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Comment by webwright | Hacker News Reader

To me, one of the biggies is raising too early. To Sam's point, you want a competitive environment. To get that you want to obviously be a good investment to as many investors as possible.

If you don't have some combination of an amazing v1 product, a traction graph that's moving in the right direction, credible investors already on board, a big/timely market, or a top 5% team, you're almost certainly fundraising too early... And you should do whatever you can to get one or more of the above.

See: http://andrewchen.co/2011/06/21/video-the-anatomy-of-a-funda...

(note: salesmanship can trump all of the above)

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It's sort of silly though - founders already take risk with years of their life going nowhere, why should they also bear the entirety of the financial risk? Isn't the purpose of early stage investment to validate the idea? And by contrast late-stage investment is to grow the validated idea? It feels like these days everyone wants to invest only in validated ideas. It just feels suboptimal that hardly anyone ever wants to finance the actual validation... Am I missing something?

Marc Andreessen kind of touches on this in Why Software is Eating The World: http://online.wsj.com/news/articles/SB1000142405311190348090...

The barriers to entry for startups have gone down, and thus there's higher quality startups competing for the same funding. As development becomes cheaper, easier, quicker we are just going to see the bar go up for early stage investment because investors will have more and better options.

The "graph moving in the right direction" doesn't have to be impressive in absolute terms. If I can prove that I have 100 paying, engaged customers this week, 50 last week, 25 the week before, etc. I've proved that the idea resonates with a market, and its growing. Note that this is still early stage. You have to be able to prove some indication of longterm value though.

If you have paying customers with consistent growth then you are well past idea stage.

I think DenisM's point is that founders often need to be somewhat wealthy on their own in order to create a product in the first place. This doesn't seem like an optimal division of responsibilities.

Validation for pure-play software is cheap in today's markets. Work-two-years-for-a-large-company-to-save-up-some-cash-to-bootstrap cheap.

Be that as it may, why is this true just for founders? Ie, we sometimes forget the echo chamber we live in around here - ie, no one owes anyone a "fundraising" opportunity. Early stage investment is absolutely about validation, but does that mean anyone who's interested should be able to raise money for it? If it was your own money, wouldn't you do everything you could to minimize the risk for a given upside profile?

Yeah, getting a working prototype and alpha users before even thinking about angel or VC.

Later, the right amount of validation will speak for itself and reduce friction. That is if investment would win a race-to-market. Otherwise, plan to get to market as quick as you can on with the team and money you have.

Founders have to have enough credibility to find customers and a business model to seek out profit, or it seems like a risky proposition no amount of selling can overcome.

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