Use this skill when preparing pitch decks, negotiating term sheets, conducting due diligence, or managing investor relations. Triggers on fundraising, pitch decks, term sheets, due diligence, investor updates, cap tables, SAFEs, convertible notes, and any task requiring startup funding strategy or execution.
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Use this skill when preparing pitch decks, negotiating term sheets, conducting due diligence, or managing investor relations. Triggers on fundraising, pitch decks, term sheets, due diligence, investor updates, cap tables, SAFEs, convertible notes, and any task requiring startup funding strategy or execution.
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Startup Fundraising
Fundraising is the process of exchanging equity (or a promise of future equity)
for capital to accelerate a startup's growth. Done well, it funds the team and
runway needed to reach the next milestone. Done poorly, it creates misaligned
investors, excessive dilution, and governance problems that compound over years.
This skill equips an agent to build compelling pitch materials, negotiate
founder-friendly terms, manage the diligence process, write investor updates,
model dilution, and choose the right instrument for each stage.
When to use this skill
Trigger this skill when the user:
Needs to build or review a pitch deck for investors
Asks about term sheet terms, investor rights, or negotiation strategy
Is preparing a data room for due diligence
Wants to write an investor update or board update
Needs to model dilution, pro-rata, or ownership across multiple rounds
Is deciding between a SAFE, convertible note, or priced round
Asks about valuation, cap table management, or option pool sizing
Needs to build or manage an investor pipeline and outreach strategy
Do NOT trigger this skill for:
SaaS metrics analysis or revenue modeling - use the saas-metrics skill
Legal document drafting or securities law advice - recommend engaging counsel
Key principles
Raise when you don't need to - The best time to fundraise is when you have
leverage: strong metrics, multiple term sheets, or a credible alternative path
to profitability. Fundraising from a position of desperation forces bad terms.
Extend runway, cut burn, reach a milestone - then open the round.
Fundraising is a full-time job - timebox it - A founder running a process
while also running the company will do both poorly. Set a defined window (6-8
weeks for seed, 8-12 weeks for Series A), run all investor conversations in
parallel to create urgency, and close fast. Drag kills momentum and leaks
information.
SAFE > convertible note for early stage - SAFEs have no maturity date,
no interest accrual, and no debt on the cap table. Convertible notes accrue
interest and have a maturity date that creates pressure to convert or repay.
For pre-seed and seed, default to a YC SAFE (post-money valuation cap, MFN
clause). Use convertible notes only if investors insist or if you need bridge
financing on an existing priced round.
Dilution compounds - be strategic - Every round dilutes all prior
shareholders proportionally. A 20% seed round, 20% Series A, and 20% Series B
leaves founders with 51% of what they started with before any option pool
refreshes. Model dilution through your target exit before agreeing to any
terms. The option pool shuffle (investors requiring a larger pool pre-money)
is the single most founder-dilutive mechanic in term sheets.
Investor-market fit matters - The wrong investor is worse than no investor.
A consumer VC leading a B2B enterprise deal, or a growth fund leading a seed
round, creates a board dynamic and expectation mismatch that will resurface at
every decision point. Research every investor's portfolio, check-size history,
and founder reputation before taking a meeting.
Core concepts
Funding stages map to company maturity. Pre-seed ($250K-$2M) validates the
idea with early product and founder quality. Seed ($1M-$5M) funds finding
product-market fit with initial traction. Series A ($5M-$20M) scales a
repeatable go-to-market motion with clear unit economics. Series B ($20M-$80M)
accelerates a proven model. Later stages (C, D, pre-IPO) fund market dominance
and expansion. Each stage has different investor types, diligence depth, and
typical deal structures.
Instruments determine how money enters the cap table. A SAFE (Simple
Agreement for Future Equity) converts into equity at the next priced round at a
discount or valuation cap - whichever is more favorable to the investor. A
convertible note is a debt instrument that converts to equity; it accrues
interest (typically 5-8% annually) and has a maturity date (12-24 months). A
priced round sets a definitive pre-money valuation today, issues new shares,
and creates a new share class (typically Series Preferred) with specific rights.
Term sheet economics encompass the terms that directly affect founder
ownership and control: pre-money valuation (how much the company is worth before
new money), post-money valuation (pre-money + investment), option pool size and
timing (pre- vs post-money), liquidation preference (1x non-participating is
standard; participating preferred is investor-friendly), anti-dilution provisions
(broad-based weighted average is standard; full ratchet is punishing), and
pro-rata rights (investors' right to maintain their ownership percentage in
future rounds).
Dilution mechanics operate on shares outstanding. When new shares are issued
in a round, all existing shareholders' percentages decrease proportionally. The
key formula: new ownership % = old shares / (old shares + new shares issued). The
option pool shuffle increases dilution further: investors require a specific
option pool size post-round, but if the pool is sized pre-money, founders bear
the entire dilution of the pool creation before the round closes.
Common tasks
Build a pitch deck - 12 slides framework
A pitch deck tells a coherent story: problem, solution, why now, why us, and
what we need. Each slide has one job.
