- A YC company from North Carolina was concerned about fundraising in Silicon Valley after struggling to raise money in their local community.
- The speaker explains that investors in the Bay Area have likely said no to successful companies in the past, which makes them more cautious and willing to dig deeper into new opportunities.
- In other parts of the country or world, angel investors may not see as many deals or good deals, so they are more likely to be right when saying no.
- Investors in strong startup communities are more likely to give the benefit of the doubt and focus on execution rather than debating the idea itself.
- The speaker suggests considering fundraising in the Bay Area or a larger startup community where investors may be more open to ideas and less likely to dismiss them.

Y Combinator CEO and Partner Michael Seibel on why fundraising in Silicon Valley is different.

 https://twitter.com/mwseibel

Topics
00:00 - Why Fundraising Is Different In Silicon Valley
00:25 - Overcorrecting based on investor feedback outside Silicon Valley 
00:35 - Investors are not spread evenly around the world
00:50 - Why Silicon Valley investors are different
1:50 - Investors in Silicon Valley are less likely to dismiss ideas out of hand
2:30 - Judging based on if a team is executing

The other day I did office hours with a YC company and they were very concerned about fundraising because they had tried really hard to fundraise in their local community.

They grew up in North Carolina and it was impossible for them to raise any money.

So they said to me, Michael, how do I make sure that we can actually raise money out here in Silicon Valley?

And they were so concerned to the point that they were overcorrecting based on the feedback they got from their angel investors in the local community.

The feedback that I gave him is that unfortunately, investors are not spread evenly around the country or around the world.

And there's something interesting about investors in the Bay Area that's different from investors in other locations typically.

In the Bay Area, if you're an early stage investor for long enough, you will have said no to a number of companies who've gone on to be very successful.

That gives you pause every time you meet with a new company.

That lets you think, this company might be a good 1.

I should really learn a lot before I make a decision.

Unfortunately, in many other parts of the country and the world, if you're an angel investor, you don't see as many deals and you don't see as many good deals.

So it might be the case that almost every time you've said no, you've been right.

If you're in the Bay Area for long enough as an investor, you've said no a bunch of times and you've been wrong.

If you're outside of the Bay Area, it's much more likely that every time you've said no, you've been correct.

So the mentality of the investor is completely different.

The result is that the investor in the Bay Area or any really active startup community is much more likely to not dismiss an idea out of hand.

They're much more likely to give you the benefit of the doubt on your idea and dig into how you plan to execute, how you plan to monetize, and how big the idea can get.

Whereas I notice it's far more common outside of strong startup communities for the investor to try to debate whether or not the idea is a good idea.

And what I've noticed looking at literally hundreds and hundreds of thousands of YC applications is that my ability to figure out what ideas are good or not is much less sharp than my ability to figure out, Is this team executing?

And so I much rather use the is this team executing bar to choose companies than the idea bar.

So this is a long way of saying if you have been discouraged fundraising in your local startup community, that doesn't necessarily mean you've got a bad idea, that doesn't necessarily mean you should quit.

Maybe you should consider trying to do that same fundraise in the Bay Area or in a larger startup community with investors who might be a little bit more afraid to say no without digging deep into what you're working on.


Speaker 0: The other day I did office hours with a YC company and they were very concerned about fundraising because they had tried really hard to fundraise in their local community. They grew up in North Carolina and it was impossible for them to raise any money. So they said to me, Michael, how do I make sure that we can actually raise money out here in Silicon Valley? And they were so concerned to the point that they were overcorrecting based on the feedback they got from their angel investors in the local community. The feedback that I gave him is that unfortunately, investors are not spread evenly around the country or around the world.

And there's something interesting about investors in the Bay Area that's different from investors in other locations typically. In the Bay Area, if you're an early stage investor for long enough, you will have said no to a number of companies who've gone on to be very successful. That gives you pause every time you meet with a new company. That lets you think, this company might be a good 1. I should pay extra special attention.

I should really dig in. I should really learn a lot before I make a decision. Unfortunately, in many other parts of the country and the world, if you're an angel investor, you don't see as many deals and you don't see as many good deals. So it might be the case that almost every time you've said no, you've been right. So think about this dichotomy.

If you're in the Bay Area for long enough as an investor, you've said no a bunch of times and you've been wrong. If you're outside of the Bay Area, it's much more likely that every time you've said no, you've been correct. So the mentality of the investor is completely different. The result is that the investor in the Bay Area or any really active startup community is much more likely to not dismiss an idea out of hand. They're much more likely to give you the benefit of the doubt on your idea and dig into how you plan to execute, how you plan to monetize, and how big the idea can get.

Whereas I notice it's far more common outside of strong startup communities for the investor to try to debate whether or not the idea is a good idea. And what I've noticed looking at literally hundreds and hundreds of thousands of YC applications is that my ability to figure out what ideas are good or not is much less sharp than my ability to figure out, Is this team executing? And so I much rather use the is this team executing bar to choose companies than the idea bar. So this is a long way of saying if you have been discouraged fundraising in your local startup community, that doesn't necessarily mean you've got a bad idea, that doesn't necessarily mean you should quit. Maybe you should consider trying to do that same fundraise in the Bay Area or in a larger startup community with investors who might be a little bit more afraid to say no without digging deep into what you're working on.

You

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Why Fundraising Is Different In Silicon Valley - Michael Seibel