Venture Hacking Blueprint

Mastering the Startup Game

Introduction

Starting a successful company is extremely hard. Most startups fail. The odds are stacked against founders. But with the right knowledge, mindset, and skills, entrepreneurs can dramatically increase their chances of building an enduring business.

This guide summarizes the most important lessons on how to raise money, negotiate term sheets, launch products, and build startups the right way. Learn from experienced founders, investors, and lawyers on how to avoid failure, structure optimal deals, achieve leverage, and set your company up for greatness.

Contents

• Fundraising Hacks

• Term Sheet Mastery

• Launching Products

• Building Leverage

• Organizational Tips

• Survival and Growth

• Mental Models

• Quotes and Principles

Fundraising Hacks

Master these essential fundraising strategies to close investment rounds fast, at the best possible terms, with the right investors.

Create a Market for Your Shares

• Having strong alternatives is the #1 leverage point in fundraising. You get favorable terms when investors compete for the deal.

• Create a market by pitching 20+ investors simultaneously in a defined 4-8 week timeframe.

• Reject anything longer than 8 weeks. Extended fundraising processes benefit investors, not founders.

• Concurrent pitching compresses diligence and social proof. It pressures investors to act quickly before competitors snatch the deal.

• Parallel outreach yields a quick yes or no so you can get back to executing the business.

Lead Investors Anchor Rounds

• Great deals are built around a lead investor who champions you. They take at least 50% of the round and set the terms.

• Treat leads better than anyone else. Make them feel like you’re joining their team.

• If you can't find a lead, assess if your story needs more traction. Avoid "party rounds" with no clear lead—it's like herding cats.

Forget valuation; Focus on Share Price

• Fixating on valuation metrics like pre-money can distract you. Instead, evaluate how a proposed deal affects your share price. This captures dilution accurately.

• Share price = (pre-money valuation) / (fully diluted shares outstanding)

• Model this formula to understand your economics. Did the last round increase or decrease your share price? Will the next round be accretive or dilutive?

Make Warm Introductions

• Cold emails get ignored. Even warm introductions have low conversion rates. You need hot introductions.

• Get introductions to investors from startup founders/CEOs they have already funded and worked closely with.

• This implicitly signals you are fundable because that founder is staking their reputation and network to recommend you.

Interview Investors

• Treat fundraising like hiring. Interview investors to assess their mutual fit and how they'll add value.

• Ask about their track record, value-add, future support, decision-making process, and ideal founder profile.

• Check references thoroughly. Don't take meetings with investors who have a bad reputation.

• Be selective about who you partner with.

Scheduling Wins Deals

• Treat fundraising like enterprise sales. Use a CRM to track your pipeline. Set hard appointment dates. Confirm the night before. Send reminders day-of.

• Make it stupidly easy for investors to meet with you. Remove all scheduling friction.

• Good investors want to meet great founders. But they juggle infinite demands on their time. Help them prioritize you.

Slide Investors from No to Yes

• When investors say "no" or pass, don't walk away. Ask for advice on improving your pitch, then keep them updated on your traction.

• Give them reasons to change their mind. Send progress emails. Reach out when you hit new milestones.

• This lightweight approach keeps you top of mind without badgering them. Gently slide passive investors to yes over time.

Lead with Traction

• Investors care about market size, team, and product. But they care 10X more about traction and growth potential.

• Lead with your core traction slide. Bury details on market size, product features, etc.

• If you have strong early traction, you can raise money even if the team and product are unproven.

Tell a Story

• Think in narratives. Craft a compelling origin story of why you specifically started this company, how the initial idea evolved, key lessons learned, etc.

• Investors invest in people first. Help them understand your personality, motivation and backstory. Make it personal.

Don't Take Money from A**holes

• Bad investors can ruin your startup. Don't sacrifice integrity or control for the money.

• Extensively reference-check investors. Look for red flags like bullying founders, overreach, etc.

• Make sure you genuinely want to work with an investor through thick and thin. Don't just take the highest bidder.

• You can usually tell if investors are arrogant jerks within 30 seconds of meeting them. Trust your intuition.

Tell Investors How Much You Want to Raise

• Investors ask founders, "How much are you raising?" Don't fall into this trap.

• Instead, flip the script: "We want to raise $X million on a $Y million pre-money valuation."

• Take control of the conversation. This implicitly signals that you're sophisticated and denotes confidence.

Provide a Timeline

• Give investors a concrete timeline of your process, even if it's artificial:

"We'll be closing this round within 6 weeks. Our goal is to have term sheets in hand by [date] and close financing by [date]."

