Fundraising

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This letter was written amid the bursting of the dot-com bubble in 2000, when Amazon’s share price fell 80%. It reports 20 million customers, an increase of 1.4 million; sales rising from $1.64 billion to $2.76 billion; gross margin growing 125%; and $1.1 billion in year-end cash. By every measure, it says, Amazon was in a stronger position than ever. Why, then, did the share price plunge? Bezos quotes Benjamin Graham: in the short run, the stock market is a voting machine; in the long run, it is a weighing machine. The 1999 surge reflected plentiful “votes,” not “weight”; Amazon wanted to be weighed. He also acknowledges the failures of the living.com and pets.com investments and underestimating how hard it would be for single-category online retailers to scale. Looking ahead, he draws confidence from advances in bandwidth, storage, and processors, believing roughly 15% of retail would move online permanently. As usual, he appends the first letter from 1997.

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A framework from another source lists what investors look at in a venture: integrity, profitability, customer acquisition, key metrics, the team, runway, barriers to entry, market potential, and the competitive landscape. Robin adds his own comments: partnerships should benefit both sides, the business must be able to make money amid competition, and founders need to know their key numbers. At the end, he challenges the claim that the venture itself is unimportant, reaffirming the importance of the market and validation. Note that points such as a 12- to 24-month runway and refusing to invest without patents reflect particular investors’ preferences, rather than universal requirements.

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Material from another source discusses support from angel investors, fundraising windows, and equity and exit arrangements. Robin adds two comments: trust is the foundation, and valuations should be reasonable. Raise somewhat more than you need according to the circumstances, rather than relentlessly seeking the highest valuation and the largest amount of capital. The examples in the source—raising 1.5 to two times the calculated amount, a 5:3:2 ownership split, and four-year vesting—illustrate particular scenarios, not universal rules. Equity, exit, and profit-distribution arrangements still call for expert advice.

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The foreign-language material argues that early-stage founders should not sacrifice funding opportunities or good investors over a small difference in valuation. An excessively high valuation can become a constraint and add pressure in the next round. Robin adds that the goal is to find long-term partners, not someone to take an investment off your hands. The amounts and ownership percentages are hypothetical examples, not advice on an actual transaction. The highest bidder is not necessarily the worst investor, nor is the public-market price an absolute benchmark; dilution and other terms still need to be assessed case by case.

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The cash pressure of unit economics: customer acquisition cost (CAC) is paid up front, while customer lifetime value (LTV) takes years to realize. After finally reaching positive cash flow and profitability, founders face another decision: raise more money and increase spending again. Both founders and investors struggle with this choice; it takes foresight, patience, and resources. Caution: the original’s description of the CAC–LTV relationship raises questions about both direction and definitions. It is retained as written, has not been independently verified, and must not be used as a quantitative model. Reinvestment is not mandatory; it depends on resources and whether the expected returns can be validated.

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Three bootstrapping cases from Surviving a Startup, all starting with a real problem faced by the founders or their customers: Mailchimp, which reached $700 million in revenue and was later acquired by Intuit for more than $10 billion; Shopify; and Shutterstock. Companies can grow large without venture capital, but the figures, including market capitalizations and acquisition amounts, refer to the time of the original text. A founder’s own need is a starting point, not sufficient proof of a market.

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The Unicorn Hunters series from Surviving a Startup looks at investing in teams. Smart investors bet on a team, not a particular idea or business. Startups are works in progress: even if their initial idea is wrong, a winning team will change direction and keep iterating until it finds a way forward. The CEO is the most important person on the team, yet investors’ most popular screening criteria can be traps. Elite universities select for test scores and extracurricular activities, not leadership. That mindset filters out rebels, free spirits, and late bloomers—neither Jack Ma nor Steve Jobs attended a top university. Senior VPs at major companies are often excellent executors, not natural risk-takers. Real due diligence goes beneath the résumé: how did the founder persuade cofounders to give up six-figure salaries for equity, what obstacles arose while advancing ideas, and what did they learn from failure? Outstanding leaders act like magnets, drawing people willing to take enormous, even irrational, risks to follow them. Almost nobody builds a unicorn alone; the CEO is the catalyst who gets everyone moving.

