Moneymakers

Why founders stopped raising capital from friends and family

Founders' go-to first round is no longer raising capital from friends and family.

Building on last week’s discussion ‘how to become a VC’ with an open discussion below:

More founders replace raising capital from family and friends with the new operator-angel round to de-risk technical dependencies, accelerate time to launch and build momentum for the next round.

Raising capital from friends and family isn't the best way to start a business. Fareed Mosavat speaks about early stage SaaS companies and the importance of measuring early-stage investor metrics.
Slack’s head of self-serve product Fareed Mosavat on why early stage SaaS companies need to measure more than early-stage investor metrics

Replace raising venture capital from family with an operator-angel round

There are three goals of an operator-angel round.

1. Accelerate your startup’s time to market

Rather than focusing on family and friends capital raising, drive strategic alignment with core integration partners and founders/operators who can open doors quickly.

2. Augment your team’s current capabilities

Find operators who can immediately deliver a high value per dollar invested through a focused body of work and immediate access to network. To do this, skip raising capital from friends and family. Instead:

  • Choose angels based on relevant operating experience
  • Create goals and focused body of work to leverage an individual angel’s superpower
  • Continue to build momentum with angel until your startup has enough momentum to hire someone full-time. Leverage angel’s peer network to source, vet and onboard someone full-time

3. Act on first mover advantage and engage high-signal angels

New entrants will be viewed as a fast follow with a low chance of becoming the category leader. How? 

  • Build your sector-aligned CEO network to establish credibility with users & investors
  • Leverage early investor alumni networks to scale hiring momentum & culture
  • Box out competition with a bottom-up community of early believers and evangelists

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