• Time scarcity ignites action. Investors may string you along indefinitely without a forcing function.

Use Pressure Tactics Ethically

• It's fine to create artificial pressure as long as you're transparent about your timelines and intentions.

• But don't outright lie or exaggerate to investors. Karma will catch up with you.

• Use tactics like scheduling constraints, alternate offers, and press leaks artfully. Don't be overly aggressive.

Ask Investors for Advice

• Ask warm prospective investors for advice instead of a meeting. For example:

"We respect your judgment. If you were in our shoes, how would you approach this fundraising round?"

• This flips the script away from a pitch mindset. Investors enjoy doling out advice. And it keeps you top of mind.

Don't Take Dumb Money

• Not all money is smart money. Dumb money comes with hidden strings attached that can derail your business.

• Extensively vet investors for red flags: interfering, self-serving, unethical behavior at portfolio companies.

• Ask founders in the portfolio about their experiences. Don't rely on reputation alone.

• Avoid dumb money even if it's your only offer. One bad investor can tank your startup.

Term Sheet Mastery

Master these term sheet hacks to get favorable deal terms, maintain control of your company, and maximize your potential payout.

Create a Balanced Board

• The board composition is the most important deal term. It's more important than valuation.

• Create a board that reflects the post-money ownership split. Don't let investors control the board.

• For example, if common stock owns 60% of the company, the board should have 3 common seats and 2 investor seats.

• Elect directors by vote in proportion to their ownership. Don't allocate board seats arbitrarily.

Accelerate Vesting on Termination

• Your contributions become relatively less important over time. But your vesting remains high. This misalignment incentivizes firing you before full vesting.

• Accelerate 50-100% of your remaining vesting if you're terminated without cause or resign for good reason.

• Make sure acceleration applies in any termination scenario, not just related to an acquisition. You can clash with your acquirer too.

Get Vested for Time Served

• Investors will want you to re-earn all your founder shares via vesting. Get credited for time already spent building the company pre-funding.

• If you worked full-time for one year, get one year's worth of shares vested upfront. The remaining shares can vest monthly over 3–4 years.

Limit Your Liquidation Overhang

• Your term sheet will have a liquidation preference, meaning investors get paid before common shareholders if the company is sold.

• Make sure the total liquidation preference stays under 2-3x the original investment. Otherwise, commons won't see a dime until a much larger exit.

• For example, with a 3x preference, common shareholders only get paid if the acquisition is over $75 million on a $25 million investment. Keep your liq. preference low.

Make a New Board Seat for New CEOs

• Don't let your term sheet force a new CEO to take one of the common board seats. This transfers control from you to investors.

• Instead, create a new board seat for the CEO that doesn't dilute common shareholders.

• This preserves board composition and keeps director elections in the hands of common shareholders even after CEO changes.

Increase Share Price with a Small Option Pool

• Investors size the employee option pool before your Series A share price. Bigger pools mean more dilution for you and lower prices.

• Justify a tight 10-15% option pool with an 18-24 month hiring plan. This directly increases your share price post-money.

• Don't let investors unilaterally determine the option pool size. Make your case with data.

Clearly Define Roles and Responsibilities

• Ambiguously defined roles create conflict. Clearly delineate responsibilities and decision rights for founders, the CEO, the board, and investors.

• Specify who controls the budget, hiring/firing, acquisitions, product direction, etc. Get aligned early.

• Formalize founder titles/roles if taking significant investment. Minimizes politics down the line.

Maintain Pro Rata Rights

• Make sure your term sheet specifies you will have pro rata rights for future rounds to avoid dilution.

• Investors may resist since this constrains their ownership. But it's critical you can participate to maintain your stake.

• 10-20% pro rata is standard. Don't accept less than 5% to keep a minimum level of control over dilution.

Accept Convertible and SAFE Notes for Early Rounds

• Full equity rounds are complex. Use lightweight convertible notes or SAFE notes for early capital until you have major traction.

• Debt instruments are simple, fast, and preserve equity upside. Make sure maturity dates provide enough runway between rounds.

• If taking priced equity like Series A, wait until you have enough leverage to get strong terms.

Negotiate Warrants Judiciously

• Warrants let investors buy more equity at fixed terms in the future. This will dilute you, often at low valuations.

• Avoid granting warrants altogether if you have leverage. Or set tight expiration terms like 1 year maturity.

• If you grant warrants, make sure the exercise price increases by a minimum of 25% in subsequent rounds to avoid mass dilution.