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The Unicorn Hunters series from Surviving a Startup turns from the team to the market. A large market provides room for growth, exits, and follow-on funding. A company can start in a small niche, but it needs a path to expansion: a local bakery and a bakery chain are different businesses. VC needs large exits, not a tenfold return in a small market; if your market is inherently small, do not rely on VC. Note the book’s qualification: starting small is fine if the company can expand. Claims such as “smart angels do not invest in companies without follow-on funding” are too categorical. Fund sizes and strategies vary, and small businesses are not without value.

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This excerpt from Xuan Tian's Finance and Innovation: A New Framework examines the kind of capital that supports innovation. VC supports innovation through active governance, knowledge networks, and funding. It tolerates short-term failure and offers substantial rewards for long-term success—precisely the incentive structure innovation needs. A fund's own fundraising structure and liquidity constraints affect its investment behavior: research finds that young firms become more tolerant of failure after successfully raising a new fund. Career concerns can work in either direction, making young managers more conservative or more aggressive; researchers have not reached a consensus. The dates and methods of the studies cited in the book have not been individually verified.

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In Jason Fried's fictional press release, Basecamp announces that it will stop generating revenue, pursue a higher valuation, and raise an imaginary dollar. A fictitious professor proclaims a $100 billion valuation and uses an absurd social-media-and-burn-rate formula to project 12 billion users by 2016. The piece satirizes valuations built on imagined traffic rather than business results. Its fictional framework must remain clear: Basecamp did not actually stop collecting revenue, raise one dollar, or receive a $100 billion valuation. The formula is not a valuation tool.

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36Kr reported that Sequoia Capital restructured its US and European businesses on October 26, 2021. It established the permanent, open-ended Sequoia Fund as a parent fund; public-market holdings would return to it rather than face mandatory distribution. Sub-funds would remain closed-end, with investment returns throughout their life cycles flowing back to the parent. LPs could redeem annually, fee and carry arrangements would change, and employees could invest. Long-term ownership addresses the forced exits associated with traditional ten-year funds, allowing Sequoia to keep holdings that continue growing after an IPO. LP acceptance and the risk of concentrated redemptions test the structure, in contrast with traditional approaches such as Benchmark's. Fees, carry percentages, and fund sizes are those reported at the time, not today's terms.

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Robin's late-2022 view of startup fundraising over the next one to two years: pandemic-driven remote demand and quantitative easing fueled capital markets and startup investment in 2020–2021. In 2022, the continuing Russia–Ukraine war, inflation following a decade of easy money, tightening and rate hikes in Europe and the United States, and spending shifting from electronics to offline activities battered technology stocks. Meta and Netflix fell over 70%; AMD, NVIDIA, and Intel over 60%; Zoom and C3.ai as much as 90%. Sequoia and Y Combinator warned of a funding winter. Startups must return to fundamentals: will customers pay for the product or service, rather than merely hoping VCs will? The era of burning cash for market share has passed. Be more focused and lean, and right-size the organization if necessary to weather the next one to two years. VCs assess investments over five to seven years, rather than being entirely driven by two to three years of volatility, but large portfolio write-downs create operating pressure and may require valuation adjustments. Stock declines are figures from 2022.

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Robin opens with his view that the hottest investment area of 2022 has returned to AI, especially the widely discussed topic of AI generation: the future is here. The reprinted 36Kr Shenyiju report describes a San Francisco generative-AI gathering organized by Conviction founder Sarah Guo, bringing together engineers, entrepreneurs, and financiers, including Hugging Face's CEO. Stability AI announced $101 million in funding at a $1 billion valuation; Jasper raised $125 million at a $1.5 billion valuation. Microsoft's Copilot and OpenAI's GPT-3 and DALL-E 2 fueled the excitement, with even Sergey Brin appearing at a related gathering. Investor Nathan Benaich observed considerable FOMO. Legal questions were emerging too: the boundaries of fair use for training models on copyrighted data were expected to be tested in court. Valuations and funding amounts are figures from 2022.

