Hey friends, it’s Jorian—welcome to Into the Ring. I’m a startup fundraising coach and have worked with 60+ founders who’ve raised over $270M.

I’m feeling energized after last week’s 90 minute session I hosted on how top founders run an accelerated fundraise. Thank you to the dozens of you who attended live. If any of you would like to get the recording and/or slides, please just reply to this email to ask.

For today’s newsletter, I’ll share a 1min take on picking the best partner, provide a rundown of the Tier 1 VC deals from the past week, share my recommended VC essays & podcasts, and do a deep dive on demonstrating traction when you’re pre-revenue.

As always, thank you for being part of this Into the Ring tribe of 2.0K+ startup founders and operators/investors from OpenAI, Anthropic, a16z, Lightspeed, etc. If you think someone else might like this newsletter, they can sign up here.

Now onto today’s newsletter!

Several times a quarter, a founder will ask me some version of:

“Which term sheet should I take?”

And almost always, my immediate response - before even asking about price - is “Which VC partner do you most want to work with?”

The answer to that question is telling, and most often the right choice for which term sheet you should take. I can’t tell you how many times I’ve seen a founder cede on price to go with the partner they were most excited about, and be thrilled with that relationship for years.

And unfortunately the opposite - so many stories of founders picking a slightly higher price, but with a VC they had a bad spidey sense about, and coming to regret it.

Of course, I’m not saying you shouldn’t care about price. No. I want you to negotiate a great deal for your startup, and if the price doesn’t work, then it doesn’t work.

But I am saying that more often than not, the best term sheet isn’t the one with the highest price. It’s the one from the partner you most want to work with.

Last week when I gave a talk on how top founders run an accelerated fundraise, I mentioned you want to ideally fundraise at a point of revenue inflection for your startup. A founder pushed back: "Well that's great if you're post-revenue, if you have hundreds of thousands or millions of revenue, but what about me if I'm pre-revenue or barely past it?"

I thought that was a great question because this is a super common scenario that founders find themselves in. The truth is there's far more than just revenue that you can show to demonstrate traction and an inflection point. Revenue is just the most obvious signal but it's not the only one.

Let me share a few of the best alternatives to revenue you can show early on to demonstrate traction or an inflection:

First up: having signed LOIs and design partners, especially if you're in the B2B space. That’s evidence of real demand. People who want to work with you and interesting logos carry some weight with VCs that you're more than just a cool company name on a pitch deck.

Next: being able to demonstrate deep usage and engagement of your product. In the early days of building you likely won't have that many customers or users. If you can demonstrate that some or all of those users or customers are heavily engaged with your product and that it's truly solving a problem for them, then that can give credence to the idea that you're building something people want

Those are the two I’d lead with. A few more worth having in your back pocket:

One might be willingness to pay before the product even exists, for example paid pilots or deposits. Another example might be retention or cohort curves. Even with few customers have you been able to retain them? And a last example might be measuring customer love. What percent of your design partners would be very disappointed if your product went away?

What you want to be careful of, however, is confusing vanity metrics for real traction. For example things like raw downloads or cumulative charts don't really demonstrate real traction.

Back to that inflection point I raised in the webinar. Whether it's revenue or other forms of traction, it's not just enough to have a strong number. What helps sway a VC even more is seeing a metric inflect. Another way of saying this is that the slope of the metric is a lot more important than the absolute value. Remember that when VCs are investing in early-stage startups, there's a big leap of faith, so showing them a point of inflection makes it easier for them to take it.

One example I want to share is a pre-seed founder that I worked with who was building AI software for manufacturing. He had under $10,000 in revenue and was just getting started, but he needed to fundraise in order to build out the team and keep developing the product.

What he did was in the six weeks before fundraising he was able to get from zero to six high-quality LOIs. As he was talking with VCs, the number of LOIs kept increasing. These folks who signed LOIs were his design partners and they really enjoyed digging into the product, and they were happy to talk to his VCs directly. All this buzz around these early design partners gave VCs a bit of FOMO and a sense of "hey, what's going on here?" They thought that this was a strong founder who's building in a category he really knows well.

Even though this founder had almost no revenue traction, his momentum he demonstrated via LOIs led to three VCs offering him competitive term sheets.

One area of pushback you might have is: "Isn't this just gaming the optics?" To that I would say don't do anything you wouldn't already do for building your business. Don’t make up any metrics or kick off any activities you wouldn't otherwise want to do. Rather, do the activities that are helpful for growing your business - but just be thoughtful about fundraising at a moment where you can show inflection in those activities.

One tip: what you can often do is take the milestones you are already going to hit and try to purposely concentrate them into a tighter window so that it shows strong momentum (I know, this is easier said than done). Ideally you can time your raise to land right as that inflection is happening so that you can raise at a point of maximum perceived momentum.

If you're a pre-revenue or early-revenue founder, you have more to show than your lack of revenue. You can show the traction signals (signed LOIs, customer love, usage, etc.) that are the best for your business and ideally get them bending before and through your fundraise.

So, for the pre-revenue founders out there, what are you planning on showing instead of revenue for your traction?

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I’ve helped 60+ founders run high-quality fundraises and raise over $270M. Check out jorianhoover.com to read founder testimonials and learn more about my approach.