If your startup is struggling to raise fund, READ THIS!

My experience since 2014 has revolved around building, launching and growing startups. I thought I did it all!

Pitching in competitions, talking to investors, building teams, optimizing growth metrics, mentoring other founders, organizing entrepreneurship conferences….but little did I know back then that I was missing one of the most important experiences in my entrepreneurial career; & ironically it wasn’t with a STARTUP but rather at a VENTURE CAPITAL!

I’m glad someone saw something in me and decided to give me an “entrepreneur in residence” role at a Venture Capital, which is normally a world for investment bankers, financial consultants and investors.

I’ve been slowly observing, learning & connecting the dots to figure out how to transform my learnings from this experience & use it to help other founders and entrepreneurs!

So before I share the top 10 lessons I learned, let me answer a couple of questions:

A) Why did I move into a VC?

Founders and/or senior startup talents in a transition phase after selling/leaving their startup, usually might not have a 100% crystal clear decision on what to build next or might have not bumped into another super exciting startup that gets their creative juices flowing. This is when they choose to capitalize on their previous experiences by helping other startups either as consultants or by doing what I’m doing now!

B) What am I doing now in this VC?

From one side, investors want someone with hands-on experience in evaluating and growing a startup + talking the language of the founders.

From another side, startups would be more motivated to take fund from a VC that has well-rounded professionals with previous experiences in other startups as they will help them avoid reinventing the wheel.

So that’s what I do, I build and manage a portfolio of EdTech startups for my investors, helping the startup founders’ in multiple domains from strategy to hiring to BD & growth.

That being said, let’s jump into some of the best lessons I learned working with them.

P.S.: I will just write headlines, and in the comments tell me which points in your opinion deserves to be addressed in more details as there is no capacity to dissect each and every one of them here!

1) There’s a 99% chance that your pitch deck is being passed from one VC to the other, so make sure you know what you want to expose to the world!

Your pitch deck is ‘technically’ not confidential data, so don’t leave in it anything that you believe shouldn’t be visible to anyone out there. Actually, think of it as a company profile that should look really good and have decent info about your company because many VCs pass them around (hopefully with good intentions to help you find a relevant investor).

Also note that the VC world is all about word-of-mouth, so try to not mess up so bad with one of them or bad mouth anyone in general, they won’t be too kind to you or your future startups.

The VC community is much smaller, exclusive and tighter than that of the founders’ community.

2) We should stop portraying raising funds as success stories, in many cases they’re FAAAR from that!

We like to romanticize these stories, but little do some founders and talents know that once you sign that contract you’re tied to a train of expectations of exponential growth that doesn’t end!

In fact, sometimes raising funds can be the same reason for the quick downfall of your startup!

Before you take this decision, make sure you fully understand why you NEED to raise funds instead of focusing on the external pressure and validation associated with getting one! For God’s sake, stop being influnced and triggered by these announcements and features on whatever online magazine that covers startup news. THIS ISN’T A HEALTHY MOTIVE!

3) Raising funds for early stage startups is mostly about a story, founders dynamics & some numbers.

Some of those who haven’t been around the startup scene except recently won’t believe this.

Raising pre-seed funds is easier than ever nowadays. (BEFORE the Russian/Ukraine war)

If your founding team has some track record, are great story tellers & can do some basic forecasting exercises; I promise you you’re more than half way there in getting your first round of investment. (or winning that first pitching competition). I’m not saying this is a good or bad thing, just stating what I’ve been seeing in recent months…

4) Not all founders are born alike, some raise funds easily because of their network or brand name ONLY.

I mean this shouldn’t come to you as a surprise.

Some founders are basically full time fundraisers and leave their co-founders to manage the company.

Agree or disagree with this strategy, these founders are usually great sales people and even better story tellers, telling and selling their startup’s vision everywhere!

I honestly think that a founders main role should always revolve around enabling the their team to stretch themselves, learn and hit new milestones in their journey to fulfill the company’s vision.

Their role shouldn’t be only limited to fundraising.

5) Valuations are sometimes complete bullshit!

There’s no pretty way to put it. No matter how much you compare a startup with others similar to it in your country or elsewhere, valuation boils down to investors or VCs FEELING fine with this value put on the table.

I’ve seen founders asking for a valuation and then finding no way to persuade investors except by pushing down these figures significantly. Some experts believe it’s more of an art than a science, others go by the book. Some VCs develop informed decisions by conducting a proper due diligence, others might resort to using complicated algorithms to forecast the potential success of investing in this startup. But guess what, no one that I know of can claim they can accurately valuate what an early stage startup should be valued at.

6) Supply & demand of a startup’s business model in the market can significantly affect your chances to raise money and your valuation too!

So if you’re the first and/or only AI startup in the agri-tech sector, that can mean 1 of 2 things:

a- You’ll suffer to raise funds because you’re basically in a blue ocean and many low-risk appetite VCs won’t play this game

b- Some VCs with a high risk appetite will think that you have a first mover advantage and jump on with a ticket that might even be overpriced because basically you’re the only one doing this business model that has proved success elsewhere and there’s a pretty decent chance things workout for you and their Return on investment becomes exponential!

So just know where you stand in the supply/demand map of your industry’s ecosystem.

7) Even the most successful & veteran professional investors can still make really bad investment decisions

Just because they’ve been doing investments for so long, doesn’t mean they’re bulletproof. Even the best VCs & investors who are on top of their game in assessing and evaluating startups, can get relatively low success rates in tech startup investments across its different stages. (In some stages 50%+ of these tech startup investments are likey to fail).

For sure it’s great validation for a legit VC or investment body to give you fund, but it’s never a guarantee for you that you made it or WILL definitely make it!

8) Even the most promising startup brands struggle and eventually fail

Don’t be decived by the propoaganda around some of the biggest startup names. What happened to SWVL recently is not so different to what will happen to many big names in the startup scene that might have raised massive rounds previously but are now struggling with getting another round, struggling with growth or even worse struggling to adjust their unit economics.

A lot of big startup names are already dying slowly, but the VCs backing them and the founders can sometimes be delusional because they can’t imagine this investment failing miserably, and you can’t fully blame them.

9) Your mentor/board member can really propel you. Some startups raise because of this push and confidence from a veteran investor!

Don’t underestimate the impact of a strong board member, mentor or investor. They can be the sole reason you’re getting another round of investment, because of their credibility and legitimacy. Try finding that kind of support and it might do you magic.

10) Not all VC talents deeply understand what startups are to this day or how they work!

Sadly, no matter how good some VC talents are, not all of them are capable of really looking beyond the numbers and documents talking about the business. Founders might struggle explaining the phase they’re in to them and accordingly this can create a lot of friction between the startups and the VCs backing them up. Somethings cannot be learned unless and until you get deeply immersed in them.

I tried to be concise in this article; would love to know which point would you like me to elaborate more on.