If you need to meet with 100 investors to raise money you are promoting a shitty deal and you shouldn't be investing your personal time in it.
Conversely, if 500 startups routinely invests in companies where 90+ other investors already said no, you gotta worry about 500 startups.
> So, I made up a rule of thumb: 5-100-500. Over 5 weeks, meet with 100 investors to close $500k in your seed round. If you want to close $1m, double all of these numbers.
All alpha in financial returns comes from doing things your competitors are not doing. If you do what other investors do, you should expect to get exactly average results. As a commodity product, if you get exactly average results your LPs are going to start wondering what they're paying you for.
500 startups is correct for seeking out startups that the other 90+ investors are ignoring. You may or may not be correct for pitching an idea that 99% of investors will ignore; it's a risk/reward trade-off, where pitching the obvious idea will give the obvious result (getting funded) followed by the other obvious result (landing at a big company in a face-saving aquihire), while pitching the non-obvious idea gives you a 99% chance of ignominious failure and a 1% chance that you're the next Google.
Where do you get that from?
Many very successful companies had a very hard time raising money at some point. That certainly didn't make them into a "shitty deal."
In fact, Fred Wilson just wrote an article about how hard it was for them to raise their first fund at USV—and that fund ended up doing spectacularly well. [0]
> we have seen founders and CEOs get rejected by more than fifty investors during that process.
He mentions 50 rejections as an outlier. He's not saying that's the norm, he's saying thats how bad it can get for companies in his portfolio that do raise money. Nor is he saying those are his best performers.
In fact, he's saying they need to change their company to raise money. Which is to say, that they started out pitching a shitty deal and had to improve it:
> As these expansion stage companies struggle to raise capital, they are forced into a cathartic (and at times painful) process of self reflection... And as a result, these companies are coming out of these hard raises with better businesses, better operating models (lower burn rates!!), and bigger visions to go execute against
Colonel Sauders famously was rejected over 1,000 times with his pitch for Kentucky Fried Chicken.
To that extent, his company and legacy are a very fascinating study of complementary developments and capabilities. And sinking money into the Colonel in the early 1950s would have given extremely strong returns.
There's a pretty good general biography of Sanders floating around somewhere online though I can't seem to find it. A long-read type piece that starts with his gas-station shooting incident.
(FWIW There are plenty of investors that specialise in investing in restaurant outlets and consumer brand franchises, they just don't tend to be located on Sand Hill Road.)
http://www.deseretnews.com/article/700217162/Story-of-first-...
These naysayers may have made great business decisions both for themselves and for these startups companies. Not all investors will make a startup prosperous. Only the right investor will create that spark.
Airbnb and Uber barely generate profit domestically and operate at a loss internationally. Every investor not betting on inflated share prices has been smart not investing in those.
IF: CAC < NPV(LTV)
THEN: reinvest your earnings and generate zero to negative profit.
Where:
CAC: Customer Acquisition Cost
LTV: Lifetime Value of the Customer
NPV: Net Present Value
Conditions for raising seed are a bit tougher today, but even in 2015 contacting 100 investors not outside of norm.
http://blog.elizabethyin.com/post/139303202435/why-fundraisi...