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Robin opens with points he has often made: practice continually, raise money while you still have money, and approach your most desired VCs later. The excerpt from Build explains how to get noticed through a compelling story and an understanding of your audience. Most Silicon Valley VCs are not technical, so focus less on technology and more on why. A 15-slide pitch must appeal to reason and emotion; that art takes practice. Do not begin with top-tier VCs, who share information. Start with friendly investors who will give feedback. Allow three to five months for fundraising, begin before you need money, and avoid desperate financing when cash runs out. Remember vacations in August, Lunar New Year, and Thanksgiving through New Year. The checklist: no games; listen to feedback while holding to your vision; specify the amount, use of funds, and milestones; link valuation to milestones; build a data room; confront risks; seek two equally influential investors to balance each other; and, as in chess, think two moves ahead.

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Robin opens by urging founders to think things through and prepare before fundraising. From Series A onward, VC capital demands rapid scaling and exponential growth, not leisurely product refinement and product-market-fit validation. VC has a sense of urgency. Ideally, everything is ready and only the east wind is missing; money is that wind. If nothing else is ready, do not rush to summon it—it could blow you over. The excerpt from Build asks what the money is for and the minimum needed. Your business may not suit VC. Large VCs are surprisingly risk-averse, scrutinize growth, signups, and cancellations, and answer to LPs. Alternatives include niche or regional VCs, angels, and corporate investment arms. A deal is about the person in the room who will become your director. Once you accept the money, you are tied to that investor: VCs can combine to fire founders, but founders cannot fire investors. Ask founders who have weathered difficult times with the partner what they are really like.

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An excerpt from The Power Law recounts Masayoshi Son's 2017 visit to WeWork. Arriving an hour and a half late, he offered only 12 minutes. After a tour, he invited Adam Neumann into his car. Their 28-minute interaction produced a proposed $4.4 billion SoftBank investment at a $20 billion valuation—more than fellow shareholder Benchmark Capital had raised in its entire 22-year history. Son's capital encouraged Neumann's hubris and global expansion, but also opened an exit window: T. Rowe Price sold as much as it could, while Benchmark sold about 20% of its holding and locked in a 15-fold return on its original investment. Robin adds six observations: Neumann's reality distortion field merits watching; after his downfall he soon secured backing from top Silicon Valley VC A16 for a new venture; a pitch's length matters less than winning attention and more time; effortless fundraising can hurt both sides, while constraints stimulate creativity; basic investment principles must be remembered; and the era of cash-fueled expansion may have ended with the Vision Fund's decline.

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Robin proposes a hypothetical: you are a retired corporate executive who worked for 40 years and saved 100 million dollars, then became a startup adviser and angel investor. A sincere founding team puts in 1 million, while an angel club contributes 10 million. Each side holds 50% and receives 100,000 shares. Angels pay a premium nine times the team's cost, at 100 dollars per share. The same 100 dollars could buy a liquid stock such as 91APP in the secondary market, be sold for emergency cash, and perhaps still deliver a good return multiple over ten years. How would you invest? Robin adds that fundraising should follow a sequence. Do not necessarily raise externally so early; first build the minimum viable product (MVP) and refine it. Seeking a high valuation without results may bring repeated disappointment and complaints about an unfriendly environment. These figures are hypothetical; 91APP is a comparison, not a recommendation or assessment, and this is not investment advice.

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This book excerpt discusses fundraising practice: planning cash runway, addressing major risks before raising, interpreting investor interest through feedback, building fundraising momentum, and preparing alternatives. Robin's brief recommendation is to consult an experienced investor.

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Drawing on The Great Game, this note describes Wall Street as both a foundation for and a driver of America's transformation and prosperity. It financed the Civil War, supported westward development, helped build a nationwide railroad network, and fueled the first major expansion of heavy industry. During the two world wars it became a global financial center; afterward, it helped incubate at least two new economic transformations, in automobiles and the internet. Adam Smith's “invisible hand” is the thread: securities dealers pursued their own interests while also providing a reliable mechanism to supply industrialization with working capital. Robin's opening argument is that Taiwan must not casually weaken or marginalize its capital markets. The most open capital markets support the strongest environment for innovation and entrepreneurship.

