Let's face it: Fundraising is brutal.

It can feel like a roller coaster, filled with highs and lows that can leave you questioning your path. And the statistics don't lie...

• 60% of startups fail between pre-seed and Series A funding stages (SPD Load)

• 35% of Series A startups fail before Series B (SPD Load)

• the average startup takes about 4 years to become profitable (Earthweb)

While there's no foolproof guide to raising capital, there are steps to enhance your journey and ease the anxiety after 50 rejections.😅

Lesson #1: Clarify Your Funding Goals

Before stepping onto the fundraising roller coaster, clarity about your funding goals is paramount. Understand which type of investor or funding best aligns with your company—strategic partners, venture capitalists, angel investors, or crowdfunding.

Consider the variety of funding instruments at your disposal. In ecosystems like Ireland, accelerators can offer crucial support via equity, CLNs, or SAFEs. Government grants, while sometimes non-dilutive, may require match funding or come with performance stipulations. Understanding these nuances is more than academic; it's essential for aligning your company's trajectory with investor expectations.

Here are the two options most startups choose from:

1. Funding rounds through VCs, Angels, etc.

• Based on the stage of your startup, you can raise different types of funding from external investors like Venture Capitalists, Angel Investors or Strategic Partners

• Each funding round comes with its own characteristics, rising expectations, and implications the further you get in the journey

• Early Stage (Pre-Seed, Seed, Series A), Expansion Stage (Series B), Growth Stage (Series C), Late-Stage (Series D), Pre-IPO stage (Series E)

2. Startup Grants

• Non-repayable and repayable funds provided to early-stage startups to support their growth and development without giving up equity

• Can come from various sources: Government grants, state grants, private grants

• Con: Highly competitive, need to meet specific criteria and provide detailed progress reports

Of course, many entrepreneurs "simply" bootstrap their business, meaning self-fund it with their own savings or asking friends and family to invest or even join a crowdfunding platform. Moreover, just because you want to raise money from a VC for example doesn't mean you're market opportunity is big enough for them. In fact, only 1% of startups actually raise VC capital 🫢 However, if you have the market opportunity and optimize for financial returns, only the above options will take you onto the fundraising journey where you're expected to pitch your business idea, showcase potential ROI and dive deep into the question "Why you?".

If you have clarity about the possible options and what you have to expect from each, you can navigate the twists and turns of each with more confidence and have a clear direction to your fundraising efforts.

Lesson #2: Know Your Risk Profile

Despite common belief, the size of a funding round doesn't necessarily explain the funding stage. Early-stage companies can secure substantial amounts by showcasing market opportunities without bypassing Pre-Seed or Seed stages.

For investors, funding stages illuminate your startup's risk profile; each stage presenting distinct challenges:

• Pre-Seed: Uncertainty reigns as your product is in development or non-existent. It's unclear for the investor if there will even be customers willing to buy your product. Funding sizes can vary a lot at this stage based on the market opportunity the investor sees, so anything from 50K to 1M is possible.
• Seed: At this stage, your startup has its first customers and you need to figure out how to best penetrate the market within budget. Typical funding sizes range from 1M to 4M.
• Series-A: At this point, you've shown that there's demand for your product and have a stable customer base. Now you'll need to show that your company can keep growing steadily and showcase consistent ROI. The money you can raise here goes up to 15M.

Another point to consider is how much money you strive to raise in each funding round. If you raise too much money in early rounds, you give up valuable ownership that attracts investors in later rounds. Additionally, your startup is still evolving and you probably want to retain enough control to make strategic adjustments wherever you see fit, right?

As your startup proves its worth, you’ll attract more customers and orders, which will naturally drive up your valuation. When you eventually seek funding for scaling, you’ll dilute fewer shares because your pre-money valuation will have risen.

So you see, raising money through funding rounds requires strategic planning and managing one's own expectations realistically. That's why Lesson #3 is super important.

Lesson #3: Follow a Structured Fundraising Process

Once you've clarified your funding goals and understood your risk profile, it's time to make an actionable fundraising plan and implement dedicated processes in your day-to-day operations. Think of it like the sales or marketing department, now you have a fundraising department.

A structured approach, borrowing tactics from sales and marketing, reduces stress by offering a clear schedule. Here's your step-by-step guide:

1.Build a list of investors

• Create a list of potential investors based on funding goals and stage, consider their industry expertise, portfolio companies and values
• Categorize those leads for importance

2. Get networking and warm up leads

• Establish connections, attend networking events in your city/country and be present on LinkedIn
• Gently warm up leads with non-committal pitches and apply for accelerator programs to get advice throughout the fundraising journey
• Apply for funding rounds / startup grants

3. Maintain consistent communication

• Follow-up consistently, secure yes/no's and negotiate where appropriate (but also don't drag it out unnecessarily; if they don't want you, move on)
• Secure termsheets (Key Terms of a deal between a startup and its investors, read this resource on b2venture.vc for more information)

Lesson #4: Build Leverage for Increased Demand

There are 305 million startups created globally each year and only about 40.000 investors actively investing as of 2022. To stand out of the startup pool, you have to build leverage or, basically, create FOMO (fear of missing out) for investors. They should not want to miss out on the exciting journey your startup is on!

