What to Do When Your Fundraising Is Not Going Well



One of the worst things that can happen to a CEO of an early-stage company is to be in the state of perpetual fundraising.

Here is how you can tell that it may be happening to you:

  1. You have been fundraising for a while
  2. You are fundraising and running the business at the same time
  3. You don’t have strong interest from investors
  4. Investors aren’t engaged/don’t ask a ton of questions
  5. Investors keep telling you its early/to keep them posted

The list can go on, but you get the point.

You are wasting your time because you aren’t prepared and the timing is likely off.

Please go and read my popular post about nine seed funding gotchas and I will be right here when you come back.

“Disorganized, prolonged fundraising is exhausting, and is harmful for your company and your personal brand.”

So what can you do?

Here are some things for you to consider to help the situation.

Do the Gut Check

Be honest—are you really READY to fundraise?

Have you prepared enough, or are you going out too early? When you go to bed at night and think about it, like really think about it, are you really ready?

The best way to fundraise is not to go out early, but to first prepare and answer a bunch of key questions about the business and the opportunity.

Think about questions like: why are you the right team, why are you going after this opportunity, why now, how do you know this is needed, what are the early indications of product market fit, what is the business model, what are the unit economics, how are you going to acquire the customers, what is the pricing, what will this business be like in three years from now, who are the right investors, why would they invest, how do you get in front of them, what will be important to them—etc, etc, etc.

The nerdier you get about fundraising, and the more prepared and disciplined you are, the higher the chance you will be able to get it done faster.

If you aren’t ready, pause, go back, prepare, read my posts on fundraising and particularly on building a deck and pipeline, and then go back to the market.

Build Investor Pipeline

Assuming you passed the gut check, and you really feel like you are ready, next assess whether you are able to get in front of enough qualified investors.

“Like sales, fundraising is a numbers game. If you don’t have a strong enough pipeline, you can’t get to the finish line.”

Every single NO should cause you to add 3-5 more prospects to the top of the funnel.

If you are early on in the process, particularly a first-time founder, without a strong network, you will find that fundraising is taking a long time because you aren’t even getting that many meetings.


Your fundraising process is stretched over weeks and months, but you aren’t seeing a lot of investors. As a result, you obsess over every single opportunity, a few conversations you are having, instead of focusing on having a more conversations.

What you need to do is to pause, and focus on filling up your pipeline with 20-30 new investors. Just keep filling the pipeline, but do not take the meetings. After you have the pipeline filled up, THEN go and pitch everyone. This strategy will help you get a real signal, and have a chance at creating momentum in your round.

Understand Investor Feedback

Assuming you have enough in your pipeline and you are meeting a bunch of investors in a short period of time, you really need to understand their feedback. What is the reason that people are saying NO? Do you not have enough traction? Is the space not interesting? Is the opportunity too small? Is it something else?

Whatever it is, your job as a founder is to avoid happy ears, parse the feedback you are given, and take it to heart.

If you are early, and don’t have enough traction, then you need to understand the milestones people expect, and then build the business until you hit them.

Investors may tell you that they don’t believe in the market size, unit economics or your customer acquisition strategy—whatever feedback they give you, whatever the signal is, go back and address it. Understand the pushback, do research, get data, execute and come back with a solution.

Also, know that there are more subtle things that people won’t necessarily tell you about. For example, investors may not believe in the founding team and don’t see strong founder-market fit. Investors may not like the space. They may have issues with well-funded competition. If the issue is subtler, try to really figure out what it is.

The bottom line is, whatever the feedback is—no matter how tough—go back and address it.

Pre-seed Fundraising Strategy

Now let’s look at specific strategies for premature financing.

Your pre-seed round is truly an idea stage. You don’t have a product, and you may not have your team fully assembled. You are super, super, super early. Read this other post I wrote first.

If you are a first-time founder, focus first on your friends and family, people who really know you, who think you are great. Get at least a little bit of their capital, and maybe even your personal capital so that you aren’t at zero. Beginning at zero is the worst state.

