The Partner-Plan-Price Fundraising Filter
Never raise money unless the investor, the use of capital, and the valuation all line up.
- Difficulty
- Moderate
- Time to result
- ~months to results
- Steps
- 4
- Confidence
- 85%
Nick Fajt described the repeatable filter Rec Room applied to every fundraise, from their earliest Sequoia rounds to an unsolicited $100M raise at a $1.25B valuation. Instead of raising reactively when cash got low, the team only pulled the trigger when three things aligned: the Partner (an investor they'd be comfortable being 'married' to for years), the Plan (a credible way the capital could meaningfully inflect the business, not just extend runway), and the Price (a valuation that represented fair, risk-adjusted value for both sides). This discipline meant Rec Room almost never fundraised from a position of weakness, giving them leverage to walk away from deals and the freedom to stay independent even as the metaverse category got frothy.
Origin
Developed informally over Rec Room's seed, A, B, and C rounds as the founding team learned fundraising by trial and error, having never pitched investors before starting the company.
How to run it
- 1
Vet the Partner like a long-term marriage
Evaluate whether you actually want to be bound to this investor for years, since a financing relationship is hard to unwind once signed.
Pro tip If you wouldn't want this investor in the room during your worst quarter, don't take the check regardless of price.
- 2
Pressure-test the Plan
Define concretely what the capital will let you do and whether it has a real possibility of inflecting the business's trajectory, not just buying more time.
Watch out A vague or purely defensive use-of-proceeds plan is a signal you're raising for the wrong reasons.
- 3
Confirm the Price is fair and risk-adjusted
Make sure the valuation reflects a reasonable risk-adjusted outcome for both the company and the investor, not just the highest number on the table.
Watch out An inflated valuation with a weak plan or wrong partner sets you up for a painful reset later.
- 4
Raise from strength, not desperation
Start the process well ahead of running low on cash so you retain the option to walk away from any deal that doesn't clear the Partner-Plan-Price bar.
Pro tip Track your runway so you're always raising 'pretty far out' from day zero, never down to a couple months of life left.
In the wild
Instead of pitching, existing investors Sequoia and Index approached Rec Room directly. The team ran the same Partner-Plan-Price gut check: trusted insiders (Partner), a plan to become a decades-enduring standalone business (Plan), and a valuation both sides felt was fair given the metaverse momentum (Price).
→ Rec Room raised $100M at a $1.25B valuation without ever needing the capital to survive.
Common mistakes
Chasing price alone
Optimizing purely for the highest valuation while ignoring investor fit or the credibility of the plan invites future misalignment.
Waiting until desperate to raise
Fundraising with only a couple months of runway left removes your leverage to say no to a bad Partner or Price.
Is it for you?
Not ideal for
Founders who need emergency bridge capital and don't have the luxury of walking away from a deal.
From the transcript
“the combination of the partner, the plan and the price match up.”
“we were always raising you know pretty far out from from you know day zero.”
From the episode
Rec Room Part II (with CEO Nick Fajt)
Nick Fajt