“What I Wish I’d Known About Fundraising”: 21 Lessons from Top Founders
“We got rejected 110 times at our seed. There was a period for eight months where it was just soul crushing. But failure wasn’t an option.” — Joe Percoco, Co-CEO, Titan
Fundraising is brutal, even for founders we now think of as iconic:
- Most VCs in Silicon Valley turned down Google.
- Jeff Bezos had to take 60 meetings to raise $1M for Amazon. Worse, it was 22 people at 50k each.
- Salesforce was rejected by every VC in the valley.
- Airbnb co-founder Brian Chesky was introduced to 7 investors by Michael Seibel at YC; five of them turned him down and two didn’t reply.
If you’re fundraising, you will get rejected many times along the way. But you can increase your chances by learning what successful founders wish they’d known earlier.
Here are the 21 biggest fundraising lessons from Scribble portfolio founders:
- Joe Percoco, Co-CEO, Titan ($58M Series B led by Andreessen Horowitz)
- Maggie Norris, CEO, Aidaly ($8.5M seed led by Alexis Ohanian at 776)
- Andrew McLeod, CEO, Certn ($50M Series B led by B Capital)
1. Fundraising is not a milestone.
Joe: The biggest myth about fundraising is that it’s a milestone, a marker of progress. We bought into this myth in the beginning but we learned not to celebrate fundraising rounds because it tended to pull the gas off the earnestness and urgency the team had before the money came in. “Look at this logo that we added to our cap table! Look at all this money.” In reality, your present value just increased by zero because a venture investment at the early stage is mostly a bet on a future state of a company. We celebrate a lot of milestones at Titan, but fundraising is no longer one of them.
2. Fundraising done well is a full-time job. Treat it that way.
Maggie: I realized early on that I’m not capable of building the business while fundraising. It requires a different part of my brain, and a different energy. I haven’t gotten to the point where fundraising feels super fluid and natural, and I haven’t met a founder who does get there. I still need to gas myself up. It was best for me to just focus on fundraising as a full-time job.
Joe: I agree, you have to treat it like a full-time job. If you do, you can get to a point where for future rounds, you can catalyze your next round organically — for example, through one very exciting working session.
3. Equity is the most expensive form of financing.
Andrew: Equity requires giving up a portion of the ownership in the company in exchange for capital. This means that as the company grows, the founders will have less control and decision-making power and the ownership share of the founders will be diluted with each round of equity financing. So the business has to be exponentially larger in some cases for the founder to have the same outcome.
Example: A $1m business you own 100% of is just as valuable to a founder who owns 10% of a $10M business… and that $1m business is much less complex!
When weighing the options, it’s important for founders to consider the long-term implications of each form of financing. Equity financing is expensive, but it can be a great option if the business is successful and the founders are able to turn the capital into exponential growth and reap the rewards of their hard work. Equity financing isn’t for every business and that’s ok!
If you want to raise money, you need to make sure your idea (and associated TAM) is big enough, then choose a venture capitalist that aligns with your culture and vision — which is the most important decision you can make as a founder. Founders should look for a venture capitalist that has a track record of success in the industry, has a good understanding of the company’s goals, and is ready to provide the necessary resources and guidance (through the highs and lows).
4. VCs are not mystical. They are just human beings who offer a form of capital, and often great people, too.
Joe: At the end of the day, we’re here to build businesses and for a business to grow, it needs revenue, customers, and capital. There are many different forms of capital, the most common and popular one — if you have any flavor of technology — being venture capital. And it’s this zoomed-out perspective that is important, that “I’m choosing to be a customer of this product called venture capital”. Venture capitalists are not mystical, they don’t have the power to make a company successful. But venture is a highly relationship driven business in many respects. These folks usually like to take really long-term bets and they’re great partners, in particular great operating partners to the business. There’s a lot of hype and performance theater around fundraising. And there’s this misconception that there is a “right way” to do it. I’ve come to realize and appreciate that it’s just a business transaction and negotiation between two parties or a bunch of parties, and then an ongoing and often very valuable relationship.
5. Run your fundraising as a sales process, not as casual meet & greets.
Maggie: I wish I’d understood the importance of building momentum early on. The first few times, it was more of a conversation and learning for me, rather than a sales process. But once I started running it as a sales process, it became more intuitive.