Fight "Standard" Claims

• VCs will claim suboptimal terms are just "standard" or "boilerplate". Don't accept this claim at face value.

• Plenty of negotiable terms like pro rata rights are presented as non-negotiable standards. But everything is negotiable with leverage.

• Founders with strong hands extract favorable terms all the time. Terms are driven by leverage, not convention.

Launching Products

Apply these product launch lessons to build traction for your startup quickly through an iterative, customer-focused approach.

Launch a Minimum Viable Product (MVP) ASAP

• Don't wait until your product is perfect. Get an MVP in users' hands as fast as humanly possible.

• Your MVP should enable customers to complete the core action that delivers value. Ruthlessly cut everything else.

• Optimize for speed over features. You need real data more than an impressive deck.

Obsess Over Product/Market Fit

• Product/market fit means customers spontaneously spread your product with minimal effort from you.

• Continuously experiment with positioning and messaging until you find product/market fit.

• Refine your minimum viable audience, high concept pitch, and value proposition hypothesis. Test them directly with customers.

Track One North Star Metric

• To validate product/market fit, focus on moving one key metric up and to the right through iteration: revenue, engagement, retention, etc.

• Don't split focus between dozens of vanity metrics. Optimize every feature and campaign toward growing the One Metric That Matters.

Watch What They Do, Not What They Say

• People are terrible at predicting their own behavior. They'll tell you they want X but then not use X.

• Observe and collect data on what customers actually do, not what they say they want in surveys and interviews.

Start With Personas, Not Market Size

• Founders overestimate addressable market size. Bottom-up market sizing is largely guesswork.

• Instead, start with clearly defined personas like "mobile DJs" or "youth soccer moms". Ideate features for specific users with acute needs.

Don't Take Advice from Power Users

• When deciding product priorities, don't rely on feedback from your most engaged power users. Often useless or misleading.

• Power users don't represent your mainstream target customers. Build for the silent majority.

Optimize Activation Flows

• Many products lose prospective customers between sign-up and onboarding.

• Analyze your activation funnel to find and fix drop-off points. This exponentially increases conversions and traction.

Evangelize Benefits, Not Features

• Customers don't care about features. They care about how your product will improve their lives.

• Describe concrete benefits like saving time or earning more money. Stay ruthlessly focused on customer value.

Charge from Day One

• Charging from the outset instills value. If people aren't willing to pay, you won't have sustainable growth leveraging freemium.

• Offer a free trial to overcome initial friction. But don't plan to monetize later via ads—that's wishful thinking for most products.

Don't Take Advice from Investors on Product

• Investors give terrible product advice. They get misled by vanity metrics on decks, not deep customer insight.

• Nod politely to investor product opinions, then discard them.

Don't Launch Merely for Press

• Founders dream of TechCrunch coverage. But an untimely press won't create sustainable traction.

• Wait to launch publicly until you have a clear product/market fit. Premature PR leads to disappointment.

Building Leverage

Apply these techniques to tilt every situational advantage in your favor when negotiating partnerships, hiring, fundraising, and making deals.

Pitch many Investors in Parallel

• Compressing fundraising timeframes maximizes leverage. You want a small burst of intense activity.

• Pitching to multiple investors simultaneously forces everyone to engage seriously to avoid losing the deal.

• Investors will try to slow you down and stretch your diligence . Use time pressure to your benefit.

Build FOMO

• Investors move in herds. They crave the validation of others making the same bet.

• Whenever you discuss your fundraising efforts, casually mention the 5+ other investors you're speaking with.

• Make interested investors believe they may lose out if they don't act quickly. (It works every time.)

Raise the Next Round Before You Need It

• Always raise money from a position of strength, not desperation.

• When you have over 12 months of cash runway, you have leverage. Investors can't squeeze you on terms.

• So raise your next round right after hitting milestones that justify a step-up, even if your bank balance is healthy.

Get Multiple Investors Engaged in Parallel

• By speaking with multiple prospective investors simultaneously, you force each of them to put their best offer forward quickly.

• They know you have options. They'll act decisively to compete for the deal when other firms are pursuing it in parallel.

Create Urgency with a Short Fundraising Timeline

• Giving investors an artificial but reasonable deadline closes deals faster. Humans act when time is scarce.

• Make your timeline seem real by leaking fundraising rumors, creating press buzz, running a tight process, etc.

Issue Press Releases for Funding Rounds

• Issue a press release and briefing journalists as soon as the fundraising round closes.

• This establishes your valuation and metrics before investors can issue announcements spinning the narrative their way.

