Being Legible to Capital

This is the most consensus market I have seen in a while. If you're hot, you're really hot. If you're not, you're not. There's almost nobody left in the middle, and I've written about what that does to Series A valuations. Michael Dempsey just published a letter telling VCs to give up entirely. It's whimsical and sarcastic and mostly true, and the line that stuck with me was that the most successful founders are the most legible.

He meant it as a joke. But if you're raising this fall, that's basically the game. In a consensus market most VCs aren't doing independent work, they're reading signals off you and comparing notes. The error of omission is just too high for funds to miss the hot deal. Whether your company is actually good comes later, sometimes much later. So with August fundraising season fully underway, here's a brain dump of what gets read, and how.

Who you talk to at a firm really matters. Associates and principals are really great. I genuinely mean it. But look at what they've backed recently to understand their leverage and their standing in the firm. Newer, worked on a few great recent deals, understands your space? Talk to them, and get a warm intro to them too. If not, they might be on the way out. Figure out quickly whether the fund is actually interested or just giving you lip service. And know that once you're assigned to someone in the CRM, you're stuck with that person. Wars have been fought over deal attribution. You think I'm joking but no.

Eventually you have to get to the GPs, the capital P partners, the ones with actual authority and not just the title. You could cold email. But a warm intro changes everything. Angels are great for this, and a founder they've already backed is even better. They'll run onto a plane to talk to you. Schedules vanish. You don't get passed to an associate (usually).

Then the ask, and here's where it gets tricky. Ask for too much and they look at you skeptically, unless you're Elon. Ask for too little and you're not ambitious enough. Too little dilution, it's not worth it. Too much, it's too good of a deal. There's no science here, but come prepared with a resemblance of a plan for why you're raising that much.

And the number you say out loud matters far more than you think, because you can't take it back. You say you're raising $30M. People say it's too much. You have confidence you can do it. You end up not being able to. So you go back and say fine, we'll take $20M. It doesn't work that way. It seeds a doubt that you weren't able to fundraise, which scares investors even more, and it shows poor judgement on why you needed that money in the first place. I always advise founders to aim a tad lower so you can actually raise the amount, ideally in a competitive scenario with multiple term sheets.

It's still an art. A hard one.

On price, the number one thing founders don't understand: VCs don't want a "deal." If the price is too good, it begets even more questions, like why is the price not higher. It's weird but it's true. Same with ownership. No established lead fund will do under 10% dilution, so don't even ask. (Obviously there are exceptions, and if you have insane leverage, go for it.) The floor is set because someone inside that fund is showing their partners how this one returns the fund. And never compare on what your competitor got. It's the single best way to tank the deal. You have no idea how that deal actually got done, though it's good to have as a comp.

Your story gets read hardest of all, especially in this era where it's easier to raise a seed and much harder to raise an A. Yoni Rechtman wrote this month that there's no revenue number that gets you a Series A anymore. The bar is whether what you're building is obvious, and "as soon as you're justifying the size of your opportunity, you've probably already lost." So share your unfair advantages in product, tech, or GTM (ideally all three). Ground them in your company, your people, what you're observing. There's probably a competitor out there already doing what you're doing. Your unique insight is what gives a VC confidence on why you'll win anyway.

People also severely discount how much hiring great folks gives you the Mandate of Heaven in a fundraise. You should hire great people for the company anyway, but if you have great new hires, showcase them in the pitch. I'm totally shocked how few companies do this. It helps VCs underwrite the downside, where worst case the company gets bought for the talent.

Small things get read too. Your traction slide should show the current month, even if you started fundraising last month. June numbers in August smell like stale goods. And when anyone asks about your timeline, the answer is two weeks. It's always two weeks.

Remember you're being read even when you're not in the room. The valley, and New York especially, is insanely small. If you tell a fund you have a term sheet from someone, it's literally a text away. VC is a co-opetition, everyone talks to everyone. It's why all decks leak and news spreads like wildfire. Don't lie, and don't share anything you don't want shared. Even if the upstanding VC keeps it close, another one won't.

And vibes are really important, maybe more than any of this. Be you. Showcase what you're excited by and highlight where you need help (we thrive on helping). You can play the silly game of negging and acting like someone you're not, but trust me, it works far less than you think. Hype can buy you eyeballs and attention. It's not the end all be all.

Finally, this market will read you top to bottom and still get it wrong. Even the best companies struggled to raise a round. Look at Anthropic. So if you're not in a hot sector, strap in. Share what makes you a great contrarian bet, because everyone is trying to balance their portfolio and you never know where you'll find a champion, even if you strike out with the top 100 firms. Figure out your default alive path. Valuation markers will come and go, and a brand and a big number are nice for the ego. What matters is fuel in the tank to keep your ambition high.

All it takes is one yes.