Part 1: Investors expect you to be great at fundraising

Building a venture-scale start-up is an exciting journey, but it requires raising venture capital. Without venture capital, you typically cannot scale fast enough. And every VC's goal is for your start-up to become a unicorn (or a decacorn) as fast as possible.

To be fundable, start-ups need to have a compelling vision, a differentiated product, signs of a scalable growth engine, a complete co-founding team, and a reasonable funding ask. In our subsequent posts, we'll dive into what makes a start-up fundable, how the fundraising process works, what VCs look for, how they're incentivized, and common fundraising mistakes to avoid.

Once you secure funding, however, you'll be on the infamous venture capital treadmill, constantly having to raise more capital to achieve your next product and growth milestones and ultimately exit your business. You can try to become cash flow positive, but that's not the primary goal of a start-up early on (and your investors may have you prioritize growth over margins).

Investors, therefore, evaluate not only whether you're a good fit for them today, but also whether you're capable of potentially raising hundreds of millions in future funding rounds. This is about you, not your business.

Competition for venture capital is fierce, given the large number of start-ups vying for relatively limited funding, and investors will pick the most competent teams.

For mature organizations, investment banks get the executive team ready to go public. Bankers prepare extensive investor materials, make the executives rehearse the pitch, set up extensive roadshows in financial centers around the world - and charge horrendous fees for their services, whether the listing process is successful or not.

For start-ups, the support system is softer and you mostly have to rely on your own fundraising skills. Of course, everyone learns over time but the basics have to be there. That's why your fundraising skills are a critical capability, and you should invest in this capability as much as you can.

In addition to our posts, turn to YouTube explainer videos, blogs, fellow founders and investors, incubators and accelerators, as well as books and reports for information about fundraising.

However, the best way to learn is to just do it. Practice with low-priority investors on your investor lead list until you become a fundraising ninja. That's when you can start moving up your list and pitch to high-priority investors.

We know it's tempting to start at the top of your list, but don't do it unless there are good reasons to do so. There's a big gap between great fundraising skills and good fundraising skills, and you'll just end up wasting introductions and pitch opportunities.

FYI - Incubators or accelerators can be helpful for learning about fundraising. However, if you are considering joining one, make sure the brand, advisors, and investors are up to par. Otherwise, you'll just end up wasting time on 9-12 weeks of an "intensive course" that leaves you with little to show for it.

Talk soon,

Rafael

PS: How do we help you? My team and I build pitch decks, review existing decks, and offer pitch simulations. Get in touch if you or someone you know may be interested.

PPS: This mini course is based on our popular “Fundraising & Pitch Deck” newsletter.