A thread on psychology and game theory in raising capital.

Here’s some stuff I’ve learned about how to create a good outcome in a fundraise.

Processes and Plans

I’ve seen people do unstructured fundraising. I hate it.

You see the them just thrashing but never getting anywhere.

Want to play a game well?

Then have a plan. Run it. Modify as needed on the fly.

Artificial Scarcity

Many of the ideas in this thread are from Persuasion by Cialidini.

This is one of them.

By running a tight process with deadlines, you create a situation that plays to the human nature of wanting scarce things even more.

Owning the timeline

If you don’t set a timeline, investors will naturally set you on *their* timeline.

You should set the timeline (as best you can) so you set the rules of the game.

Of course, be reasonable. Listen and adjust the timeline as needed.

Transparency and Trust

Winning trust from an investor is easiest if you hide nothing (post NDA obviously) through the process including due diligence.

There should be no surprises after a term sheet — and be open about your investment’s risks, strengths and weaknesses early.