5 Harsh Startup Fundraising Truths from Naval Ravikant

Naval Ravikant co-founded AngelList, and is an early investor in companies like Twitter, Notion, Uber, and many others. He is one of Silicon Valley's most influential thinkers, and his reflections on wealth, startups, and life are compiled in the bestselling 2020 book The Almanack of Naval Ravikant. Here are five harsh truths about fundraising by Naval: - Cash-constrained startups often outperform: "..it’s just human nature that when you have money you will spend it, and not always for the better. I think it takes your eye off the ball. In that sense, it is true that companies that are at least somewhat cash-constrained do better." - "Valuation is temporary. Control is forever": "Whoever has control can effectively end up controlling your valuation later. Never give up control. And control is given up in subtle ways: A lot of term sheets will have so-called protective provisions that originally existed to protect the preferred shareholders, because they were minority shareholders. But effectively they give those shareholders control over the company." - Raising capital is an emotional sale: "The process of raising money from an investor, a friend of mine once joked, is the process of young men and women seducing old men and women. You’re essentially trying to get them to look at you, and to see themselves in you… And so it is an emotional sale. It is not a rational sale. And you have to understand that at its core level.” - Don't hesitate to back out of a bad deal: "You can learn everything you need to know about a VC during the term sheet process before the close. And don’t be afraid to call off the close if you’re getting negative signals. I’ve done it and I’ve never regretted it. The moment you know that you’re working with someone that you would not work with for the rest of your life, stop working with them right there. " - Build something great and investors will chase you: "I see founders spend too much time chasing VCs for money, when the reality is that if you’re building a great product, fundraising is actually relatively easy. Usually what happens is, when your company’s not doing that well, fundraising is really hard. When your company’s doing great, fundraising is almost too easy and you’re oversubscribed…"