[I often end up repeating the same things to different founders. Some things I’ve said often enough that they are probably worth committing to writing in a blog post.]

One of the questions I get asked very often is “What does it take to get funded?” My answer is universally that it’s all about Hope and Numbers and some combination thereof. The seed round happens on hope. The Series A happens on a combination of hope and numbers. And the Series B and beyond, happen largely based on numbers.

Seed Round: the Hope Round

At the concept/seed stage, there isn’t a lot of concrete “stuff” (where stuff is a highly technical term) that early stage investors can look at to evaluate a company. In most cases it comes down to the team — whether they have the ability to execute and whether they have the right vision. The rest is hope. You hope that this founder/founding team will be able to figure things out. Will be able to recruit the right people around themselves. Will be able to build the product. And that the product will be something people love. And that it will be something they are willing to pay real dollars for. There’s LOT riding on hope, and there are very few numbers.

So getting funded at the seed stage is really about who you are, and about telling a credible story. Showing that you have 100 users, 1000 users, or even a million users may not matter much. It can help to show that at least someone is willing to use your product, but it doesn’t say anything about whether it will scale. More importantly users are not customers, and seed stage companies often have to spend  fair amount of their effort on what I like to call Revenue Development.

Seed stage funding it all about convincing investors to believe in you and have lots of hope.

Series A: the Hope+Numbers Round

When you’re ready to go out for a Series A, by this point investors expect you to have figured a few things out, and to have some level of what’s referred to as “product-market fit.” Or in other words, you’ve built something, figured out who’s going to pay for it, and things are starting to click. At this stage the numbers are not compelling, but they’re starting to emerge and are trending in the right direction. A Series A investor will look at these numbers and will hope that things will continue to trend in the right direction and in the best case scenario will start to hockey stick.

The Series A is about showing some credible numbers that can point towards a trend, and the rest is about convincing investors to have hope that those numbers point to something bigger.

Series B and beyond: the Numbers Rounds

When you get to a Series B, it’s almost all about numbers. Show that you have a compelling product, with lots of people using it, and willing to pay for it. At this stage the investment decision for most investors becomes a matter of crunching the numbers. There’s little room for hope and the numbers need to tell a convincing story.

Series B and beyond are raised on the strength of numbers.

This is not a prescriptive framework by any means, but it is a framework I find helpful to think about when founders are preparing to raise money at different stages. When you raise your seed round, think about what it will take for you to raise a Series A. When you raise a Series A, think about what it will take for you to raise a Series B.

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