Issue Press Releases for Major Product Launches

• Instead of relying on journalists to naturally come across your launch, be proactive and provide them with information under an embargo before the official launch.

• Explain key lessons learned during development, not just product features. Give journalists insightful perspectives they can't gather on their own.

Make Investors Compete on Value-Add, Not Price

• Investors will fight hard on valuation and ownership percentages. They have little incentive to bid those up.

• Once terms are set, make them compete on value-add. Ask each investor to make concrete commitments to goals they will help you accomplish.

• Then pick the investor who you believe will deliver on those promises, not just the highest bidder.

Interview Business Development Partners

• Treat potential BD partners like prospective hires. Interview them extensively before forming partnerships.

• Assess their true motivations, prior commitments, potential conflicts, decision-making process, etc.

• Reference-check them by speaking with their past partners about how the deals went.

Make Prospective Hires Compete

• The best job candidates screen prospective employers rigorously. Do the same thing to job candidates during hiring.

• Get multiple qualified prospects engaged in parallel. Make them compete against each other.

• Negotiate offers aggressively. Until the ink dries, assume other prospects are still in play.

Delay Closure Until Necessary Terms Are Finalized

• Don't close partnerships, deals, or fundraising rounds until necessary terms are finalized in writing.

• Verbal agreements are non-binding. Lock terms before closing. Don't take agreements on faith.

Extend Runway Before Fundraising

• Extend your funding runway as long as possible before fundraising by cutting burn, increasing revenue, or raising a small bridge round.

• This prevents investors from forcing unfavorable terms by exploiting runway urgency and cash desperation.

Organizational Tips

Build a startup culture and processes that enable flexibility, high performance, and strong execution as you scale.

Hire Slow, Fire Fast

• Resist pressure from investors to hire fast just because you raised a lot of money. Preserve optionality in case your initial ideas struggle.

• Conversely, act decisively if an executive hire is clearly underperforming after 6 months. Severance just delays necessary moves.

Default to Total Transparency

• Share everything by default: financials, salaries, fundraising status, product roadmap, board materials, you name it.

• Secrecy breeds politics. Transparency builds trust. And you get better ideas from every employee.

Use OKRs to Align and Track Goals

• Cascading OKRs (objectives & key results) align the company around measurable goals every quarter at individual, team, and company levels.

• They facilitate transparency, coordination, and accountability. OKRs provide clarity in chaos.

Build an Ownership Culture

• Avoid top-down micromanagement. Empower employees to make local decisions and own outcomes.

• Judge performance rigorously but provide wide autonomy to achieve goals.

Foster Direct Communication

• Things get lost across complex approval chains. Encourage people to simply walk over and directly talk to the relevant decision maker.

• Maintain an open door management philosophy. Any employee should feel comfortable approaching any manager.

Document Decisions and Learning

• Verbal agreements fade away. Write down key decisions, product requirements, lessons learned, and other resolutions in durable formats.

• Revisit past documentation frequently so employees can leverage institutional knowledge.

Celebrate Values, Not Perks

• Ping pong tables and kombucha send the wrong cultural signals. Celebrate extreme ownership, grit, resilience, and judgment.

• Show you value work ethic and results, not passing fads.

Build a Bullpen of Successors

• Always be developing potential successors for every executive role. This ensures continuity and keeps leaders honest.

• Any executive who refuses to train their replacement may be more concerned with job security than company success.

Preserve Optionality

• Make flexible short-term decisions that preserve maximum optionality for the future. Avoid long-term rigid commitments until necessary.

• New information constantly renders old decisions obsolete. Lock in strategic choices at the last responsible moment.

Survival and Growth

Apply these lessons in crisis management, change leadership, and strategic thinking to lead your company through good times and bad.

Maintain a Cash Cushion

• No matter how much you raise, keep overhead lean and maintain at least 6 months of liquid runway. This gives you flexibility to adjust.

• Extend runway by cutting expenses before doing a down round or desperate bridge financing. Those cost you leverage long-term.

Respond Calmly to Crises

• When firefighting, pause to assess situations before reacting. Breathe. Avoid adrenaline-fueled knee-jerk responses.

• Overcommunicate plans transparently during uncertainty to maintain trust and morale. But don't decide rashly.

Adapt Plans, Not Principles

• In emergencies, don't toss aside your core principles or strategic vision in a panic. Make tough calls deliberately.

• Outcomes may necessitate changing plans and tactics. But stay grounded in your purpose and ethics.

Build an Anti-Fragile Organization

• Fragile entities unravel under stress. Build systems that get stronger with volatility: loosely coupled, redundancies, modularity.