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The reprinted article explains a listing as discounting a company's expected future profits into its present market capitalization. Once shares have a public price, equity itself becomes acquisition “currency.” Focus Media listed in the US first in 2005, then acquired Target Media six months later with cash and newly issued shares: listing first and acquiring a rival with equity created an overwhelming advantage. Tudou missed its window after its founder's shares were frozen. When it listed in 2011, its market value was less than a quarter of Youku's, and it was eventually acquired, even though the revenue gap between them was under 50%. Timing was critical. Robin closes with his frequent argument that people in the internet world remember only the leader, so companies must use capital effectively to secure first place. This is his strongly held personal view.

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Robin considers why people start businesses: earning a living and supporting a family, realizing a dream, pursuing an interest or passion, or changing the world. Goals differ. Some founders aim to exit through an acquisition; others want to run a lasting enterprise. Neither is right or wrong, but founders need a clear understanding of their venture and agreement with their partners. He emphasizes that capital markets are not a cash-out tool. They provide the provisions and ammunition to pursue an ambition and build a company that changes the world; a business run solely to cash out cannot achieve that. Nor does every venture need financing, unicorn status, or a place in capital markets. Some can stay small and be excellent, carefully crafted businesses. Do not let the outside environment dictate your choices. Not every venture must serve VCs or meet their expectations.

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Using Perfect's prospectus, Robin explains why a company using an overseas fundraising structure can have negative shareholders' equity. After the original shareholders, each financing round involves preferred shares, which are classified as liabilities under IFRS because of their special terms. Before listing, Perfect had US$93.83 million in assets and US$252 million in liabilities, including US$231 million of liability-classified preferred shares. At the closing share price at the time, it was at unicorn scale. First-half 2022 revenue was US$23.38 million, with an 86% gross margin. Estimating full-year revenue at about US$50 million against a US$1.3 billion market capitalization gives a price-to-sales ratio of about 26. Listing expenses alone reached US$48.66 million, about NT$1.5 billion. These figures reflect the 2022 prospectus; the sales multiple is Robin's estimate.

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An excerpt from Tony Fadell's Build identifies three kinds of board failure. An indifferent board sees obvious CEO problems but avoids solving them because that would create too much work. A dictatorial board intervenes and controls so much that the CEO becomes like a chief operating officer, responsible only for execution. An inexperienced board does not understand the business or ask incisive questions; its companies are always short of cash, and it blames the market. Yet companies still need boards even when they are imperfect. Even the best CEO cannot act unilaterally: everyone needs accountability and a pressure-release valve. A CEO who gets this right can shape the board; the board under Jobs differed from the one under Cook. Robin recommends seeking directors with expertise you can consult and proactively asking for guidance suited to each stage.

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Robin reviews a landmark acquisition: cloud data company Databricks announced a US$1.3 billion acquisition of MosaicML, an AI startup less than three years old. Founded in 2021 with just 62 employees, MosaicML had disclosed only one financing round, at a US$220 million valuation; the acquisition represented a sixfold jump. Founded by a group of former Intel executives, its team enables enterprises to train and deploy AI models in secure environments. Automated training optimization promises training speeds two to seven times those of traditional methods. Databricks plans to combine its Lakehouse platform with MosaicML so enterprises can train generative AI on proprietary data at low cost. Robin's judgment: technology giants' acquisitions of generative AI startups are only beginning. Figures reflect company statements from June 2023.

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This reprinted entrepreneurial Q&A puts survival first. Validate that customers will pay and that unit economics work before expanding. Expansion also has a logic: deepen business with existing customers, then expand geographically, and finally add business lines. The organization and founder can themselves become growth bottlenecks. Unsuitable early employees need attention, and the founder's outlook and learning speed set the company's ceiling. Before accelerating, confirm the ability to generate cash internally; otherwise, growth merely accelerates cash burn. The interviewees are not fully identified in the original, and the opinions belong to them.

