Jessica Livingston

We often get emails from startups saying “we’re running out of money, so we’re going to raise a series A now.” As if it were like making a second trip to the ATM. And when we ask how they’re doing, the answer is usually a combination of slow growth and high expenses. We have to tell them they have no hope of raising a series A and that they’ll have to make drastic changes even to survive.

Series A investors have a totally different attitude from seed investors. Seed investors are looking for promise. Series A investors are looking for performance. They know that all the returns from venture investing are concentrated in the big winners. So they want to invest in you only if you are clearly on a path to being a big winner. They’ll pay high prices if you are. But if you aren’t, they won’t invest at all. So even if you’re on the right path, but still in the middle of converting promise to performance, they still won’t invest. To them there’s not much difference between a startup halfway along the right path, and a startup on the wrong path. If they don’t see sufficient progress, they don’t care why.

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