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Home 2021 Forums VC Quotes "First rounds need asking promising questions. Second rounds require answers to them." – Paul Graham

  • "First rounds need asking promising questions. Second rounds require answers to them." – Paul Graham

     Aram updated 7 months ago 1 Member · 1 Post
  • Aram

    March 26, 2021 at 11:20 am

    In an episode of the hilarious HBO TV show “Silicon Valley”, angel investor Russ Hannemann explains to Richard and his team that “if [they] show revenue, people ask how much, and it’s never enough.”

    As is often the case with this brilliantly written show, there is some truth beneath the caricature.

    Founders who raise the second round of financing often expect it to go like the first one: share a vision, talk about your go-to-market strategy, and maybe some unit economics at scale. But focus on the team and the problem.

    Raising a second round (often the Series A) is about much more than that.

    VCs want to see how far Founders got with the money they raised, especially in terms of de-risking the initial market assumptions.

    As Y Combinator’s Graham says, you need to bring answers to the promising questions you raised last time.

    The main obstacles Founders meet on their way between the Seed and Series A rounds typically include:

    • Spending the money too fast
    • Not focusing on value-creating tasks (finding customers vs. hiring/managing developers for a product that was already good enough)
    • Not raising enough to validate the assumptions
    • There is no market

    Yuri Sagalov, a successful Founder who recently shared his misadventure raising a Series A round with Sand Hill Road VC firms 10 years ago, was told by a prominent investor: “Hope isn’t a strategy.”

    🗣 What are the main mistakes Founders make between their Seed and Series A rounds?

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    🔗 You can read analyses of HBO Silicon Valley’s episodes in our dedicated forum

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