There are several fundraising mistakes I see first time founders repeat over and over.

I’ll address them in this article and give you my take on how to avoid them.

Let’s go.

A pitch deck is not the only thing you need!

Without good preparation fundraising will be much harder, slower and depleting.

To be precise, there are 3 preparation aspects to think about:

Here, I’ve published for you my exact preparation checklist for FREE.

This is a big mistake which almost every founder makes - they start raising just when they need the money.

The truth is that the process takes time - getting the needed traction, preparing your materials, gathering investor intelligence, building your target list, running the actual outreach, getting the first signals, navigating due diligence, signing a term sheet, closing the deal.

And if you run out of money, before you manage to raise, your company dies.

Back when I was working at the VC fund, the rule of thumb we’d give to our portfolio companies was - start fundraising at least 6 months before you need the money.

I still follow that rule today.

Most founders target 10-20 investors - that’s not enough. Even 50 is not enough.

Whether you like it or not, fundraising has a numbers game element to it - the more investors you talk to, the bigger the chances someone would say Yes.

It took Payhawk 60 “NO’s” to get the first “YES” for their €3M Seed round. And this number doesn’t count all investors who ghosted them altogether. The investors they reached out to for the Seed round alone, probably nears 150-200.

With the founders I work with we prepare an initial investor target list of at least 100 qualified investors. Over 100 is a good rule of thumb.

The best way to get connected to an investor is a warm intro. Warm intros come from people in your network. The more well-connected you are, the bigger your chances of getting the right investors.

Hack #1 here: befriend Superconnectors. Superconnectors are founders who already raised several funding rounds and are obviously well connected. See how you can be helpful to them and their companies. Provide value, before you ask for anything. Once you’re close enough, you can explore potential warm introductions to investors.

Hack #2 here: join startup organizations and networks like Sigma Squared, EO, Endeavor, Founders Forum, etc.. Join builder or hacker houses. Become part of founder communities. Provide massive value, before asking for anything back.

Start building your network in advance - before you actually need it. Don’t wait for the moment you desperately need introductions, because investors are ghosting you.

Selling too much of your company early on is one of the hardest mistakes to undo. 

If you give away 30-40% at Pre-seed or Seed, the numbers stop making sense for everyone who comes after. Future investors need enough equity to make their return work. Your team needs a meaningful option pool. And you, as the founder, need enough skin in the game to stay motivated through years of grinding. When the cap table is already damaged before Series A, sophisticated investors will pass because the incentive structure is broken. 

The standard to keep in mind: 10-20% per round at Pre-seed and Seed, up to 25% at Series A.

Toxic terms can pretty much destroy your company. 

A full-ratchet anti-dilution clause, a liquidation preference of 1-3X (or participating preferred), or a vesting acceleration trigger (to name a few), can leave you with nothing after years of building, even if the company does well.

This is a longer topic, on which I’m currently preparing a piece, but when it comes to term sheets remember one thing:

Never sign a term sheet blindly!

Always get a legal opinion. Or at least re-check each clause with experienced founders. Use Claude only as a back-up option.

The reputation of your investors gets transferred back to you. A top-tier investor is impressive (for hirees, customers, other investors) and attracts trustworthiness to your company. The same way bad reputation gets transferred back to you and your company.

Furthermore, bad reputation normally goes along with unethical or founder-unfriendly practices. This might escalate into unnecessary pressure and conflicts.

Always research the investors you’re speaking to - talk to their portfolio companies and dig deeper in their previous work.

And don’t forget that in many countries nowadays it’s easier to divorce than get rid of a toxic investor in your company.

When you raise more than you need, your valuation gets pushed way above where your company actually is. That's a problem because your next round needs to be an up-round from that inflated number. So now you need metrics, traction, and growth that justify a valuation you weren't really at in the first place. If you can't grow into it, you're looking at a down-round (which is a bad signal and might trigger anti-dilution clauses) or no round at all.

And when it comes to your investors: higher valuation = higher expectations from investors.

On the flip side, when you raise too little money, you will run out of money sooner. This means two things: 1. You’ll be limited in your growth; 2. You’ll need to raise again very soon after the previous round, not allowing you to spend enough time developing the product and focusing on growth.

Check out my article to help you figure out how much to raise: The 3-step method to size your funding round (VC-approved)

There we go - 8 of the most common fundraising mistakes which could cost you the round.

That’s all for this week.

See you again (most likely) on a Thursday soon.