• Decentralize decision rights and avoid single points of failure. Chaos breeds opportunity for antifragile organizations.

Fire Fast, Then Support

• Once a hard call is made to terminate or demote someone, do it ASAP. Don't waffle.

• Then support the impacted person extensively through the transition. Have empathy, even during difficult leadership moments.

Rotate Roles

• Rotate employees’ roles every 1-2 years to develop well-rounded generalists. Build institutional knowledge.

• Especially, have managers do occasional stretches in non-management positions to renew perspective.

Make Redundant Skills a Virtue

• Rather than siloed specialists, cultivate intentionally redundant skills across the team like marketing and sales acumen.

• Makes it impossible for one person to become a chokepoint or point of failure.

Fire Your Worst Customers

• Some customers cost more to serve than they will ever return in value. This is OK.

• Find your most high-maintenance, low-value customers and cull them. Ruthlessly optimize for quality clients only.

Don't Scale What Doesn't Work

• Most startups die from indigestion, not starvation. Abandon broken parts of the business before scaling them.

• Pivot rapidly if products struggle. Even late stage companies reject legacy offerings to stay relevant.

Let Data Dictate Strategy

• Most strategy debates can be settled empirically if enough data exists.

• Resist executive ego battles. Continuously run controlled experiments and let data guide strategy.

Acquire Adjacent Verticals

• Once core product-market fit is proven, smartly reinvest revenue to expand into adjacent customer segments, geographies, and products.

• Mature startups branch out vs just compete on core offerings. Know when to sustain vs disrupt your own business.

Mental Models

Apply these mental models and decision-making principles to think clearly as a founder and leader.

Think in Second Order Effects

• Smart leaders consider indirect second order consequences, not just direct first order actions.

• What dominos will this trigger down the line? How will people respond? What dynamics will this unlock over time?

Invert the Problem

• When facing a challenging question, invert it to examine from alternative angles.

• This disrupts default linear thinking. For example, ask "How would we fail fast?" instead of "How do we succeed?"

Reason from First Principles

• Reason from first principles instead of by analogy. Similar surface conditions often imply different root causes.

• Identify foundational truths and logically build up analysis from there. Don't assume old templates apply.

Consider Counterfactuals

• Ponder counterfactuals to expand perspective. How would this decision differ in an alternate universe?

• Forces you to reexamine assumptions. Useful for challenging the status quo.

Apply Second Order Thinking

• Think through not just direct implications but also second and third order consequences of key decisions.

• How will people respond? What downstream effects will this create? What unintended impacts may result?

Think Probabilistically

• In a startup context, very little can actually be known with certainty. Unfolding outcomes depend on complex interdependent factors.

• Train yourself to think probabilistically in terms of likelihood distributions, not deterministic conclusions.

Leverage Mental Models, Not Passions

• Founders tend to be zealous about their ideas. This leads to confirmation bias and rationalization.

• Lean on vetted mental models for decision-making, not emotions. Continuously stress test your reasoning.

Avoid Reasoning By Analogy

• Superficial pattern recognition generates false confidence. Similarities in unimportant factors often hide deep structural differences.

• Don't justify decisions because something vaguely worked in a previous different context. Use first principles thinking instead.

Think Long Term

• Optimizing short-term results often compromises long-term value. Prioritize durability.

• Apply 5+ year time horizons for strategy. Quarterly financials are irrelevant to enduring companies.

Invert Decision Making

• Most decisions are made positively by asking "How do we achieve X?" This lends itself to confirmation bias.

• It is more rigorous to ask "How do we not achieve X?" Then prevent those failure paths from emerging. Removes bias.

Conclusion

Starting a company tests the limits of human perseverance. To come out ahead, founders need every advantage they can get. Use the lessons in this guide to avoid common mistakes and tilt situational leverage in your favor.

But ultimately, success comes down to determination. If you own a relentless drive and unending hustle, you can will a great company into existence, block by block. 

When faced with obstacles, just remember the words of Henry Ford:

"Obstacles are those frightful things you see when you take your eyes off your goal."

As long as you maintain tenacity and focus, luck will eventually break your way. Master the strategies in this guide, stay resilient, outwork everyone, and never take your eyes off the goal. That formula leads to momentous outcomes.

I hope you have great success in creating your legendary company. If you have any further inquiries, please feel free to ask. I am more than happy to provide additional information on any section in this guide. Furthermore, you can download the Venture Hacks Bible, which includes over 1,000 pages of valuable insights, by clicking the button below.