Introduction

With over 25 investment decisions made and having closely observed many more, I have had the privilege of working with hundreds of early-stage companies - many in their nascency - which have collectively raised hundreds of millions of dollars. Based on this experience, I have developed a “ninja & bushido” protocol, which I modestly call the “Hambardzum Protocol V1,” to guide the warriors of black and white through the early stages of fundraising.

This protocol combines high-level strategies and tactics I have seen in action, as well as a step-by-step guide designed to help founders navigate pre-seed and seed fundraising - from initial preparation to securing investment. Everything in this article is backed by real-life experience, further confirming the author’s commitment to a Bullshit Free world. Amen.

Pre-seed: trust and vision

At the pre-seed stage, the focus is on building (or leveraging) trust and selling a vision. This stage is often characterized by a bold and innovative idea and a team with strong credibility. The goal is to secure enough funding to validate the idea, knowing that the amount raised will likely fall short of the revenue targets necessary for a solid Series A round (e.g., $3M ARR for SaaS).

Key Considerations:

• Big Idea: The idea should be compelling enough to attract interest based on its potential, even if it is still in its infancy. Showing defensiveness is a big plus - maybe even a must for many investors.
• Trustworthy Team: At this stage, investors are often betting on the team’s ability to execute over the long run. Demonstrating strong expertise and resourcefulness is the key.
• Not for Everyone: Not all pre-seed investors are truly fit for this stage despite their claims. The best investors I’ve encountered are those who are willing to give a capable team with an intriguing vision a chance to change the world. Tim Draper is one of these guys: do your best to get him and folks like him on board. Don’t just go after anyone with a checkbook.

Real life examples from my experience:

1. Visionary backing by an industry expert: A billionaire with deep industry expertise backs an entrepreneur they know well - ideally, someone who has previously made them money. This investment is based on a raw, visionary idea and represents a small fraction (less than 0.1%) of the billionaire's net worth.
2. Trusted and strong relationships: A robotics company raises funds to build the first version of their product and begin sales. The funding comes from investors with whom the founders have deep personal relationships, aka friends. These founders have demonstrated exceptional capabilities, extraordinary commitment and a steep learning curve, having worked on the product for about a year before seeking investment.
3. Strong expertise and warm introductions: A PhD ninja from a top university with extraordinary subject matter expertise raises funds for the first version of their product and initial sales. This investment comes through a warm introduction from another expert in the field. The business case is compelling, and the founder's character and integrity are clear selling points.

Seed: early traction and validation points

As of the seed, startups can raise funds through three primary scenarios, depending on their traction and founder credibility. Each scenario comes with distinct expectations and strategies for positioning your startup to potential investors.

• Raise on early traction of the company: Market signals are the key here, eg. rapidly growing revenue (from $300K ARR for SaaS). Having identified and established promising distribution channels is another key move in your arsenal. If executed well, you might just find yourself raising a solid seed round that is above the market average ($3M and more).
• Raise upon startup program/accelerator graduation: Graduating from a reputable startup program or accelerator can provide a promising ground for raising a seed round. Here, you should present 5-6 strong validation points - tangible, proven aspects of the business that demonstrate potential. Coupled with a big and compelling vision and a simple yet huge promise, this can lead to a modest seed round ($1-2M). The goal here is to secure enough funding to continue refining the product towards the holy product-market fit, and hit key milestones necessary for a successful Series A round (eg. raise $10M with $3M ARR).
• Raise with “nothing”: Sometimes, a startup might attempt to raise a seed round with little to no traction or tangible results - essentially fighting with “bare hands”. This scenario relies heavily on the strength of extraordinary founders, usually with a proven track record. Such founders can often raise $1M+ based purely on their reputation and the promise of delivering results by the time they reach a Series A round. Here, the investment is a bet on the founder's ability to execute and navigate the early stages of company building successfully. Comes without saying, there has to be a big vision too, like “diagonal AI”.

Real life examples from my experience:

1. The early traction triumph: Entering VC office on a horse with parked trebuchet around the corner. Few companies here. Strong teams with early traction - whether achieved through bootstrapping or a pre-seed funding - manage to land significant early sales or secure strategic partnerships. The product or brand begins to gain recognition, perhaps even attracting global media accolades. This traction in a promising industry enables the startup to raise a robust seed round that exceeds market averages.
2. The compelling tech: A samurai startup with unique tech at its core demonstrates 5-6 strong, fact-based validation points. These could include technological breakthroughs, key customer acquisitions, or successful pilot projects. These concrete achievements come also with a really big vision that investors find irresistible. The seed funding raised is intended to give the company the runway to prove its story on a larger scale, with the goal of raising a Series A within 18 months.
3. The serial entrepreneur's new venture: A founder with previous successful exits steps into the ring again. She raises a seed round primarily from personal networks: family, friends, investors they’ve made money for in the past, and even their own personal funds. The new venture is built on deep domain expertise, a strong narrative and the founder’s own reputation. This scenario is similar to pre-seed fundraising in terms of relationship-based investment, but the amount raised is often higher, reflecting both the founder’s previous successes and the ambitious new vision.