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How to Fund a Startup

paulgraham.com · 9,103 words · saved by 1 readers

November 2005 Venture funding works like gears. A typical startup goes through several rounds of funding, and at each round you want to take just enough money to reach the speed where you can shift into the next gear. Few startups get it quite right. Many are underfunded. A few are overfunded, which is like trying to start driving in third gear. I think it would help founders to understand funding better—not just the mechanics of it, but what investors are thinking. I was surprised recently when I realized that all the worst problems we faced in our startup were due not to competitors, but investors. Dealing with competitors was easy by comparison. I don't mean to suggest that our investors were nothing but a drag on us. They were helpful in negotiating deals, for example. I mean more that conflicts with investors are particularly nasty. Competitors punch you in the jaw, but investors have you by the balls. Apparently our situation was not unusual. And if trouble with investors i

How to Fund a Startup --> Want to start a startup? Get funded by Y Combinator . November 2005 (This article is meant to be a complete summary of funding options for startup founders. In effect we're open-sourcing the kernel of what we tell founders about funding at Y Combinator .) --> Venture funding works like gears. A typical startup goes through several rounds of funding, and at each round you want to take just enough money to reach the speed where you can shift into the next gear. Few startups get it quite right. Many are underfunded. A few are overfunded, which is like trying to start dri

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