6. Avoid the temptation to take a lot of VC meetings.
Joe: Early on, there’s a temptation to talk to a lot of VCs and just keep on taking incremental meetings. What I like to do now is to take a much more thoughtful approach to relationship building — I do it long before I need to fundraise. That way, if and when you’re ready to raise, you already know the precise cohort you want to talk to and get feedback from. In the early days of Titan, I took 100+ meetings. But now with each subsequent funding round, the number of people I talk to decreases. I think this is a pretty important insight for founders who are just starting out.
7. Venture math is not a science.
Andrew: Venture math is not a science, and so it is important to understand that there is a degree of uncertainty involved. Be prepared to adjust your expectations and plans as needed. Founders should also keep in mind that venture math is not just about the numbers. Although, early stage VC’s do typically want to see your revenue triple for 3 years and double for 2, or you won’t get invited back.
Venture math is also about the intangible factors, such as the quality of the team and the overall vision of the company. Building a great team can be a massive valuation accelerator so don’t underestimate who you bring on as your early stage executive team! It is important to think of venture math as a way to maximize the potential of the company and minimize the risk for investors.
8. All decks are flawed.
Joe: In the early days of fundraising, you ping a bunch of your friends and get their deck template. Then you start to realize all these decks are flawed and you need your own POV. I keep communicating now with less words and more data. I wish I’d known you don’t need to create a PowerPoint deck to win a dissertation. It should be really simple. One point per page on a slide deck, and use data whenever possible.
9. It’s not what you say, it’s what others understand.
Joe: In fundraising, it’s critical how you tell the story of why your company should exist in clear, articulate language. The biggest thing I wish I had known sooner was how to develop really clear thinking. Usually, clarity of thought precedes clarity of communication.
10. Investors never say “No” until they have to.
Andrew: My first-ever financing lasted 9 months and never really closed. I learned quickly that you need to set a realistic target and a timeline for closing and stick to it! I personally run a 90 day cycle — 30 days of pitching, 30 days to term sheet, 30 days to close. This way I can put firm dates on when everything is happening to create a sense of urgency. The urgency is real! The fact that you’re fundraising means you’re distracted from growing the business so you need to get back to it right away.
As for the seriousness test, always make sure you’re talking to a partner (sorry associates). If not in the first meeting, every meeting afterwards until you get a term sheet or commitment. Associates will often pick your brain until it’s mush and rarely have the ability to make a decision and worse, sometimes are trying to validate another investment in the space.
11. Leverage other founders to help identify your top 4–5 investor targets.
Joe: Founder references are critical. We sort of have a code that we’ll all be honest with each other. If Maggie ever pings me for a reference on someone, you can rest assured I am going to be brutally honest. A lot of other founders have been helpful for that sort of stuff — who’s good or not, who should I chat with? After my first fundraise, the existing people on our cap table helped a lot too. Fundraising is almost like you’re marrying someone without really dating them. You’ll be stuck with them for a while. So that’s why I try to “date them” over a few quarters at least.
12. Avoid trying to convince people who don’t believe in your vision.
Maggie: I no longer try to convince people who don’t get what I’m building. I don’t spend time trying to explain or sell. I don’t oversell if people have a different picture of the future than I do. It’s about focusing on what drives you forward instead of what might be pulling you down.
13. You don’t need a data room at seed stage.
Maggie: This is another myth — you don’t need a data room of documents early-on. For our first fundraise, we used a notion page. Our story was on one page. We created a lot of additional documents like a hypothetical financial model and no one cared.
Joe: Write down on one sheet of paper what you’re building and why. Solve for the goal of being able to have a coffee chat with grandma about what you are building and how it will get scale.
14. It’s ok to psych yourself up before a pitch meeting.
Maggie: It’s natural for founders to be hyper focused on what’s not working, but if you’re too focused on that it comes out in the conversation. Focus on the positive. I started to hype myself up before fundraising meetings because I’m not naturally the most sales-y person. So I had to pump myself up and get in that mode of, what felt like to me, tooting my own horn. I think it helped a lot. I focused on the positive points and metrics of the business, running through it in my head before going onto a call.
