“Mere” $B outcomes are no longer interesting to many VCs. For many, it's now about $T outcomes.
VC expectations have shifted majorly. As a result, founders need to update their strategies on how to raise in today’s environment. There are 4 key buckets that work:
- 𝗡𝗔𝗥𝗥𝗔𝗧𝗜𝗩𝗘: Talk a big game about something that sounds like it could be very big, even if the details are fuzzy [𝘪𝘯 𝘧𝘢𝘤𝘵, 𝘵𝘩𝘦 𝘭𝘦𝘴𝘴 𝘥𝘢𝘵𝘢 𝘵𝘩𝘦 𝘣𝘦𝘵𝘵𝘦𝘳, 𝘣𝘦𝘤𝘢𝘶𝘴𝘦 𝘯𝘰𝘵𝘩𝘪𝘯𝘨 𝘬𝘪𝘭𝘭𝘴 𝘢 𝘨𝘰𝘰𝘥 𝘴𝘵𝘰𝘳𝘺 𝘭𝘪𝘬𝘦 𝘥𝘢𝘵𝘢]. 𝙴̲𝚡̲𝚊̲𝚖̲𝚙̲𝚕̲𝚎̲𝚜̲: we are building an AI doctor, we are building the world’s fastest LLM, we are rebuilding payments rails for agentic commerce
- 𝗜𝗡𝗡𝗢𝗩𝗔𝗧𝗢𝗥’𝗦 𝗗𝗜𝗟𝗘𝗠𝗠𝗔: Go after a large, publicly listed incumbent (eg SAP, Salesforce, Costar, ServiceTitan). Explain why the incumbent is hampered by an innovator’s dilemma, and how an AI-first upstart is better placed to win the future with a 10x better value prop
- 𝗚𝗥𝗢𝗪𝗧𝗛: growth expectations have changed radically. Growing from $1 to $3M ARR or $1.5 to $5M ARR no longer excites VCs (who are gaga over the narrative-led businesses mentioned above). If you are going to raise on the basis of growth, you need best-in-class growth, which is now astronomical (e.g. $1 to $10M ARR in a year). No easy feat. [𝘵𝘩𝘪𝘴 𝘪𝘴 𝘢 𝘩𝘶𝘨𝘦 𝘴𝘩𝘪𝘧𝘵 𝘵𝘩𝘢𝘵 𝘧𝘰𝘶𝘯𝘥𝘦𝘳𝘴 𝘯𝘦𝘦𝘥 𝘵𝘰 𝘪𝘯𝘵𝘦𝘳𝘯𝘢𝘭𝘪𝘻𝘦 𝘲𝘶𝘪𝘤𝘬𝘭𝘺]
- 𝗥𝗘𝗖𝗘𝗡𝗖𝗬 𝗕𝗜𝗔𝗦: The absolute numbers matter less if you’ve had a very strong few months leading into your fundraise (could be as few as 3). If you went from 0 to $500K ARR in 9 months, but then went from $500K to $1.5M in 3 months, you should anchor your storytelling on how you’ve recently cracked the code on your business/market. VCs are suckers for recency bias
*Overall, what’s wild is that today it’s easier to raise large amounts of capital on narrative than it is on business performance**