Should I Raise Angel, Seed, or Series A?

What can be said about fundraising that hasn’t been said already?

A lot.

Let’s talk about who to raise from and how to raise from them, depending on the stage of your company.

The answers are actually quite simple and well-known. It’s getting to the answer that is the tricky part because it requires being brutally honest with yourself.

When raising funds, be brutally honest with yourself about specifically which stage you’re at — one of three:

  1. Are you pre-traction? Raise an angel round. Strategy: sell the dream. You don’t have numbers to sell so don’t even try to sell investors on traction at this point. You will only end up with dumb investors. You’re raising money to prove people will use what you make.
  2. Do you have early traction? Raise a Seed round. Strategy: sell the traction. Show off your traction. You’re raising money to figure out how to convert this traction into repeated, up-and-to-the-right growth.
  3. Do you have repeatable, up-and-to-the-right growth? Raise an A round. Strategy: sell the growth. You’re raising money at this point just to cover costs because you’re not generating enough revenue yet, but everything else is up and to the right. “We’ve got a fire; let’s pour gas on it.”

It’s simple. Be honest.

Then go raise the money. That’s also simple: just talk to people until you find out who fits with your vision.

Why focus on traction? There’s no easier way to prove you’re right than traction. Not to mention: if you’re contrarian, it’s the only way.

Worth saying: sometimes you can be in between these stages. E.g., pre-product, post-product without product-market fit, and post-traction without repeatable growth. The answer is still simple: tell investors what stage you are and find investors who are OK with that. For example: if you have a product but not product-market fit, still go after angel investors and just double down on selling the dream. Another example: hardware startups often raise money pre-product.

Fundraising isn’t mysterious. It’s a lot of work.

❤ Tyler