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This reprinted article compares several leadership transitions: Iger’s repeated extensions at Disney and eventual handover, Morris Chang’s succession planning, a founder returning to take the helm at Airbnb during a crisis, and Musk’s close identification with Tesla. What would happen if Musk left? The hypothetical itself raises a risk question. The central argument is that a great CEO must do more than lead growth: the role also demands difficult decisions and a system that allows a business to keep growing without its founder. Iger’s departure as CEO in 2020 did not mean retirement; valuations and dates are reproduced from the reprinted source and have not been independently verified.

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The authors of Rework remind us that staying small can be a company’s final form; expansion need not be the default goal. Size should follow real needs. Retail and some other industries require scale, but many low-capital service businesses can operate without external financing. Financing creates commitments to growth, which can distort judgments about actual needs. Reducing requirements, focusing on the core business, and protecting enduring usefulness matter more than pursuing size. The article does not reject all financing or expansion; it challenges an unexamined default assumption.

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Robin begins with Facebook’s famous financing story: Reid Hoffman introduced twenty-year-old Zuckerberg to Peter Thiel in 2004. Thiel invested US$500,000 for 7%, and Hoffman added US$40,000. The point is the trust behind the introduction rather than the amount. The later section reuses ‘Why Should I Invest in You?’ Angel investing is personal, offers limited scope for due diligence or management involvement, and demands integrity. Unsolicited business plans rarely succeed; if friends and relatives will not support you, other angels are hard to persuade. Lei Jun’s investments in acquaintances and Jerry Yang’s fifty or sixty unsuccessful calls illustrate why unfamiliarity discourages investment.

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Notes from Silicon Valley 101’s discussion of the Middle East. The Arabic-speaking Middle East and North Africa is described as a roughly 400-million-person cultural market with similar language and culture. The Gulf Cooperation Council states, described as about 100 million people, are the wealthiest segment. The proposed path is to validate the business in Dubai, around four million people, expand quickly across the Gulf, then reach the wider region. Dubai’s ecosystem is described as self-sustaining, while Riyadh and Abu Dhabi remain government-led. Saudi Arabia’s PIF and Abu Dhabi sovereign funds, each described at hundreds of billions of U.S. dollars, are active investors. Robin recommends the episode to startups seeking overseas markets.

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A legendary story describes a retired Navy SEAL, John Jin’en, whose armored-vehicle company lacked money for a second-generation prototype. A large black box in the showroom was presented as holding a top-secret vehicle. Curious investors supplied funding, the vehicle was built and sold out—but the box had been empty. Robin is reserved: he does not recommend this and sees a parallel with Theranos’s Elizabeth Holmes. Delivery may bring hero status and failure fraud allegations, yet successful delivery does not erase earlier false statements. Advertising also sells imagined futures; delivery is the distinction the story proposes. Details are reproduced from the retelling and have not been verified.

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The article challenges common misconceptions: Amazon did not go ten years without profit. Founded in 1994, it first reported a quarterly profit in Q4 2001 and a full-year profit in 2003, with intervening losses attributed to the September 11 shock. It listed in under three years and raised only US$48 million, less than many companies’ Series B rounds today. Nor was it always favored by Wall Street: value remained depressed after the internet bubble, before a post-2009 transformation led investors to value it as a technology company. The closing reflection favors examining one’s own actions over attributing others’ success to benefactors or inventing excuses.

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Media, content, distribution, and influence have become part of venture capital fundraising in Europe and the United States. Finance has used this approach for years: expanding influence through media and broad distribution to influence or even manipulate prices. Internet-enabled influence has spread into e-commerce, through influencer livestream selling, and other fields. The quoted article says that the ability to propagate a viewpoint at scale is a new and significant function in financial markets. Firms such as a16z build their own media platforms, while individual VCs use Twitter, podcasts, and YouTube. Their ability to shape portfolio companies’ narratives can affect hiring, capital costs, and exits. Creators with large audiences can also use their influence to enter investing.

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Robin urges patience in choosing investors. Investment is a two-way choice, and rushing to choose an investor or portfolio company can create lasting problems for both parties. Entrepreneurship should create and deliver value and earn reasonable, sustainable profits. The quoted article warns that investor money is not free: taking certain investors’ funding can change a company’s goals and displace its original purpose with a drive to satisfy investors. When faced with a lengthy three-to-six-month process versus immediately available money, founders may make impulsive mistakes. Robin adds the reverse warning: investors should not be taken in by polished pitches from ‘2VC’ teams that cater to investors rather than customers.

