, shares, or information rights at the time of investment
“when you raise with SAFEs, you don’t give up any board seats”
YouTube Unverified1 source· Talk
- metric
Zapier: Raised over a million dollars from angels and small funds at Demo Day“They had a few customers and raised over a million dollars”
YouTube Unverified1 source· Talk
- metricZapier: $100 million revenue business
“Today, that’s a $100 million revenue business”
YouTube Unverified1 source· Talk
- metricPodium: Makes $100 million a year and has raised more than $200 million
“Today, that company makes $100 million a year and has raised more than $200 million”
YouTube Unverified1 source· Talk
- metricEnvision: Rejected more than 50 times to get its first check
“She was rejected more than 50 times by investors”
YouTube Unverified1 source· Talk
- foundedSerbi Sarna founded Envision
“Envision is a medical device startup for cancer detection, started by Serbi Sarna”
YouTube Unverified1 source· Talk
- acquiredEnvision: Acquired for $275 million
“the company was acquired for $275 million”
YouTube Unverified1 source· Talk
- metricEnvision: First round was $500,000
“Her first round of funding for the company was only $500,000”
YouTube Unverified1 source· Talk
- metricWhatnot: Worth $3.7 billion and raised over $400 million
“Whatnot is worth $3.7 billion, and they’ve raised over $400 million”
YouTube Unverified1 source· Talk