Slide order and content:
#
Slide
Content
Goal
1
Cover
Company name, tagline (one sentence), logo
First impression
2
Problem
The specific pain, who has it, why it's costly
Create urgency
3
Solution
What you built, how it solves the pain
Land the concept
4
Why Now
Market shifts, tech unlock, or regulatory change enabling this
One idea per slide; if a slide needs two headers it is two slides
No more than 30 words of body text per slide
Use real data over projections wherever possible
Market size must be bottom-up: Total Addressable (universe) > Serviceable
Addressable (reachable) > Serviceable Obtainable (realistic 3-year target)
Avoid bullet-point walls. Investors scan decks in 3-4 minutes before deciding
whether to read deeply. Every slide must work as a visual first.
Negotiate a term sheet - key terms explained
When you receive a term sheet, focus on economics first, then control, then
everything else. Most terms are standard; a few are founder-critical.
Economics terms:
Term
Founder-friendly
Investor-friendly
Flag if you see
Liquidation preference
1x non-participating
2x or participating
Participating preferred
Anti-dilution
Broad-based weighted average
Full ratchet
Full ratchet
Option pool
Post-money sizing
Pre-money sizing (larger the worse)
Pool >15% pre-money
Pay-to-play
Not included
Required
Required pay-to-play
Control terms:
Term
Watch for
Board composition
Investors should not have majority control at seed; 2 founders / 1 investor / 1 independent is standard Series A
Protective provisions
Standard: approval for asset sales, new share classes, changing board size. Non-standard: approval for hiring/firing VP+, budget approvals
Drag-along
Must require founder consent to trigger; beware low-threshold drag-along
Information rights
Standard quarterly/annual financials; flag if they include competitor-sensitive access
Negotiation sequence:
Get term sheets from multiple investors before engaging on terms
Use competing terms as leverage - never share the other term sheet directly
Focus on 3-5 material terms only; fighting every clause signals inexperience
Ask for explanation on any term you don't understand before agreeing
Have counsel review before signing - term sheets are binding on exclusivity
See references/term-sheet-guide.md for a complete term-by-term breakdown with
founder-friendly vs investor-friendly ranges.
Prepare a data room for due diligence
A data room is a secure folder (Notion, Docsend, Google Drive with restricted
access) containing everything an investor needs to complete diligence. Organize
it before the first close request to avoid delays.
Common diligence red flags to resolve before starting:
Cap table has missing IP assignments or unvested founder shares without a
cliff/schedule
Revenue recognition is inconsistent (mixing cash and accrual)
Open litigation or IP disputes without documented resolution
Customer concentration: one customer > 30% of ARR needs a narrative
Send the data room link only after an investor has expressed intent to move
forward. Broad distribution of financials before interest is confirmed leaks
sensitive data to potential competitors in your space.
Write investor updates - template
Monthly or quarterly updates keep investors warm, build trust, and convert
passive investors into active ones who refer deals and open doors.
Investor update template:
Subject: [Company] - [Month Year] Update
TL;DR: [2-3 sentences: key wins, key challenges, key ask]
METRICS
- MRR: $X (+Y% MoM)
- Customers: N (+Z this month)
- Runway: N months at current burn
- [1-2 stage-appropriate metrics: DAU, conversion rate, NRR]
WINS
- [Concrete achievement #1]
- [Concrete achievement #2]
CHALLENGES
- [Honest challenge #1 and what you are doing about it]
PRIORITIES THIS MONTH
- [Focus #1]
- [Focus #2]
ASK
- [Specific intro request: "Looking for a VP of Sales with PLG background"]
- [Specific advice: "Know any reliable tax counsel in Delaware?"]
Rules for investor updates:
Send on a predictable cadence (same week each month/quarter)
Be honest about challenges - investors who find out later feel blindsided
Always include a specific ask; it gives investors a way to add value
Keep to under 300 words; use the template above as a hard cap
Reply to investor responses within 24 hours
Model dilution across rounds
Use a dilution model to understand founder ownership at each exit scenario.
Round-by-round calculation:
Pre-money valuation: $8M
Investment: $2M
Post-money valuation: $10M
New investor ownership: $2M / $10M = 20%
Existing shareholders retain: 80% of prior holdings
If founders owned 100% before:
After seed: 80%
After Series A (20% dilution): 80% * 80% = 64%
After Series B (15% dilution): 64% * 85% = 54.4%
After option pool refreshes (~5% each round): subtract 5pp per round
Option pool shuffle example:
Investor requires 15% option pool post-round on a $10M post-money round.