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Robin also received the fundraising email behind a controversy in e-commerce, with details omitted to protect those involved. It was sent in September 2019, before the pandemic, when liquidity was relatively ample and some money was moving from technology stocks to ‘new consumption.’ Nobody foresaw a three-year pandemic and the subsequent funding winter. Robin rejected the approach for two reasons. First, the asking price was so unrealistic that it removed any incentive to continue the discussion: test the market before naming a price. Second, intellectual-property-based products and toys lay outside his interests and knowledge. It is hard to earn beyond one’s understanding, and without convincing himself he could hardly convince his boss.

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Joe Tsai may well have been the greatest gift Jack Ma ever received. Tsai describes three levels of CFO contribution: avoiding financial detours; helping the CEO commit to moving forward at critical moments, beyond risk control; and allocating resources. Robin proposes three corresponding levels for venture capital and private equity. First, invest in promising companies, help them grow quickly, and exit. Second, raise funds by earning shareholders’ trust, creating wealth for them, and helping them transform. Third, use investing and fundraising to change industry structures and support industrial upgrading. These levels reinforce one another in a flywheel. Robin asks what the three levels are in your own field, observing that helping others succeed can bring success to yourself.

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Robin’s fundraising advice to portfolio companies: the paradox is that you need money to raise money. Start another round before spending half your cash, and coordinate fundraising with burn rate so you are not constantly raising. If investors expect the next round to struggle or become a down round, they may refuse this round or demand a discount, setting off a vicious cycle of lost confidence. Ample cash gives you room to negotiate patiently. Seek existing investors’ continuing support, ideally with shareholders able to provide sustained support of at least 30%. Deliver results that make investors approach you, and tailor each pitch to the target investor’s concerns rather than giving everyone the same presentation.

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Entrepreneurship often runs against human instinct, and chasing a high valuation is a major trap. When capital is plentiful, a barely started company can be valued above many listed businesses. Founders may develop an inflated sense of importance and think they run a large company when little exists yet. Rising valuations also impose competing demands: justify the last round to existing shareholders, make the current round attractive to new investors, and prepare a bigger story for the next. Attention shifts from products and customers to financing and valuation. Trying to serve three rounds’ valuations leads to poor decisions and misallocated resources. Written in late 2022 as the capital environment changed.

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Klook raised US$200 million, bringing cumulative funding to US$720 million, with each round a multiple of KKday’s; KKday had completed a US$75 million round the previous year. Robin compares this with Lion Travel, Taiwan’s largest travel agency, whose market capitalization was under NT$5 billion: a single Klook round exceeded the market value built over Lion Travel’s decades in business. Three lessons follow: traditional giants must transform digitally; startup business-model innovation can always challenge incumbents; and capital remains a powerful way to accelerate change. The figures refer to January 2021.

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In this installment on thinking about capital, Robin argues for a reasonable rather than high valuation. A high valuation can corner a company when capital markets, its industry, or the business turns down. Raise somewhat more than current needs, rather than assuming more is always better; steady, small steps are another option, depending on circumstances and careful planning. Entrepreneurship is lonely, and angels back founders with real money on trust alone; that trust should not be betrayed. The reprinted passage says founders must remain the protagonists, with investors serving behind them. Founders need clarity about needs, goals, and methods, and the ability to decide what to accept, reject, and say no to at the right time.

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Robin says good stories are influential, memorable, easy to spread, and emotionally effective; founders should develop a complete story for their startup and fundraising. The quoted text argues that brains naturally prefer stories to abstract lectures. The quoted text says a cigarette warning that ‘smoking harms your health’ had little effect, whereas adding the vivid detail that smoking causes impotence reduced purchases and prompted reconsideration. In a Jewish tale, naked Truth enters a village and frightens everyone. A wise elder gives Truth clothes, and under the new name Parable, Truth returns to a warm welcome. Stories can give ideas greater influence.