Angel investors Ashley Mayer, Packy McCormick, Sander Daniels, Patrick McKenzie, and founder Ryan Delk discuss rethinking minimum check sizes in fundraising. They highlight the value of small investors in building momentum and making introductions, emphasizing the need to optimize the startup's cap table.
The size of an investor's check is relatively unimportant compared to their expertise, network, and legibility on the cap table.
Bringing on smaller investors has become less complex and costly due to the use of safes and RUVs, allowing for bundling investors and prioritizing the best people on the cap table.
Deep dives
Forget Minimum Check Sizes in Fundraising
One common assumption about fundraising is the need for a minimum check size, typically between $25,000 and $50,000. However, this belief persists from an outdated era when onboarding new investors was more costly. The focus should be on optimizing for people with relevant expertise, network, and legibility on the cap table. Expertise helps in specific areas, network connects to investors and potential customers, and legibility impacts how other investors view the company. The check size of an investor who brings these qualities is relatively unimportant, as smaller investors can still be valuable and contribute significantly to funding rounds.
Cost is No Longer an Issue in Bringing on Smaller Investors
The podcast highlights that the cost and complexity of bringing on smaller investors has significantly decreased. The use of safes and RUVs (Rolling Venture Funds) have standardized terms and simplified the process. This reduces legal complexity and decreases expenses related to bringing on smaller investors. Safes and RUVs also allow for bundling investors into a single line item on the cap table. Additionally, the podcast suggests considering engineers as small-check angel investors, as they can bring added value and contribute to the startup's success. The key takeaway is to prioritize getting the best people on the cap table, regardless of the investment amount.
Welcome to the third week of the brand new Texts with Founders Podcast.
The goal of this podcast is simple: make the knowledge being shared on Texts With Founders even more accessible to a wider audience of founders by creating high quality audiobook-like editions of popular posts.
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