Leverage is the secret sauce that makes investors eager to join the ride with you. Here are a few ways you can create it:

• Understand your market size: We can't emphasise this one enough; You need to know your market inside out by conducting thorough market research and presenting numbers like TAM, SAM, SOM convincingly. Investors are more likely to invest when they see a sizable market opportunity for a product or service.

• Have a working product or an MVP: A functional Minimum Viable Product (MVP) demonstrates that you're not just about ideas - you can execute them. It doesn't need to be the most beautiful version of your product yet, just focus on functionality so you can demonstrate how your product works.

• Well-defined growth stages: Think beyond year 1, what could your startup look like in 5 or even 10 years? How can your product serve more people over time, what functionalities can you add? Where do you want to expand to? Lay out your growth strategy clearly and think about scalability (this will be expected from you anyway in Series-A stage)

• Impressive Team: Last but not least, showcase that you have people with the right mix of expertise, experience, and passion. The employees you work with can make or break your young project.

If you can showcase the buzz around your company, growing interest, and the potential of significant returns, investors are more likely to line up for a front-seat on your fundraising roller coaster.

Lesson #5: The Power of Yes, Embracing No's and Dealing with Maybe

When you finally get to the point where you get that crucial "Yes" from an investor, it will set off a chain reaction, propelling your startup forwards and you start building momentum. However, before you get that first "yes", there will be a lot of rejections and "Maybe's".

First of all, embrace the "No's". It wouldn't be a roller coaster without a descent before the next ascent. The key lies in viewing rejection not as a setback but as a redirection, an opportunity to refine your pitch and strategy. And it's certainly better than being ghosted! Whatever feedback you get, take it with grace and be respectful - you never know when your paths will cross again.

Moreover, not every investor will share your vision, and that's perfectly okay! In fact, it's beneficial. You want to seek investors who resonate with your vision and align with your values as well as enthusiasm.

Yet, amidst the clear distinctions of "Yes" and "No", lies the ambiguous realm of "Maybe". Interpreting "Maybe" responses requires a nuanced understanding, distinguishing between cautious interest and polite deflection. Genuine curiosity, follow-up questions, and expressed engagement are signals of potential interest. On the other hand, vague or non-committal responses may indicate a lack of alignment. Entrepreneurs must proactively seek clarification, fostering transparent communication to discern genuine interest from indecision. It's this skill of navigating the grey areas that separates adept fundraisers from the rest.

Here's a great overview from Mikkel Sundø on how to interpret what VCs say:

Just remember, securing that initial "Yes" sparks the momentum, but it's your ability to embrace the "No's" and "Maybe's" and navigate the uncertainties that define your resilience as a founder.

Lesson #6: Practice Self-Care and Stress Management

Once you get on the emotional roller coaster of fundraising, stress is an inevitable companion. Not trying to sound dramatic but the success of your startup can turn your life around completely. Prioritizing self-care in this scenario isn't a luxury, it's a strategic necessity.

Picture self-care as the emotional seatbelt that keeps you secure during the twists and turns of the fundraising roller coaster. Adequate sleep, regular exercise, and moments of relaxation are not just indulgences but essential tools to equip yourself for the challenges ahead. Stress management is not about avoiding stress altogether, but about building the capacity to handle it effectively. Just as a roller coaster is designed to provide a thrilling yet safe experience, self-care ensures you can navigate the exhilarating journey of fundraising with resilience and poise.

Here are some practical tips:

1. Set realistic boundaries: Define clear boundaries between work and personal life. Allocate time for focused work and intentional breaks. This not only enhances productivity but also prevents burnout, a common challenge in the startup landscape.
2. Seek support: Don't hesitate to lean on your support network. Whether it's talking to a mentor, sharing experiences with fellow founders, or seeking professional guidance, the emotional support of others can be a powerful antidote to stress.
3. Celebrate small wins: Amid fundraising, celebrate small victories. Recognize and appreciate the progress you make, acknowledging that each step forward, no matter how small, contributes to the larger success of your venture.
4. Find time for mindful moments: Incorporate short mindfulness exercises into your daily routine. Whether it's a few minutes of deep breathing or taking a walk outside, these moments can provide a mental reset, allowing you to approach challenges with clarity.

Navigating the startup thrills

Congratulations! You've now completed a crash course in surviving the emotional rollercoaster of fundraising. The startup journey is undeniably challenging, resembling a rollercoaster ride full of exhilarating highs and daunting lows. As founders, you're not merely passengers; you're the architects of this wild journey.

In the startup world, where uncertainty and risk are constants, fundraising becomes a rite of passage. We've explored the critical lessons to equip you for the twists and turns, providing not just survival strategies but the tools for a triumphant ride.

Are you a startup founder?

The startup community thrives on shared experiences. As part of a startup myself, I'd love to hear the lessons you've learned and the tips that saw you through.

Share your insights in the comments or connect with us on our LinkedIn page!🚀

Sources used:

• https://medium.com/@mikkelsundoe/5-tips-on-how-to-speak-vc-and-raise-capital-5738f7bd3737
• https://resources.b2venture.vc/fundraising

Header picture adapted from: https://medium.com/@mikkelsundoe/5-tips-on-how-to-speak-vc-and-raise-capital-5738f7bd3737

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