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Figure: Lack of Seasonality in VC Funding

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Source: Crunchbase*

Scarcity and Parallel Fundraising

important Having more interest in your company than you can possibly accommodate is a highly valuable situation for any founder. Generating more demand for your round than you have room for—that is, creating a sense of scarcity—helps you gain leverage by increasing the urgency with which investors approach your company. When you decide to raise a round is crucial, and the way you schedule meetings within that round can greatly affect whether investment in your company is seen as scarce—something investors will fight to be part of.

FOMO may be an obnoxious acronym, but it’s a very real thing. The fear of missing out influences how investors think about opportunities. When an investor hears about a company that got funded in a space they’re interested in, but didn’t know the company existed before hearing about the deal, it’s immensely frustrating. Given the power laws of venture capital, investors really need to make sure they don’t miss out on a good investment. When they miss a deal, it can make the investor question their skills. This desire to see all relevant deals, even if only to pass on most of them, comes partly from FOMO. For this reason, investors are said to have a herd mentality. While FOMO isn’t a good reason for an investor to invest in a company, it influences investors when a highly competitive deal—one in which many investors are interested in investing—comes along.

Investors’ not-so-well-kept secret is that it’s really hard to pick the winners early on, which leads to significant fear of missing out. Venture capital depends completely on outliers with very high returns. This means good deals in venture capital are scarce. The realities of FOMO should help motivate you to reach out to any and all investors who could realistically invest in your company (and who you would be excited to work with). Your goal is to convince investors that your company is one of these scarce good deals.

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