Don’t spend any time with VCs at this stage; you are WAY TOO EARLY.

You can raise capital from angels, but the key things are to a) get a little first from friends and family, b) target the investors correctly, and c) figure out milestones.

To build a correct list of potential investors, talk to other founders, and ask them who the pre-seed stage firms and individuals were that funded them. Research, research, and research some more to build the right list, otherwise you will be massively wasting your time.

Only specific funds and individual angels invest so early, so your job is to find investors whose strategy it is to fund the companies at your stage.

Next, think through all the tough questions you will be asked. Do the gut check—do you know the market, the customers, competitors, etc.? The more fluent you are in the problem and the business, the higher the chance you will get the check.

Lastly, clearly define milestones you are going to hit with the pre-seed round.

A typical milestone at this stage would be shipping of the product. A better one would be shipping the product, and getting a few early customers. No investor wants to give you a check to support your burn.

Investors want to fund you to the NEXT MILESTONE.”

In the case of pre-seed, the key question an investor needs to answer is what milestones will enable you to raise a seed round. That’s really the meat of getting the pre-seed check—articulating the milestones and metrics that will get you to the next round.

Seed Fundraising Strategy

Everything that we said for the pre-seed applies to the seed round as well.

Keep in mind that the bar is now higher in the seed round. You can’t be pre-product; you need to know your customers, and you will likely be expected to have early traction. The game overall is upped significantly compared to pre-seed.

In addition, since the amount of capital you are raising is larger, you need to spend more time on identifying more relevant investors, and getting introductions to them.

In terms of targeting investors, start with angels and micro-VCs and try to get a few hundred thousand committed. Don’t spend a ton of time early on talking to venture firms, as they take longer, and most of them would still think you are early.

By getting several hundred thousand committed on the round, you will be able to create momentum, and will have a better chance of getting larger checks.

“Start with small checks—get to 1/4 or 1/3 of the round, then shift your focus to larger checks.”

Also, how much capital are you asking for? 1.5MM – 2MM may be too high. Review your financial model. Can you make things happen with 1MM? If so, revise your model to be more capital efficient.

“It is always better to start lower and then, based on the demand, oversubscribe rather than start high and never get there.”

Series A Fundraising Strategy

It’s really tough to raise series A if you don’t have strong metrics. Some founders raise on a story, but they are either repeat founders or working in the hyped-up spaces. Most founders will need really strong metrics.

There are exceptions, but if you are already generating revenue, you will be judged by your a) MRR/ARR and b) MoM Growth. However, strong metrics alone won’t get you a check. Not in this market anyway.

The dance to raise series A involves identifying the right firms, identifying the right partners, then getting to know them and letting them get-to-know you. It will also involve a lot of guts and luck.

Assess clearly how much appetite is there on the market. You should have a gut feeling.

If the demand is not there, cut the burn (you should do it anyway), and go back to building the business.

“Focus on getting to profitability.”

Get feedback from the investors on what your metrics need to look like, and keep them posted every eight weeks or so. Assuming you are growing well, and hitting profitability, the investors will likely be open to another conversation.

In conclusion, fundraising is stressful and complex, and needs to be done thoughtfully or else it is extra painful and takes way too long.

“A lot of founders get fundraising wrong.”

Do not be fundraising randomly and perpetually. By doing so, you are literally harming your company and your personal brand.

As the CEO/founder, have the strength to listen to feedback, understand that you are not ready, pause, regroup, improve, and go back to the market.

And lastly, get help! Read up, connect with other founders, get 2-3 key advisors on board. You don’t have to do this by yourself.




Reprinted by permission.

Image credit: CC by Howard Lake

About the author: Alex Iskold

Alex Iskold is the Managing Director of Techstars in New York City.

Previously Alex was Founder/CEO of GetGlue (acquired by i.tv),  founder/CEO of Information Laboratory (acquired by IBM), and Chief Architect DataSynapse (acquired by TIBCO).

Alex routinely writes about entrepreneurship and startups at Alex Iskold.

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