Pool sized pre-money: 15% of $10M = $1.5M comes from existing shareholders
Founders bear $1.5M of dilution before the round closes
Effective pre-money valuation is reduced by $1.5M
Prefer: size the option pool post-money, or negotiate a smaller pre-money pool
Key outputs to model:
Founder % at each round close
Founder % at exit (after all dilution events)
Return multiple to founders at different exit valuations ($50M, $100M, $500M)
Choose between SAFE and priced round
Decision framework:
Factor
SAFE
Priced Round
Stage
Pre-seed, seed
Series A+ (occasionally seed)
Valuation certainty
Deferred to next round
Set today
Legal cost
$1K-$5K
$20K-$100K+
Speed to close
1-2 weeks
6-12 weeks
Cap table complexity
Minimal until conversion
Immediate new share class
Investor preference
Angels, micro-VCs, YC
Institutional VCs
When to use a SAFE:
Pre-product or pre-revenue with high valuation uncertainty
Rolling close across multiple angels ($25K-$500K checks)
YC batch companies raising alongside Demo Day
When to use a priced round:
Leading institutional VC with $3M+ check size requires priced terms
Company is profitable and has negotiating leverage on valuation
Prior SAFEs are at multiple different caps creating cap table complexity
SAFE terms to negotiate:
Valuation cap (sets maximum conversion price - lower benefits investor)
Discount rate (5-20% off next round price - standard is 10-20%)
MFN clause (most favored nation - ensures this SAFE gets best terms
if you issue future SAFEs at better terms; include on uncapped SAFEs)
Pro-rata rights (right to invest in next round to maintain %)
Manage investor pipeline - CRM approach
Treat fundraising like a sales pipeline: stages, owners, next actions, and
close dates.
Pipeline stages:
Target -> Intro Requested -> First Meeting -> Follow-up/Diligence -> Term Sheet -> Closed
CRM fields to track per investor:
Firm name, partner name, contact email
Stage (above)
Date of last contact
Next action + due date
Check size range / typical first check
Portfolio relevance (companies they have backed in your space)
Warm intro source
Notes on fit / reservations
Outreach sequence:
Identify 50-75 target investors (not 200; quality over quantity)
Prioritize by: thesis fit > portfolio fit > check size > brand
Lead with warm intros (investor > investor intro is highest conversion)
Send a concise cold email if no warm path: 3 sentences max, attach deck
First meeting: 30-45 min, no slides - tell the story conversationally
Follow-up within 24h with deck and data room link if interest shown
Create artificial scarcity: all term sheet conversations happen simultaneously
Never give an investor an indefinite timeline to decide. Set a soft close date
("We are planning to close this round by [date]") and hold it.
Gotchas
Term sheets are binding on exclusivity, not economics - Signing a term sheet typically triggers a no-shop clause (30-90 days) that prevents you from soliciting other investors. You are not committed to accepting the deal, but you are committed to not running a competing process. Read the exclusivity clause carefully before signing.
Post-money SAFE valuation cap is not the same as company valuation - A $10M post-money SAFE cap means the investor's ownership is calculated as if the company is worth $10M after their investment. If you raise $1M on a $10M post-money SAFE, you have given away 10% - not a fraction of $10M minus $1M. Model this explicitly before issuing multiple SAFEs at different caps.
Option pool shuffle happens before close, not after - If a lead investor requires a 15% option pool "post-round" but structures it pre-money, the existing shareholders (founders) absorb the full dilution of creating the pool before the round closes. The effective pre-money valuation is reduced by the pool value. Always model both scenarios before agreeing.
Data room access given too early leaks competitive intelligence - Sharing your full data room with investors who are still in early conversations exposes your customer list, pricing, and financial model to potential competitors in your space (many VCs hold portfolio companies that compete with you). Gate data room access until a term sheet or strong letter of intent.
Pro-rata rights compound dilution in down rounds - Pro-rata rights allow investors to maintain their ownership percentage in future rounds. In a strong up round this is manageable. In a down round, investors exercising pro-rata to avoid dilution may force founders to take worse terms or face a harder close. Negotiate pro-rata rights to apply only above a minimum round size.
Anti-patterns / common mistakes
Mistake
Why it's wrong
What to do instead
Raising too early with no traction
Dilutes founders at the lowest possible valuation; invites investor skepticism
Find 3-5 paying customers or strong product engagement before opening a round
Sequential investor outreach
Each rejection kills momentum; no sense of urgency for the next investor
Run all investor conversations in parallel within a defined 6-8 week window
Accepting participating preferred
In a downside exit, investors double-dip: they get their principal back first, then participate pro-rata in remaining proceeds
Insist on non-participating 1x liquidation preference; decline or restructure otherwise
Ignoring the option pool shuffle
Investors who require a large pre-money option pool effectively reduce your pre-money valuation by the pool value
Model the effective pre-money valuation including pool creation; negotiate pool post-money
Optimizing for brand over fit
A top-tier VC with no conviction in your market will under-support and block future rounds
Pick investors with relevant portfolio companies and genuine thesis alignment
Sending deck without a story
Decks sent cold without context get skimmed in 90 seconds and passed
Lead with a 3-sentence email hook, then attach the deck; get a meeting before sending materials
References
For detailed content on specific sub-domains, read the relevant file from
references/:
references/term-sheet-guide.md - Complete term-by-term breakdown with
founder-friendly vs investor-friendly ranges and negotiation tactics. Load
when reviewing or negotiating a specific term sheet.
Only load a references file when the current task requires deep detail on that
topic.
Companion check
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