The Hidden Warning Sign That You’re Fundraising Too Early

Aaron Dinin, PhD
Sep 8, 2020 · 6 min read
Photo by Douglas Alves on Unsplash

A few years back, a venture capital conference was being hosted in a city a couple hours from my house, and it had a few opportunities for startup pitches from local entrepreneurs. At the time, I was thinking about whether I was ready to start raising another round of capital. One of my investors knew this, so he worked some connections and got me one of the pitching slots. He figured it would be a good chance for me to get on the radar of a bunch of investors at once.

Personally, I wasn’t so sure. I was looking at my growth numbers and wondering if they were too soft. At the same time, I knew opening a new funding round would suck up lots of my focus and resources, preventing me from continuing to grow the business. But, ultimately, the allure of getting in front of lots of high quality investors was too great, so I decided I was being too critical of my company’s progress. It was time to start fundraising for a new round, and I began prepping for the conference.

While I was at the event, I bumped into a fellow entrepreneur from my hometown. “Hey there!” I said when I recognized him. “I didn’t know you were pitching here, too.”

“I’m not,” he said.

“You aren’t?” I responded. “Then why are you here?”

He raised his hands in a shrug. “Look around,” he said. “It’s a bunch of VCs in a ballroom. It’s like shooting fish in a barrel.” Then he held up a stack of business cards he’d been collecting.

I remember being jealous. As petty as it sounds, his decision to attend the conference made me mad because I felt like I’d “earned” my place there — even if that wasn’t necessarily true — and he was gate-crashing. In my mind, his trick was going to help him “steal” some of my investors.

It wasn’t the first time I’d felt that way about another founder. In fact, I often viewed other fundraising founders as bigger competitors than my business competitors. To me, the venture capital dollars felt more limited than the customer dollars, so I got more jealous of other founders going after the same VCs than the ones going after my potential customers. In retrospect, I find myself questioning those priorities. Can other entrepreneurs really steal investors from you? Are other fundraising entrepreneurs really your competitors?

Love and fundraising

When I think about “stealing” someone away from another person, I immediately think of romantic relationships. Is it strange, then, to think other founders are trying to “steal” your investors? After all, on their surface, the relationships entrepreneurs develop with investors aren’t like the relationships that develop between lovers. However, if we look a bit closer, we can see some unexpected similarities. The most important of those similarities is the courtship process.

Think back to the first time you noticed an attractive “someone-special.” Before anything could happen, you had to get that other person interested in you. To do that, you began the flirting process. Among other things, you maybe dressed a certain way that’s not your normal style, you maybe talked about certain things you thought would make you seem more attractive, and you maybe attended certain events that you wouldn’t normally attend. You also looked for other people who already had a relationship with the person you were interested in, hoping they might be able to put in a “good word” for you. And you surely did your best to hide all the less-than-ideal things about you — your tendency to sweat when you’re nervous, your annoying family, your crazy exes that won’t leave you alone, and so on.

Fundraising entrepreneurs do a lot of the same kinds of things. From the clothes they wear to the things they talk about to the places they travel, fundraising entrepreneurs change their behavior to get noticed by their dream investors.

Once the founder does get noticed, the real courtship begins. They meet for coffee. If the coffee date goes well, the investor invites the founder back to his office — “his place” — for a more formal meeting where they can really get to know each other. As the relationship gets more serious, the investor has to get the blessing of his partners — his “work family.” If that goes well, there’s a formal proposal… a term sheet. Once the due diligence is complete, it’s time to legally formalize the relationship by signing some paperwork and sending it off to the government.

With the paperwork signed, the courtship is over, and the hard part begins — the part where all the potential and promise and dreams of future bliss have to be proven. Sometimes it works out beautifully in the end, and sometimes it doesn’t. Regardless of the outcome, there will be struggles along the way that test the relationship and either make it stronger or destroy it.

What makes investor relationships unique?

While the founder-investor relationship does have things in common with romantic relationships, and these similarities can make the notion of “stealing” investors seem plausible, there’s one big difference: exclusivity.

The majority of serious romantic relationships are exclusive. Since we’re rarely in serious romantic relationships with multiple people at the same time, if someone else wants a relationship with the person you’ve got your eye on, you should definitely be concerned/mad/annoyed/jealous. After all, if the other person succeeds in starting a relationship with your crush, it means you’ve lost. Hence, a romantic partner can be “stolen” from you.

Investors are different. Yes, investors have a finite amount of money to spend, but, so long as they have money to invest, they will invest it in promising startups. That means if they see two amazing opportunities simultaneously, unless the two startups are direct competitors, they’ll invest in both.

And this, fundamentally, is the best argument for why none of us should worry about other entrepreneurs stealing our investors. If your startup is worthy of investment, investors will invest because that’s their entire reason for existing. Investors need to find startups worth investing in, otherwise their capital is being wasted. This means the only person you’re ever competing against during fundraising is yourself.

In other words, when investors say “no,” it’s not because they’ve got their eyes on some other hot startup they’re hoping will ask them for money. It’s because you haven’t proven your value.

Jealousy is a fundraising warning sign

I was recently at a grocery store when I ran into the same entrepreneur who’d I’d bumped into at the conference all those years earlier. It was a completely different environment. Rather than trying to raise capital, both of us were shopping for our families. In that moment, the only thing he might have been able to steal from me was the last half-gallon of skim milk. But seeing him at the grocery store reminded me of when I’d seen him at the venture capital conference and how jealous it had made me. However, this time, rather than being jealous, I was frustrated with myself.

Seeing the other entrepreneur again made me realize how ridiculous I’d been. Thinking the investors at that conference were somehow “my investors” or that they could be stolen showed just how unprepared I was to fundraise.

I was never competing against him or anyone else. Instead, I was competing against myself. My concern that another entrepreneur might steal my investors was really just a manifestation of my own insecurities. I didn’t truly believe I had an investable company or that I deserved investment. Instead of projecting that insecurity onto another entrepreneur, I should have realized I wasn’t ready to fundraise. I should have left the conference and gone home to get back to work on my company. Instead, I pitched my startup, and — not surprisingly — it didn’t get me a single investor.

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Aaron Dinin, PhD

Written by

I teach entrepreneurship at Duke. Software Engineer. PhD in English. I write about the mistakes entrepreneurs make since I’ve made plenty. More @

The Startup

Get smarter at building your thing. Follow to join The Startup’s +8 million monthly readers & +787K followers.

Aaron Dinin, PhD

Written by

I teach entrepreneurship at Duke. Software Engineer. PhD in English. I write about the mistakes entrepreneurs make since I’ve made plenty. More @

The Startup

Get smarter at building your thing. Follow to join The Startup’s +8 million monthly readers & +787K followers.

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