How to Start a Startup

HTSaS · Chapter 07

Raising Money & the Long Term

Fundraising is fuel, not a milestone. Learn the investor psychology, the instruments, and how to run a company for a decade, not a demo day.

After this lesson

  • Understand default alive vs. default dead before deciding urgency
  • Know how investors actually think, and what a fundable narrative looks like
  • Plan for the multi-year grind, not just the next round

The last two lectures of the arc

This chapter compresses Lecture 9 (Marc Andreessen, Ron Conway & Parker Conrad on raising money) and Lecture 13 (Reid Hoffman on being a great founder), plus Ben Horowitz's wartime/peacetime framework from Lecture 15. By this point you should have PMF signal (Chapter 5) and a real culture (Chapter 6) — fundraising without either is the single most common way founders waste a good story.

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Lecture 9 — How to Raise Money — Marc Andreessen, Ron Conway & Parker Conrad

Extract the three different vantage points — VC, angel, and founder-who-raised — on what actually moves a decision, then compare to your own target list.

This chapter is a working summary. When the idea matters, read the source once — then come back and do the practice.

Read the original

Default Alive or Default Dead? — Paul Graham

The single most useful spreadsheet question for a founder deciding whether — and how urgently — to raise.

This chapter is a working summary. When the idea matters, read the source once — then come back and do the practice.

Default alive or default dead

Take your current burn, growth rate, and cash on hand, and project forward: if nothing changes, do you run out of money before or after you'd naturally reach profitability or your next raise? That single spreadsheet answer should drive most of your near-term fundraising urgency — not vibes or competitor announcements.

How investors actually think

  1. They're underwriting a small number of huge outcomes across a portfolio — they need a story where you could be one of them, not just a safe bet
  2. Pattern matching and FOMO are real; a warm intro and visible momentum change how a pitch is received
  3. They're buying the next 18 months of narrative, not just today's metrics
  4. A partner has to convince their partnership, not just themselves — give them ammunition for that internal pitch

Case

Reid Hoffman's LinkedIn Series B pitch

When Hoffman raised LinkedIn's Series B from Greylock, the deck he later published publicly showed modest, unglamorous early numbers — not a hockey-stick chart.

Takeaway: What sold the round wasn't the snapshot, it was a credible story about how the network effect would compound over the next 18 months. Investors underwrite the trajectory and the narrative behind a number, not just the number itself.

Instruments, briefly

  1. SAFEs / convertible notes: fast, common at pre-seed/seed, defer valuation to a later priced round
  2. Priced rounds: fix valuation, board seats, and protective provisions — read every term, not just the headline number
  3. Watch dilution compounding across multiple SAFEs stacked before a priced round
  4. Ownership targets are rough guides (funds often want a meaningful stake), not laws — but they explain why some deals don't get done

Running a real process

  1. Get the pitch and narrative tight before the first real meeting — practice it out loud, not just on slides
  2. Build a target list from comparable deals and warm paths in, not a cold list from a database
  3. Try to get multiple conversations moving in the same window, so decisions compress into weeks, not months
  4. Use early yeses (angels, smaller checks) to build momentum and social proof for the larger checks

The long game: wartime and peacetime founders

Startups are a multi-year psychological endurance event, not a sprint to a headline. Ben Horowitz's wartime-CEO/peacetime-CEO distinction is the clearest framing: wartime is urgent, directive, crisis-mode; peacetime is patient, sustainable, and focused on developing the team. Founders who last know which mode the moment calls for — and don't default to running wartime for years, which burns out both them and the company.

Read the original

Lecture 15 — How to Manage — Ben Horowitz

Extract Horowitz's wartime/peacetime distinction and at least one of his rules for delivering hard feedback — both apply directly once you're managing people you didn't personally hand-pick.

This chapter is a working summary. When the idea matters, read the source once — then come back and do the practice.

Read the original

Lecture 13 — How to Be a Great Founder — Reid Hoffman

Pull Hoffman's specific advice on playing infinite games responsibly — the through-line between raising money now and still having a company (and a marriage, and a sense of self) in five years.

This chapter is a working summary. When the idea matters, read the source once — then come back and do the practice.

Should you raise now?

Be specific about your actual runway math and story, not general market sentiment.

Practice