How to Raise Money

Paul Graham’s essay How to Raise Money is a comprehensive guide to fundraising. The core message: fundraising is just a means to an end.

Core Principles

Don’t Raise Unless Necessary: Only pursue funding if your company needs it to grow faster and can attract investors. Rapid growth is what makes a company a startup, not external funding.

Commit Fully or Not at All: Fundraising is extremely distracting. Either enter “fundraising mode” completely or avoid it entirely. Half-measures destroy momentum.

Treat Investor Interest Skeptically: Investors naturally delay decisions while preserving options. Regard them as saying no until receiving unequivocal written commitment.

Strategic Tactics

Use Parallel Outreach: Approach multiple investors simultaneously. Serial approaches give investors no competitive pressure to act.

Get First Commitments First: The initial investor is often half the total difficulty. Subsequent investors follow more easily due to herd behavior.

Accept Offers Greedily: Take acceptable offers as they arrive rather than holding out for better ones.

Avoid Valuation Obsession: Valuation ranks third in importance behind securing necessary funds and attracting quality investors.

Important Warnings

• Commitments aren’t real until funds arrive
• Don’t sell more than 25% in phase 2 to preserve founder motivation
• Designate one founder for fundraising to prevent team-wide distraction

My Takeaway

The strongest position is “type A fundraising”—raising money when you don’t desperately need it. Being able to reach profitability independently gives you negotiating leverage.

What’s your experience with fundraising? I’d love to hear at persdre@gmail.com.