15. There’s a long list of iconic companies that had “near death” fundraising experiences.
Joe: All the companies we admire most struggled fundraising and almost died. Resilience is the thing. It’s sheer force of will. We couldn’t raise a seed round to start. We got rejected 110 times at our seed! Imagine this, over and over. There was a period for 8 months where it was soul crushing in many ways. There’s a famous quote that when you’re annihilated, you figure out what part of you is indestructible. I’m grateful it happened because it put us in wartime mode. We were forced to grow up as entrepreneurs. The world was telling us “no” so we had to think about our thesis. Then we asked ourselves how we could supercharge our resilience. Fundraising made me a lot more centered.
16. Take advantage of fundraising announcements.
Joe: At the early stage it can make a lot of sense to announce a raise. It can really add a lot of legitimacy to your product and for hiring. I wouldn’t overthink it. Do what makes most sense for you.
Andrew: Yes, and it depends on the industry and the timing. It’s really helpful for recruiting talent but conversely, it also puts you on the radar of competition.
17. Investors are looking at you just as much as your company.
Andrew: As you know, investors are looking at your company as a whole, but they are often, especially at an early stage, looking at the people behind the company. At the end of the day, the cause of business failure is always the people. As a founder, you should make sure that you are taking steps to get in front of investors and make sure you are putting your best foot forward. You should be actively networking and attending events that will put you in front of potential investors. Once you’re in with one who loves you, you quickly realize how small the world is.
When trying to make that first connection make sure you are genuine, have a strong pitch, delivered at the right time and that you know who you are pitching. The biggest mistake founders make is pitching someone who doesn’t have experience or a passion for their product. It’s easy to research these people on LinkedIn, find out what they like and are interested in, and if it aligns with your product. Then just reach out, ideally through a trusted mutual connection!
18. A whiteboard can make fundraising negotiations human.
Joe: There’s a lot of pressure put on fundraising rounds and it’s often a lot of performance theater. You can get psychologically triggered to do it “perfectly” at each step. I’ve come to realize it’s really just a business transaction between two parties or a group of parties. Most of the tier 1 VCs in Silicon Valley all know the 6–7 things you need for the round. When I met with Anish from A16z, who is now on our board, we used a whiteboard and wrote out the core points that defined our term sheet. Then I drew a line on what could be fair for both of us, based on what we each cared about most, and we shook hands. In other rounds, where there’s the dynamic of involving multiple people, the simple question for me is: Is there a way we can make it work for everyone? We’re all just humans, so we approach fundraising as a friendly partnership. I’m rigorous but I’m informal in my approach to fundraising.
19. VCs are an excellent resource. Talk to them early.
Joe: Fundraising is a great way to get feedback on what matters. VCs have a lot of perspective. Their questions, the dialogue, seeing what excites them — you end up learning a lot. It’s important to notice patterns of what VCs say because those are the things you’ll need to consider growing into later.
20. Fundraising can be a transformational experience.
Joe: At the seed and early stage, to get into the stratosphere you have to create a rocket ship. Once you start to get there, paradoxically to go from Earth to Jupiter you have to shed the boosters. As a person, my fundraising journey has made me more calm, centered, long-term oriented, and I feel gratitude in the day-to-day. Do I want to do this for the next 20 years? Yes. This has spilled over into my personal life, too.
Maggie: Coming out of this last fundraise, I’m more open to contrary ideas, thoughts, and input. I previously had a more rigid view of the path forward. I’ve also become better at managing my own time personally and professionally.
21. “When there’s a why, there’s a how”.
Joe: Fundraising and company building takes a relentless force of will. I took $5,000 from my mom, and my co-founder went to his grandma for $10,000. We set out to raise a million and we cobbled together 200k. There’s that Victor Frankl quote, “When there’s a why there’s a how”. For us it was literally just a sheer force of will that this business didn’t die. When we raised our series A and people looked at our cap table, they were like “Got it. You had one of those journeys.”
Tough fundraising experiences cleanse the pretenders from the real folks. It forces everyone to really figure out if they truly want to be an entrepreneur. Because your biggest source of power is your own resilience.